(iv.) veyance shall only be a mortgage, or pass an estate redeemable, Chap. II. the Court will always construe it so, and reject any stipulation seeking to negative or fetter the right of redemption (). It was held under the old law that no condition could be valid Restriction within limited which purported to restrict the right of redemption within a time. limited period, as the life of the mortgagor (1). But it is clear that a mortgage may be made irredeemable for a reasonable period, as, for instance, for five or seven years; it is an old and well-established practice and perfectly valid (m). redeem to persons. Nor did the attempt better succeed to confine the right of Restriction redemption to a particular heir or class of heirs. Thus, where of right to a mortgage deed contained a proviso for redemption by the particular mortgagor or the heirs male of his body, and a covenant by the class of mortgagor that no one but himself or the heirs of his body should be admitted to redeem, the jointress was allowed to redeem, though circumstances were adduced to explain and support the proviso and covenant (n). right to redeem. It is clear, notwithstanding a dictum to the contrary in the Covenant for case last referred to, that the absence of a covenant for repay- does not affect repayment ment of the money, or of a collateral bond, cannot affect the right to redeem; for though these are collateral securities (as has been seen) creating a personal obligation on the mortgagor, yet independently of them every loan implies a debt, and the right to redeem proceeds on the principle that a creditor shall not obtain advantage by his security beyond his principal, interest and costs. The bond or covenant may tend to explain a transaction and show the intention of the parties in a doubtful case to create a mortgage; it may be good matter of evidence; but neither of them is a necessary ingredient in the creation of a mortgage; for, to apply the remedy, equity only requires to be satisfied that the conveyance was originally intended as a security for the payment of a sum of money, whatever form the security may take (0). (k) 5 Bac. Abr. 5; Seton v. Slade, 7 Ves. 265, 273. () Newcomb v. Bonham, 1 Vern. 7; reversed on special grounds. See post, p. 22; Kilvington v. Gardiner, cited i Vern. 192; Salt v. Northampton, sup. And see Spurgeon v. Collier, 1 Ed. 55; Jason v. Eyre, 2 Ch. Ca. 33; Price v. Perrie, 2 Freem. 258; Goodman v. Grierson, 2 Ba. & Be. 278. (m) Teevan v. Smith, 20 C. D. 724, 729; Biggs v. Hoddinott, (1898) 2 Ch. 307; Bradley v. Carritt, (1903) A. C. 253, per Lord Macnaghten. (n) Howard v. Harris, 1 Vern. 33, 190. See Floyer v. Lavington, 1 P. Wms. 271; Mellor v. Lees, 2 Atk. 494, 496. (0) See King v. King, 3 P. Wms. 360; Mellor v. Lees, 2 Átk. 494, 495. Chap. II. closure an essential element of a mortgage. v.-Mortgage enforceable by Foreclosure. In strictness, where (v.) there is no right of foreclosure, there is no mortgage. Where, Right of fore- upon a deed of grant of lands subject to a limited power of redemption, the question was, whether the deed was to be construed as a mortgage, or as a conditional sale (p), the rule was thus expressed by Lord Manners-"The fair criterion, by which the Court is to decide whether this deed be a mortgage or not, I apprehend to be this, are the remedies mutual and reciprocal? Has the defendant all the remedies a mortgagee is entitled to ?" (2). Securities not importing right of fore closure. Mortgage of uncalled capital of company. Principle of the rules. So, where an estate was conveyed to a person in trust that the same should stand charged with a principal sum and interest, with a power of sale, it was held that this was not a mortgage entitling the grantee to foreclosure (r). So, a trust to pay out of rents and profits is not strictly a mortgage, as there is no right of foreclosure (s); nor, for the same reason, is an equitable charge created by will upon a reversionary interest in land (†). But the Court will presume an instrument intended as a security to be an ordinary mortgage entitling the mortgagee to foreclose, unless the terms exclude such construction (u). So the deposit of a certificate of shares by way of security amounts to an equitable mortgage entitling the mortgagee to foreclosure (x). In a recent case (y), where foreclosure was claimed in respect of a mortgage of uncalled capital of a company, the claim was allowed, although it had never previously been made in respect of property of the kind in question, apparently upon the ground that every mortgage imports a right of foreclosure, irrespective of the nature of the property comprised in the security. That foreclosure is essential to a legal mortgage is evident, if the strict terms of the mortgage contract and the grounds on (p) As to the difference between conditional sales and mortgages, see post, p. 22. (q) Goodman v. Grierson, 2 Ba. & Be. 274, at p. 279. (r) Sampson v. Pattison, 1 Ha. 533. See Jenkin v. Row, 5 De G. & Sm. 107; Schweitzer v. Mayhew, 31 Beav. 37. (8) Taylor v. Emerson, 4 Dr. & War. 117. See Slade v. Rigg, 3 Ha. 35; Bell v. Carter, 17 Beav. 11. Such incumbrances, however, have other incidents of a mortgage, as, for instance, the right of redemption : Schweitzer v. Mayhew, 31 Beav. 37; Wicks v. (u) Balfe v. Lord, 2 Dr. & War. 480. (x) Harrold v. Plenty, (1901) 2 Ch. 314. (y) Sadler v. Worley, (1894) 2 Ch. 170; Re Continental Oxygen Co., (1897) 1 Ch. 511. which equity interferes to mitigate the strictness of that contract are considered. By such a mortgage the property is conveyed to the mortgagee subject to a condition for redemption or reconveyance if the money is paid on a specified day; on default in payment, the conveyance becomes at law, and according to the strict terms of the contract, absolute, and, but for the interference of equity, would operate as a foreclosure. In order to moderate the severity and consequent hardship incident to a strict enforcement of the contract, equity has interfered to prevent it from having its full effect, and when the ground of interference is gone by the non-payment of the debt, equity simply removes the stop it has itself put on, or, in other words, decrees foreclosure (z). And the same principle has been applied by the Courts of Equity with respect to equitable mortgages. The result appears to be that the mortgagee is entitled to foreclosure (subject to the jurisdiction to order a sale in lieu of foreclosure (a)) in all cases where, but for the interference of equity, foreclosure would, in effect, have followed ex contractu; so that foreclosure is a necessary incident of every transaction which the Court treats as a mortgage as distinguished from a pledge (b). Chap. II. costs. (v.) vi.-Collateral Advantage cannot be obtained.-It is a well- Mortgagee established rule in equity that a mortgagee will not be allowed, entitled only as such, to avail himself of the necessities of his debtor so as to interest, and obtain a collateral or additional advantage beyond the payment of principal, interest, and costs. The principle underlying the decisions is that a creditor shall not be allowed to have interest. for his money and an advantage besides for the loan of it, so as to "clog the redemption." The rule, as stated by Lord Hardwicke, is that, if any fetter is laid upon redeeming the mortgaged estate by some original agreement, either in the mortgage deed or a separate deed, it will not avail, where it is done with a design to wrest the estate out of the hands of the mortgagor (c). Accordingly, equity will not allow the mortgagee to enter Agreement in (2) See per Jessel, M.R., in Carter v. Wake, 4 Ch. D. at p. 606. (a) This jurisdiction will be considered later. See post, Chap. XLIX. (b) Harrold v. Plenty, (1901) 2 Ch. 314. The exception in the case of a mortgage for Chap. II. (vi.) purchase of equity of redemption. Agreement that policy effected on loan shall be property of mortgagee. Result of recent decisions. into a contract with the mortgagor, at the time of the loan, for So, where an insurance society advanced a sum of 10,0007. Notwithstanding the recent decisions of the House of Lords, and having regard to the diversity of opinion in Bradley v. Carritt, it cannot be said that the principles relating to collateral advantage are perfectly clear, still less are they easy of application; and it seems that it is and must always be in each case a question whether the particular advantage is valid or not. There are, however, some points which may be regarded as settled. It is clear that a collateral advantage will be valid if there is no unfair advantage taken by the mortgagee, and provided that it does not clog or fetter the equity of redemption (f). It seems also clear that a collateral advantage will be valid if it arise out of an entirely separate transaction from the mortgage (g). On the other hand, it is equally clear that equity will not permit any device or contrivance, designed or calculated, to prevent or impede redemption; and this is so, though the mortgagee retains no hold upon the property direct or indirect (h). It seems also clear that no collateral stipulation which is part and parcel of the mortgage transaction can extend beyond redemption (i); but it does not seem quite clear whether (d) Price v. Perrie, 2 Freem. 258; Willett v. Winnell, 1 Vern. 488; Bowen v. Edwards, 1 Rep. in Ch. 221; Re Edwards, 11 Ir. Ch. R. 367. (e) Salt v. Marquess of Northampton, (1892) A. C. 1. See post, p. 306. (f) Noakes v. Rice, (1902) A. C. 24, 33. (g) Reeve v. Lisle, (1902) A. C. 461. See also Santley v. Wilde, (1899) 2 Ch. 474. (h) Bradley v. Carritt, (1903) A. C. a collateral stipulation which takes effect before redemption is Chap. II. necessarily good (k). (vi.) Perhaps the best statement of the principle in a brief and general way is that the property which comes back to the mortgagor must not be impaired or worse than it was when it was mortgaged. The property itself, and the owner of the property in the use and enjoyment of it, must be as free and unfettered as if the property had never been mortgaged (1). And it seems, according to the most recent authority, that the property is impaired even if it comes back enveloped in an atmosphere of danger, and in a state requiring delicate handling and cautious treatment to prevent its becoming a source of danger to its owner (m). The rule prohibiting the clogging of the equity of redemption under a mortgage by an individual applies equally to a mortgage by a limited company (n). The question whether a bonus or commission is a clog on the Bonus or equity will be dealt with later (o), but it may here be stated commission. that a bonus or commission will be valid if properly stipulated for and if it has become payable before redemption (p), but not otherwise (q). The most important class of cases in which the question Stipulations restricting whether a collateral advantage is a clog on the equity has been use of the recently considered is where some covenant or stipulation has property. been entered into by the mortgagor restricting his right to the enjoyment or disposal of the mortgaged property. And it seems to be now established that such a stipulation can only be valid during the continuance of the security, and will be void on redemption. Accordingly where a mortgage of a public-house to a brewer provided that the loan should continue for a period of five years, and contained a covenant that the mortgagor should not during the continuance of the security sell on the premises beer other than that supplied by the mortgagee, the covenant was held to be valid (r). This decision has been frequently approved, |