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CHAPTER II.

Restrictions

to prevent clogging equity of redemption.

set aside because the value has changed in the lapse of years (q). Where a mortgagee took a lease from the mortgagor subsequent to a puisne mortgage, he was treated as mortgagee in possession, but no objection was raised to the lease (). Leases in nature of a Welsh mortgage stand on a different footing (s).

The Courts, fearful of opening a door to fraud and usury, on mortgagee have imposed numerous other restrictions on the mortgagee so as to prevent him from clogging the equity of redemption, as, for instance, that he shall not be permitted, as a general rule, to make any charge by way of bonus or commission in consideration of the advance (t); nor to stipulate for interest at an increased rate on default (u), or for compound interest (~); nor to make any charge for his personal trouble (y); nor appoint himself the receiver, even under an express agreement for that purpose with the mortgagor (z); for he is entitled to no benefit beyond his principal, interest, and costs, besides that such an agreement might subject the mortgagor to imposition, and, under the old law, have tended to usury.

Exception to general rules of equity in cases of family

arrangements.

So, also, until the recent Act (a), a solicitor-mortgagee was not generally allowed to charge profit costs (b).

The preceding authorities show with what jealousy equity has looked on every attempt made to counteract or oppose its interference in behalf of the mortgagor; but its object being to protect him at a time when his necessities may have placed him at the mercy of the mortgagee, cessante causâ cessat etiam lex; and therefore the general rules of equity before stated will admit of a very considerable exception in cases in which there is evidence of intention in the nature of the transaction, that provision was intended to be made by the mortgagor for some branch of his family, or that the mortgage was intended by him in the nature of a family settlement. Thus, where the right to redeem was confined to the mortgagor during his life only, but there was an express covenant that the mortgagor might redeem at any time during his life, so that the mortgagee could not have compelled the mortgagor to redeem, and it was proved that the mortgagor had a kindness for the mort

(a) Hickes v. Cooke, 4 Dow. 24, 25.
(r) Gregg v. Arnott, Ll. & G. t. Sug.
246.

(s) See post, p. 26.
(t) See post, p. 1145.
(u) See post, p. 129.

(x) See post, pp. 131 et seq.
(y) See post, p. 1203.
(z) See post, p. 1192.
(a) 58 & 59 Vict. c. 25.

(b) See post, p. 1194.

gagee, his near relative, and intended him to have the land, and that the restriction of redemption was inserted only for a particular reason, it was held by Lord Keeper North (c), reversing the decision of Lord Nottingham, C. (d), that redemption after the death of the mortgagor must be refused. The like doctrine governed a case (e) in which a man, by settlement on his marriage, reserved to himself the option of paying a sum of money, or letting the settlement stand (f). In Jason v. Eyre (g) redemption was decreed, although it might have been fairly regarded as coming within the same exception, on the ground of the transaction being intended by way of settlement or family provision. In this case parol evidence was offered and read on both sides, which the Court took no notice of, but rejected. It will be observed that, in Newcomb v. Bonham (h), the ultimate decision was expressly founded on parol evidence of the mortgagor's intention, and at the present day such evidence would be clearly admissible (i).

CHAPTER II.

vii.-Distinction between Defeasible or Conditional Purchase What are defeasible

and Mortgage.-With reference to the rule already con- purchases. sidered (), that a mortgagee will not be allowed to obtain for himself an advantage collateral to his security, mortgages must be distinguished from contracts for purchase, subject to a right for the vendor to repurchase within a limited time, or subject to a condition avoiding the conveyance if the vendor pays a specified sum at a fixed date. In such instances the vendors will be strictly kept to their contracts, which are regarded as defeasible or conditional purchases, creating only a right of repurchase in accordance with the condition, and not as imposing such a right of redemption as in the case of a mortgage (1).

for lease on

So, where a certain sum had been lent without security, and Agreement an agreement was entered into that if the money so lent, together default of with certain further advances, were not repaid by a specified repayment of day, the lease of a farm should be assigned to the lender without any further consideration; it was held that the relation of

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loan.

CHAPTER II.

Absolute conveyance with

vendor and purchaser, and not that of mortgagor and mortgagee, was constituted by the agreement (m).

So, also, where an equity of redemption was absolutely consubsequent veyed, and subsequently it was agreed between the parties that, agreement for if the vendor should desire it, he might have the estate back on

repurchase. payment of the purchase-money with interest and costs, the

Agreement for convey

ance to third

person defeasible on payment by purchaser.

Conditions strictly enforced.

Time for repurchase of essence of contract.

Exception

where amount not settled.

Transaction

must be pur

transaction was held to be a sale and not a mortgage (n).

Where the purchase-money of an estate was paid by a third person on behalf of the purchaser, and a further sum also advanced, and it was agreed that the estate should be conveyed to such third person, and that, if the purchaser repaid the sums with interest by a future day, then the agreement was to be void, and if not, then the sale was thereby confirmed absolutely to the other party; it was held that the agreement constituted a conditional purchase (o).

The right of repurchase is a privilege, and is only to be exercised upon a strict performance of the terms (p), unless the terms are waived (9); otherwise the grantee's estate will become absolute (r).

In Davis v. Thomas (s), the mortgagor released to the mortgagee his equity of redemption, and the mortgagee granted him a lease for ninety-nine years determinable on lives at a rent, with a proviso that, if he paid the rent regularly, he might redeem within five years, and in default the agreement was to be void; it was held that the privilege of redemption was lost on non-payment of the rent at the periods fixed for that purpose.

But, where a time is fixed for the repurchase, and the terms depend on the result of an account which has not been rendered by the other party, a reconveyance will be decreed (†).

It is not always easy to discriminate between a mortgage and chase or mort- a purchase qualified by a power to repurchase (u). In determining questions of this nature, it must be borne in mind that

gage as regards both parties.

(m) Tapply v. Sheather, 8 Jur. N. S.

1163.

(n) Cotterell v. Purchase, Cas. t. Talb. (Williams) 61. See Neal v. Morris, Best, 597; Brooke v. Garrod, 2 De G. & J. 62; Ward v. Wolverhampton Waterworks Co., L. R. 13 Eq. 243.

(o) Perry v. Meddowcroft, 4 Beav. 197, affirmed, 10 Beav. 141.

(p) Gossip v. Wright, 9 Jur. N. S. 592; Joy v. Birch, 4 Cl. & F. 58.

(2) Pegg v. Wisden, 16 Beav. 239.

(r) Floyer v. Lavington, 1 P. Wms. 268; Mellor v. Lees, 2 Atk. 494.

(s) 1 R. & My. 506. And see Joy v. Birch, 10 Bli. N. S. 241; Williams v. Owen, 5 My. & Cr. 303; St. John v. Wareham, cited 3 Swanst. 631.

(t) Ponsford v. Hankey, 9 W. R. 353.

(u) Sevier v. Greenway, 19 Ves. 413; Fee v. Cobine, 11 Ir. Eq. Rep. 406; Waters v. Mynn, 14 Jur. 341; Murphy v. Taylor, 1 Ir. Ch. 92; Ogden v. Battams, 1 Jur. N. S. 791.

a mortgage cannot be a mortgage on one side only; it must be CHAPTER II. mutual (a); that is, if it be a mortgage with one party, it must be a mortgage with both. But the rule only requires that it shall not be competent to one party alone to consider it a mortgage. In other respects the rights of the parties may be different, for it happens not unfrequently, that one party may not be able to foreclose at a time when the other may redeem (y). So, in Williams v. Owen (z), it was held that if the parties Agreement intended an absolute sale, a contemporaneous agreement for a for repurchase not acted on. repurchase not acted upon will not of itself entitle the vendor to redeem. The Lord Chancellor seemed to attach some weight to Goodman v. Grierson (a), in which Lord Manners held, that the fair criterion to ascertain whether a transaction be a mortgage or not is, whether the remedies are mutual and reciprocal (b).

The rule is that primâ facie an absolute conveyance, containing nothing to show the relation of debtor and creditor, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase. In every case the question is what, upon a fair construction, is the meaning of the instruments (c), and the absolute conveyance will be turned into a mortgage if the real intention was that the estate should be held as a security for the money (d). The deed may be absolute in form but still a mortgage (e), and the absence of a proviso for redemption will not prevent its being a mortgage (ƒ).

The payment of interest will be evidence that the transaction Payment of was intended to be a mortgage (g).

interest.

&c.

The fact that the purchase-money is not near the value of the Undervalue, property may be taken into consideration as tending to show that the transaction was a mortgage (h).

The payment by the grantor of the expenses of the convey- Payment of expenses by ance will raise a primâ facie, but not a conclusive, presumption grantor. upon this question (¿).

(x) Howard v. Harris, 1 Vern. 192. See Coplestone v. Boxwell, 1 Ch. Ca. 1; White v. Ewer, 2 Vent. 340; Stokes v. Verrier, 3 Swanst. 634; Goodman v. Grierson, 2 Ba. & Be. 274. As to Welsh mortgages, see post, p. 27.

(y) See Talbot v. Braddyl, 1 Vern. 395. (z) 5 My. & Cr. 306. See Barrell v. Sabine, 1 Vern. 268; Waters v. Mynn, 14 Jur. 341.

(a) 2 Ba. & Be. 274.

(b) Goodman v. Grierson, 2 Ba. & Be. 274, cited in Williams v. Owen, 5 My. & Cr. 306.

(c) Alderson v. White, 2 De G. & J. 97, 105; Shaw v. Jeffry, 13 Moo. P. C.

432.

(d) Douglas v. Culverwell, 4 De G. F. & J. 20.

(e) Barnhart v. Greenshields, 9 Moo.
P. C. 18; Holmes v. Mathews, 9 Moo.
P. C. 413.

(f) Bell v. Carter, 17 Beav. 11.
(g) Allenby v. Dalton, 5 L. J. K. B.312.
(h) Thornborough v. Baker, 3 Swanst.
628, 631.

(i) Alderson v. White, 2 De G. & J.
97. See Langton v. Horton, 5 Beav. 9.

CHAPTER II.

Notice of intention to repurchase.

Conditional settlement.

Absolute conveyance fraudulently obtained.

Presumption of sale.

No covenant

A similar inference will be raised where the conveyance stipulates that the grantor shall give notice of any intention to repurchase on repayment of the purchase-money and interest due, together with an additional half-year's interest, so as to allow ample time for re-investment ().

Similarly, a conditional settlement has been held to be a security for money; as a settlement that, upon payment of a sum of money in a certain event, the prior limitation should cease and the lands go to the heirs and assigns of the settlor; upon the happening of the event, it was held only to be a security for the money, and to be redeemable after the time limited, and that not merely by the heir or executor, but also by a creditor (1).

An absolute conveyance, obtained under circumstances of surprise and oppression from a person intending only to borrow, was treated as a mortgage (m). So an absolute conveyance by a client to his solicitor of a reversionary interest was reduced to a mortgage, it not being proved that the nature of the transaction was fully explained to the client, or that full value was given (»). Where an absolute interest is turned into a security and the money is to be repaid, the Court in its discretion will allow five per cent. interest (o).

Conversely, the fact that the grantee took possession immediately after the execution of the conveyance raises a presumption that the transaction was a sale (p).

In several cases (q), the absence of a covenant to pay was for payment. deemed explanatory of the intention; so a trust deed for creditors was held, by reason of its containing no such covenant, not to be a mortgage entitling the creditors to foreclosure (r).

Length of possession by grantee.

Where the circumstances of a case are such as not to render it certain whether the original intention of the parties was to effect a mortgage or a conditional sale, the lapse of a considerable time during which the grantee has been in possession, as

(k) Lawley v. Hooper, 3 Atk. 278; Bulwer v. Astley, 1 Ph. 422; Verner v. Winstanley, 2 Sch. & L. 393; Preston v. Neele, 12 Ch. D. 767.

(1) Frederick v. Aynscombe, 2 Eq. Ca. Abr. 594, note at B., 1 Atk. 392. And see Sir Thomas Mans' case, cited Freem. Ch. 206; Earl Winchelsea v. Wentworth, 1 Vern. 402; Earl Winchelsea v. Norcliffe, 1 Vern. 430.

(m) Douglas v. Culverwell, 4 De G. F. & J. 20.

(n) Denton v. Donner, 23 Beav. 285.

(0) Re Unsworth's Trusts, 2 Dr. & Sm. 337; Douglas v. Culverwell, sup. ; Carter v. Palmer, 8 Cl. & F. 657; Macleod v. Jones, W. N. (1884) p. 53. (p) Williams v. Owen, 5 My & Cr. 303.

(a) Mellor v. Lees, 2 Atk. 494. Floyer v. Lavington, 1 P. Wms. 268. See Davis v. Thomas, 1 R. & My. 506.

(r) Taylor v. Emerson, 4 Dr. & W. 117; Holmes v. Mathews, 9 Mo. P. C. 413.

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