null.1 As a consequence of this double character in the trust in such cases, trustees were considered the agents of both parties, debtor and creditor, and their action in performing the duties of their trust should be conducted with the strictest impartiality and integrity, and courts of equity watch their proceedings with a jealous and scrutinizing eye.2 It has been generally held, therefore, that he cannot become a purchaser of the estate; and whether the creditor in whose favor the trust is created can become a purchaser at a sale thereof at auction or not, has been variously held, depending upon whether, in making such sale, the trustee acted independently of any control or direction of the creditor, as well as fairly, or whether the creditor had the power to control the sale.3

1 Lowe v. Grinnan, 19 Iowa, 197; Heard v. Baird, 40 Miss. 798; Thornton v. Boyden, 31 Ill. 210.

2 Goode v. Comfort, 39 Mo. 325.

Davoue v. Fanning, 2 Johns. Ch. 252; Iddings v. Bruen, 4 Sand. Ch. 223; Thornton v. Irwin, 43 Mo. 153; Bloom v. Van Rensselaer, 15 Ill. 503; Richards v. Holmes, 18 How. 143; Wade v. Harper, 3 Yerg. 383; Hughes v. Lyon, 6 Ves. Jr. 617.

.

1. BESIDES the mortgages which have been above described, there are two species of lien upon real estate recognized by equity as a security for the payment of money, and treated in the light of equitable mortgages. One of these is created by a deposit of the title-deeds of an estate with the lender of money. The other is raised in favor of a vendor of real estate as security for the purchase-money due from the purchaser. In respect to the first, equity regards it as an agreement to make a mortgage by the borrower to the lender, when he deposits his title-deeds with him as security for the loan, and will enforce it against the mortgagor and all persons claiming under him with notice.1 This doctrine of creating a lien in the nature of a mortgage, by a simple deposit of the title-deeds of an estate, has been strongly opposed by

1 Story, Eq. Jur. § 1020; Russel v. Russel, 1 Bro. Ch. 269, and Perkins' note and cases cited. This, in 1783, was the first case in which the law was stated. Langston, Ex parte, 17 Ves. 230; Pain v. Smith, 2 Mylne & K, 417; Mandeville v. Welch, 5 Wheat. 277. It is not necessary that the deed deposited should, in order to create an equitable mortgage, show a good title in the depositor. Roberts v. Croft, 24 Beav. 223; Edge v. Worthington, Cox, 211; Corning, Ex parte, 9 Ves. Jr. 115, and cases cited in note.

many able jurists. * Lord Eldon esteemed it as a [*503] practical repeal of the statute of frauds.

A pledge

of a lease by merely delivering it to the pledgee was held to be a good mortgage of the leasehold estate as against the assignee in bankruptcy of the pledgor, who had subsequently become bankrupt.2

2. To give the effect of a lien to the possession of title-deeds, it must be shown affirmatively that they were deposited as a bona fide, present, immediate security. If left, for instance, with the attorney for the purpose of his drawing a mortgage which had been agreed upon by the parties, it will not be sufficient. Mere possession even by a creditor is not enough.3 Nor can such a lien avail against an actual bona fide registered mortgage by one without notice, though against a creditor who subsequently levies his execution it may. Under the English system, questions have arisen how far a mortgagee would be postponed in his security, if he leaves the mortgagor's titledeeds in his possession, and he, by means of it, obtains a second loan, and makes a second mortgage upon the same premises.5 In this country, it would seem that the principle would not apply, the party making the loan having the registry of deeds to guide him, without any occasion to refer to the title-deeds of his mortgagor.

3. And the burden of proof is upon the equitable mortgagee to prove notice on the part of the subsequent legal mortgagee. What will amount to notice depends upon the circumstances of the case.* It is said that, if the owner's title-deeds

* NOTE. - For the principal proposition, see Hardy, Ex parte, 2 Deac. & C. 393. For cases illustrative of what would amount to notice, see Hiern v. Mill, 13 Ves. 114; Hewitt v. Loosemore, 9 E. L. & Eq. 35; Head v. Egerton, 3 P. Wms. 279; Adams, Eq. 123; Story, Eq. Jur. § 1020.

1 Whitbread, Ex parte, 19 Ves. 209. See also Haigh, Ex parte, 11 Ves. 403; Hooper, Ex parte, 19 Ves. 477; Norris v. Wilkinson, 12 Ves. 192.

2 Russel v. Russel, 1 Bro. Ch. 269.

8 Norris v. Wilkinson, 12 Ves. 192; Bozon v. Williams, 3 Younge & J. 150; Mandeville v. Welch, 5 Wheat. 277; Chapman v. Chapman, 3 E. L. & Eq. 70, s. c. 13 Beav. 308; Story, Eq. Jur. § 1020; 2 Crabb, Real Prop. 851. Edwards, Ex parte, 1 Deac. 611.

But see

4 Story, Eq. Jur. § 1020; Hall v. McDuff, 24 Me. 311; Whitworth v. Gaugain,

3 Hare, 416; Story, Eq. § 1503 b.

5 Herrick v. Atwood, 25 Beav. 212; Colyer v. Finch, 5 H. L. Cas. 924, 928.

6 Berry v. Mutual Ins. Co., 2 Johns. Ch. 604.

are in the hands of his solicitor, a deposit of a single titledeed, with an intent thereby to create a security on the whole estate, would be sufficient. But where one owning lands deposited his title-deeds with his bankers as security for a loan, and then entered into a marriage settlement with the woman he was about to marry, covering these lands, and her solicitor, upon inquiring for these deeds, was told they had been deposited with the owner's bankers for safe custody, it was held that it was such negligence on her part in not pursuring the inquiry further, that she could not set up the claim of a bona fide purchaser without notice against the banker's lien for money lent.2

4. It was doubtful, until within a recent period, whether this species of lien or equitable mortgage was or would be recognized by any of the courts in this country as valid. It was expressly repudiated by the courts of Pennsylvania and Kentucky. But though the deposit of title-deeds will not be held to create a mortgage in Pennsylvania, still, if it is accompanied by a written declaration, and an agreement to convey the land if the debt intended to be secured be not paid, and this is recorded in the proper registry of deeds, it will be treated as a mortgage.*

[*504] * 5. Indeed, it is not easy to see why such a doctrine should prevail in a country where the system of registration is universal, and where it must be carried out, if at all, in direct violence to the statute of frauds. But it has been recognized in several of the States as being in force. The power of creating a lien by the deposit and pledge of a title-deed seems to be recognized, though not applied, in Maine; and the same may be said of the court in Mississippi; though an intimation is made that a lien in the nature of an equitable mortgage may be valid under their

6

5

1 Chippendale, Ex parte, 2 Mont. & A. 299; Wetherell, Ex parte, 11 Ves. 398. 2 Maxfield v. Burton, L. R. 17 Eq. Cas. 15.

3 Bowersv Oyster, 3 Penn. 239; Hale v. Henrie, 2 Watts, 143; Shitz v. Dief. fenbach, 3 Penn. St. 233; Vanmeter v. McFaddin, 8 B. Mon. 435; Strauss Appeal, 49 Penn. St. 358; Kauffelt v. Bower, 7 S. & R. 64.

4 Luch's Appeal, 44 Penn. 522; Edwards v. Trumbull, 50 Penn. 512.

5 Hall v. McDuff, 24 Me. 311.

Williams v. Stratton, 10 S. & M. 418.

statute of frauds for the term of one year.

In Georgia, New

Jersey, and South Carolina,3 the power to create such a lien is recognized, and is expressly sustained in New York, though it is remarked by Comstock, J., that "we have no practice of creating liens in this manner," 5 and in Rhode Island. The same is true of Wisconsin and Illinois. The law is stated as doubtful in Vermont, while the remark of Mr. Walker upon the subject would apply in all the States: "This is called an equitable mortgage; but it is of little consequence in this country, owing to the difficulty of affecting another claimant with notice of such deposit." 8

6. This may not be the place to discuss the question how such a lien or mortgage can be foreclosed, though some writers seem to assume that the mortgagee has the same rights in equity in respect to foreclosure as he would have if it were a legal mortgage. But the remedy, whatever it may be, must obviously be sought in equity alone."

7. The other class of equitable mortgages above mentioned, which equity raises by way of lien in favor of a vendor for the payment of the purchase-money, rests upon the ground that the purchaser, in such case, is trustee of the premises for the vendor till the purchase-money is paid. In the language of one writer: "If I convey land to you, and take no collateral security for the payment of the purchase-money, you become a trustee for me until the purchase-money is paid.” 10

8. This right affects all purchasers having notice of its existence,11 and the vendor may, by virtue of it, [*505] enter and take the profits of the estate like a mort

1 Gothard v. Flynn, 25 Miss. 58.

2 Mounce v. Byers, 16 Ga. 469; Robinson v. Urquhart, 1 Beasley (N. J.), 523.

3 Welsh v. Usher, 2 Hill. Ch. 166-170.

4 Rockwell v. Hobby, 2 Sandf. Ch. 9; Chase v. Peck, 21 N. Y. 584.

5 Stoddard v. Hart, 23 N. Y. 501.

6 Hackett v. Reynolds, 4 R. I. 512.

7 Jarvis v. Dutcher, 16 Wis. 307; Richards v. Leaming, 27 Ill. 431; Keith v

Horner, 32 Ill. 526; Wilson v. Lyon, 51 Ill. 166.

8 Bicknell v. Bicknell, 31 Vt. 498; Walker, Am. Law, 315.

Adams, Eq. 125; Coote, Mortg. 220.

10 Walker, Am. Law, 315; Mackreth v. Symmons, 15 Ves. 339; Chapman v. Tanner, 1 Vern. 267; Blackburn v. Gregson, 1 Bro. C. C. 420, and Perkins' notes; Story, Eq. Jur. § 1217; 2 Crabb, Real Prop. 852; Coote, Mortg. 218. 11 Cator v. Pembroke, 1 Bro. C. C. 302, and note.