This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 536.— A customer presents his note to a chartered bank for discount and offers to give at once a mortgage as security. He is told that it is not necessary now, but is asked to promise to give it in a few days later if judged necessary. On his answering "yes" the note is discounted. He draws the proceeds or leaves them to his credit. Two or three days after he is asked to give the mortgage; he gives it.
Could the mortgage be successfully contested ?
Answer.—We think that to discount a note on a promise that mortgage security will be given is equivalent to lending money on the security of the mortgage, and that the security would be void under the Bank Act.