114. The ordinary form of a mortgage is that of an absolute conveyance with a defeasance clause. But a mortgage may be created:

(a) With a separate defeasance (p. 186).

(b) With a parol defeasance (p. 187).

(c) By a sale with an agreement to reconvey (p. 189).

(d) By a deed of trust (p. 190)

(e) By an instrument operating as an equitable mortgage, which may be:

(1) An agreement to give a mortgage (p. 190).

(2) An informal mortgage (p. 190).

(3) An assignment of a contract to purchase (p. 190).

(4) By deposit of title deeds, in a few states (p. 192). (6) A vendor's lien (p. 192).

(6) A vendee's lien (p. 19-1).

Under either theory as to the nature of a mortgage, the usual form is the same; that is, an absolute conveyance with a defeasance clause.33 But no particular form is necessary. Whenever an instrument appears to have been intended for a mortgage, the courts will so construe it.34 The defeasance clause may be in a separate instrument,35 and this may be executed at a time subsequent to the execution of the conveyance.36 Subsequent purchasers and grantees will be protected against such separate defeasance, unless it is recorded, or they have notice thereof.37 A separate defeasance may be canceled by a subsequent agreement to release, in which case the estate of the grantee becomes absolute.38

33 As to execution of mortgages, see post, p. 414. For effect of alterations, see Clark, Cont 686.

34 Hughes v. Edwards, 9 Wheat. 489; Morris v. Nixon, 1 How. 118; Russell v. Southard, 12 How. 139; Gilson v. Gilson, 2 Allen (Mass.) 115; James v. Morey, 2 Cow. (N. Y.) 246; Clark v. Henry, Id. 324; Stoever v. Stoever, 9 Serg. & R. (Pa.) 434; Rogan v. Walker, 1 Wis. 527.

35 Dubuque Nat. Bank v. Weed, 57 Fed. 513. Except in a few states where it is prohibited by statute, see 1 Stim. Am. St. Law, § 1856. And in some states the defeasance must be recorded, or the mortgagee takes nothing. See post, p. 218

36 Jeffery v. Hursh, 58 Mich. 246, 25 N. W. 176, and 27 N. W. 7; Waters y. Crabtree, 105 N. C. 394, 11 S. E. 240.

Parol Defeasance-deed Absolute on Its Face.

In a court of law a grantor will not be permitted to show by parol evidence that his deed, absolute in form, was in fact a mortgage.39 But courts of equity permit such parol defeasance to be established.40 But a mortgage cannot be set up in this way against subsequent purchasers from the grantee, without notice,41 though the mortgagee would be liable to account to the mortgagor either for the proceeds of the sale, or the value of the land.42 Some courts say that the grantor will be permitted to establish a defeasance by parol only in cases of fraud, accident, or mistake.43 But most courts grant this relief whenever necessary to effectuate the intention of the parties.44 These cases are held not to be within the statute of frauds, because that statute is never permitted to be made an instrument of fraud.45 The test of the real character of the transaction is, in all cases, the intention of the parties.46 This is shown by their acts. For instance, continued possession by the mortgagor,47 and his payment of interest and taxes,48 the continuance of the relation of debtor and creditor, and the retention of the evidence of debt by the grantee,49 as well as inadequacy of price, all go to show that the conveyance was in fact a mortgage.50 On the other hand, if the debt is canceled,51 and the mortgagee takes possession and makes improvements, the presumption is almost conclusive that no mortgage was intended.* To permit the establishment of a parol defeasance, it is not necessary that the conveyance be made by the debtor,52 since the grantee may have purchased at a foreclosure or execution sale on behalf of the one claiming to be mortgagor, and the purchaser have taken title in his own name for security,53 It may also be shown by parol evidence that an assignment of a mortgage, or of a contract to purchase, absolute in

37 Brown v. Dean, 8 Wend. (N. Y.) 208; Walton v. Cronly's Adm'r, 14 Wend. (N. Y.) 63; Dey v. Dunham, 2 Johns. Ch. (N. Y.) 182; Friedley v. Hamilton, 17 Serg. & R. (Pa.) 70.

38 1 Jones, Mortg. (5th Ed.) § 252.

39 Webb v. Rice, 6 Hill (N. Y.) 219; Gates v. Sutherland, 76 Mich. 231, 42 N. W. 1112. Contra in some states. Tillson v. Moulton, 23 111. 648; Wilcox v. Bates, 26 Wis. 465; Plato v. Roe, 14 Wis. 453. And see Jones, Mortg. (5th Ed.) § 282, note 1.

40 Mcarthur v. Robinson (Mich.) 62 N. W. 713; Morrow v. Jones, 41 Neb. 867, 60 N. W. 369; Dunton v. Mccook (Iowa) 61 N. W. 977; Montgomery v. Beecher (N. J. Ch.) 31 Atl. 451; Ahem v. Mccarthy, 107 Cal. 382, 40 Pac. 482. But see Fuller v. Trust Co., 157 Pa. St. 646, 2S Atl. 148. Contra, by statute, in some states. 1 Stim. Am. St. Law, § 1856; 1 Jones, Mortg. (5th Ed.) §§ 282, 312.

41 Jackson v. Lawrence, 117 U. S. 679, 6 Sup. Ct. 915; Meehan v. Forrester, 52 N. Y. 277; Pancake v. Cauffman, 114 Pa. St 113, 7 Atl 67; Sweetzer v. Atterbury, 100 Pa. St. 22. But see Gibson v. Hutchins, 43 S. C. 287, 21 S. E. 250.

42 Jackson v. Stevens, 108 Mass. 94; Heister v. Madeira, 3 Watts & S, (Pa.) 384; Boothe v. Fiest, 80 Tex. 141, 15 S. W. 799.

43 Sprague v. Bond, 115 N. C. 530, 20 S. E. 709; Green v. Sherrod, 105 N. C. 197, 10 S. E. 986; Washburn v. Merrills, 1 Day (Conn.) 139; Brainerd v. Brain-erd, 15 Conn. 575. And see Furguson v. Bond, 39 W. Va. 561, 20 S. E. 591.

44 1 Jones, Mortg. (5tb Ed.) § 321; Sanborn v. Sanborn (Mich.) 62 N. W. 371; Emerson v. Atwater, 7 Mich. 12; Swetland v. Swetland, 3 Mich. 482; Klock v. Walter, 70 111. 416; Wynkoop v. Cowing, 21 I1l 570; Workman v. Greening.

115 111. 477, 4 N. E. 385; Campbell v. Dearborn, 109 Mass. 130; Horn v. Keteltas, 46 N. Y. 605; Fiedler v. Darrin, 50 N. Y. 437; Ithines v. Baird, 41 Pa. St. 256; Plumer v. Guthrie, 76 Pa. St 441; Rogan v. Walker, 1 Wis. 527; Wilcox v. Bates, 26 Wis. 465.

45 Reigard v. Mcneil, 38 111. 400; Landers v. Beck, 92 Ind. 49; Moore v. Wade, 8 Kan. 380; Klein v. Mcnamara, 54 Miss. 90; Sewell v. Price's Adm'r, 32 Ala, 97.

46 Russell v. Southard, 12 How. 139; Darst v. Murphy, 119 111. 343, 9 N. E. 887; Workman v. Greening, 115 111. 477, 4 N. E. 385; Ingalls v. Atwood, 53 Iowa, 283, 5 N. W. 160; Lane v. Shears, 1 Wend. (N. Y.) 433; Cole v. Bolard, 22 Pa. St 431.

47 Campbell v. Dearborn, 109 Mass. 130.

48 Boocock v. Phipard, 52 Hun, 614, 5 N. Y. Supp. 228.

49 Ennor v. Thompson, 46 111. 214.

5o Helm v. Boyd, 124 111. 370, 16 N. E. 85; Wilson v. Patrick, 34 Iowa, 862. But see Story v. Springer, 155 111. 25, 39 N. E. 570.

51 Rue v. Dole, 107 I1l 275; Ford v. Irwin, 18 Cal. 117.

*Woodworth v. Carman, 43 Iowa, 504.

52 Jourdain v. Fox, 90 Wis. 99, 62 N. W. 936; Stoddard v. Whiting, 46 N. Y. 627; Can- v. Carr, 52 N. Y. 251.

53 Ryan v. Dox, 34 N. Y. 307; Union Mut Life Ins. Co. v. Slee, 123 111. 57, 12 N. E. 543; Phelan v. Fitzpatrick, 84 Wis. 240, 54 N. W. 614; Hoile v. Bailey, 58 Wis. 434, 17 N. W. 322.

114) form, was intended as mere security.54 But in all cases strict proof is required of the one who seeks to show that the transaction was a mortgage.55a judgment creditor, or other persons succeeding to the rights of the mortgagor, may show the true character of the transaction.56 A parol defeasance may be extinguished by a subsequentagreement57

Sale with Agreement to Reconvey.

A sale with an agreement to reconvey may be a mortgage,58 or a conditional sale.59 In a court of law it may be shown to be a mortgage, if the sale and the agreement are executed at the same time.60 Courts of equity are more lenient, and sometimes permit it to be shown that the transaction was a mortgage, although the agreement to reconvey was executed subsequently.61 Parol evidence is admissible to connect the two instruments.62 The circumstances which tend to show that an absolute conveyance was in fact a mortgage would also show that a sale with an agreement to reconvey was a mortgage.63 But such a transaction may be a condi54 Mcclintock v. Mcclintock, 3 Brewst (Pa.) 76; Briggs v. Rice, 130 Mass. 50; Smith v. Cremer, 71 111. 185.

55 Magnusson V. Johnson, 73 111. 156; Case v. Peters, 20 Mich. 298; Tilden v. Streeter, 45 Mich. 533, 8 N. W. 502; Johnson v. Van Velsor, 43 Mich. 208, 5 N. W. 265; Pancake v. Cauffnian, 114 Pa. St 113, 7 Atl. 67; Lance's Appeal, 112 Pa. St. 456, 4 Atl. 375; Hartley's Appeal, 103 Pa. St 23.

56 Van Buren v. Olmstead, 5 Paige (N. Y.) 9; Judge v. Reese, 24 N. J. Eq. 887; Clark v. Condit, 18 N. J. Eq. 358.

57 And this may be by parol. Jordan v. Katz, 89 Va. 628, 16 S. E. 866.

58 Keithley v. Wood, 151 111. 566, 38 N. E. 149; Helbreg v. Schumann, 150 111. 12, 37 N. E. 99; Shields v. Russell, 142 N. Y. 290, 36 N. E. 1061; Rempt v. Ceyer (N. J. Ch.) 32 Atl. 266; Eckford v. Berry, 87 Tex. 415, 28 S. W. 937; Williams v. Chambers-roy Co. (Tex. Civ. App.) 26 S. W. 270; Alderson v. Caskey (Ky.) 24 S. W. 629; Nelson v. Atkinson, 37 Neb. 577, 56 N. W. 313.

59 Blazy v. Mclean, 77 Hun, 607, 28 N. Y. Supp. 286; Stowe v. Banks, 123 Mo. 672, 27 S. W. 347; Tygret v. Potter (Ky.) 29 S. W. 976.

60 Murphy v. Calley, 1 Allen (Mass.) 107; Bennock v. Whipple, 12 Me. 346; Mclaughlin v. Shepherd, 32 Me. 143. Delivery of the agreement to reconvey in escrow is not sufficient Bodweh v. Webster, 13 Pick. (Mass.) 41L

61 Walker v. Mining Co., 2 Colo. 89.

62 Preschbaker v. Feaman, 32 I1l 475; Umbenhower v. Miller, 101 Pa. St 73; Gay v. Hamilton, 33 Cal. 686.

63 1 Jones, Mortg. (5th Ed.) §§ 274, 275u tional sale, if the intention of the parties so appears, either by their express declaration, or by the circumstances of the case.64 Such intention is shown by the fact that the debt previously due from the grantor is extinguished,65 and that there is no agreement to pay,66 and by an agreement that the grantee may buy the estate absolutely after a certain time.67 Nor does the mere recording of the instrument as a mortgage prevent a showing that it was in fact a conditional sale.68