Sec. 61. The three equitable rules as to priorities, p. 93.

Sec. 62. Rule 1. Between two equitable mortgages, p. 94.

Sec. 63. Rule 2. Between first legal mortgage and second equitable mortgage, p. 96.

Sec. 64. Rule 3. Between first equitable mortgage and second legal mortgage, p. 97.

Sec. 65. The equitable doctrine of notice, p. 97.

Sec. 66. Constructive notice, p. 98.

Sec. 67. Priority of first mortgagee unless he is estopped or the second mortgagee has the legal estate, p. 100.

Sec. 68. Purchase of legal estate for value without notice, p. 101.

(1) Instrument concealed from mortgagee.

(2) Subsequent receipt of notice.

(3) Subsequently getting in the legal estate.

(4) Better right to call for the legal estate.

(5) Tacking.

Sec. 61. The three equitable rules

The owner of land can create only one legal mortgage of his interest, because he can convey away the legal estate only once, but he may create any number of equitable mortgages relating to the same land, because an equitable mortgage does not involve the conveyance of the legal estate. The question of the order in which two or more mortgages are entitled to rank on property is commonly referred to as the question of priorities. Such a question may arise between a legal mortgage and an equitable mortgage or between two equitable mortgages. The general principles governing the decision of the question may be stated in the form of three rules (a). Sec. 62. Rules as to priorities.

Rule 1. As between two equitable mortgages the first in time has priority unless the second mortgagee, being a mortgagee in good faith for value and without notice, has been misled by the fraud or negligence of the first mortgagee.

This principle is often, somewhat loosely, expressed by the maxim "Where the equities are equal, the first in time prevails"-Qui prior est tempore potior est jure (b).

Equality in this connection means that there is no circumstance affecting the conduct of one of the rival claimants which makes his claim less meritorious than that of the other claimant (c). It is well established that if there is no other ground of preference priority in time will prevail (d), but that the earlier claimant may be postponed by negligence and a fortiori by fraud.

(a) See Sec. Sec. 62, 63, 64. Reference must be had to Chapter 8, The Registry Act, and chapter 10, The Land Titles Acts, as to the extent to which these statutes have affected the application of the equitable principles stated in the present chapter.

(b) It is perhaps hardly necessary to point out that a different rule of priority applies if the subject matter of the charge is personalty. Leaseholds are real estate for the purpose of this rule. Taylor v. London and County Banking Co., [1901] 2 Ch. 231, at p. 255. In the case of equitable assignments of choses in action or assignments or charges of equitable interests in personalty, priority belongs prima, facie to the claimant who first gives notice to the trustee or holder of the legal title or fund. Dearie v. Hall, 1823, 3 Russ. 1, 10 R.C. 478; Ward v. Duncombe, [1893] A.C. 369, at-pp. 384, 390; In re Dallas, [1904] 2 Ch. 385. The rule in Dearie v. Hall applies even if the legal property is reality, provided that the equitable interest which is the subject matter of the charge or assignment can be claimed only in the form of money. Lloyds Bank v. Pearson, [1901] 1 Ch. 865.

(c) Bailey v. Barnes, [1894] 1 Ch. 25, at p. 36, 18 R.C. 510, at p. 520.

(d) Phillips v. Phillips, 1862, 4 DeG. F. & J. 208, 10 R.C. 533; In re Samuel Allen & Sons, [1907] 1 Ch. 575 (unpaid vendor of ma-

In most of the cases the negligence with which the prior mortgagee is charged is negligence relating to the title deeds (e). It is customary for a person who advances money on what is intended to be a first mortgage to receive the title deeds. The possession of the title deeds by a person whom they show or purport to show to be entitled to the land is consequently proof prima facie that there is no mortgage. Accordingly, an intending mortgagee should, for his own protection, obtain, if possible, the possession of the title deeds and retain possession of them (f). If the first equitable mortgagee makes no enquiry about the deeds or upon enquiry does not receive a reasonable explanation of their non-production (g), with the result that a subsequent mortgagee is induced by the production of the deeds to advance money under the impression that no prior mortgage exists, the first mortgagee will be postponed to the second (h). Similarly chinery affixed to the freehold entitled to priority over subsequent equitable mortgagee by deposit of deeds); In re Morrison, Jones v. Taylor, [1914] 1 Ch. 59 (a similar case except that the subsequent claim was based on a floating charge); contrast Hobson v. Gorringe, [1897] 1 Ch. 182, 12 R.C. 208, in which the subsequent claim was based on a legal mortgage and was held entitled to priority in accordance with rule 3, Sec. 64, infra; Hetherington v. Sinclair, 1915, 34 O.L.R. (61, 23 D.L.R. 630.

(e) E.g. Rice v. Rice, 1854, 2 Drew. 73, 10 R.C. 507 (unpaid vendor who had signed a receipt and given up possession of title deeds postponed to subsequent mortgagee by deposit of deeds); Farrand v. Yorkshire Banking Co., 1888, 40 Ch. D. 182 (negligence on part of first mortgagee in failing to get deeds); Capell v. Winter, [1907] 2 Ch. 376.

(f) Farrow v. Rees, 1840, 4 Beav. 18; Briggs v. Jones, 1870, L.R. 10 Eq. 92. Cf. Strahan, Law of Mortgages, 2nd ed., pp. 71-73, where the substance of the paragraph in the text is stated somewhat more fully, with references to the cases.

(g) Dixon v. Muckleston, 1872, L.R. 8 Ch. 155.

(h) Clarke v. Palmer, 1882, 21 Ch. D. 124; In re Castell & Brown, [1898] 1 Ch. 135. See also note (e), supra.

an unpaid vendor who signs a receipt for the purchase money will be postponed to a subsequent mortgagee who advances money on the faith of the vendor's receipt (i).