Apart from the statute just discussed (m) there remains the distinction suggested above (n) between a collateral equity to reform a mortgage and an equity affecting the mortgage account. A similar distinction was drawn in a case in which a mortgage was transferred to a person who it was alleged purchased as trustee for the mortgagor on the understanding that the mortgagor was to be allowed to redeem the mortgage at the price paid by the transferee with an additional sum for the transferee's services. The purchaser subsequently further transferred the mortgage to an assignee without notice of the trust, and it was held that such assignee took free from the trust (1) because the trust should have been evidenced by writing and (2) because the trust was one which did not affect the mortgage account but grew out of the personal relations of the mortgagor and the first purchaser and therefore was not an equity which attached to the mortgage in the hands of the second purchaser (o). The correctness of the distinction drawn is, however, doubtful (p).

(l) E.g., in a case like Elliott v. McConnell, supra.

(m) R.S.O. 1914, c. 112, s. 12. See Sec. 105.

(n) In the judgment in Bridges v. Real Estate Loan and Debenture Co., 1885, 8 O.R. 493, at p. 498.

(o) Wright v. Leys, 1885, 8 O.R. 88.

(p) In Wright v. Leys, the distinction is supported by the citation of Judd v. Green, 1875, 45 L.J. Ch. 108, 33 L.T. 597, and Nant-y-glo and Blaina Ironworks Co. v. Tamplin, 1876, 35 L.T. 125, in which it was held that where the mortgagor's equity was to set aside the mortgage, a transferee for value had a better equity and was entitled to his security. The decision in these cases is opposed to the general principle and is doubtful. See 21 Halsbury, Laws of England, pp. 177-178, note (r); 2 W. & T.L.C. Eq. note (b).

In the case of a mortgage which is voidable for fraud, it would seem that the mortgagor may set up the fraud against the assignee by way of defence as cancelling or diminishing the amount which may be claimed under the assignment (q).

Where a person holding land as trustee, at the request of the beneficial owners, and without any consideration to him therefor or intention to become personally liable, executed a mortgage on the land, the mortgage without his knowledge containing a covenant to pay the mortgage debt, it was held that the covenant was not enforceable against the mortgagor by the assignee of the mortgage for value and without notice, and that the assignee's remedy was restricted to proceedings against the land (r).