Rule 3. As between a first equitable mortgage and a second legal mortgage the second mortgage has priority if the holder is a mortgagee in good faith for value and without notice.

This principle is often expressed by the maxim "Where the equities are equal the law [that is, the legal title] prevails. " The reason of the rule is that if two claims are equally meritorious there is no ground for depriving the claimant who has the legal estate of the priority which that estate gives him (m). If, however, the second mortgagee in taking his security is guilty of negligence so gross as to render it unjust to deprive the prior mortgagee of his priority, the second mortgagee will be postponed notwithstanding that he has the legal estate and that has not been guilty of fraud or of negligence amounting to fraud (n).