Mortgage (Fr. mort, dead, and gage, pledge; Lat. vadium mortuum). Kent defines a mortgage to be "the conveyance of an estate by way of pledge for the security of a debt, to become void on payment of it." The old law writers Glanvil and Spelman say that mortgage is so called because, between the time of making the conveyance and the time appointed for payment of the debt, the creditor by the old law received the rents of the estate to his own use, so that these rents were dead or lost to the mortgageor. Littleton gives another derivation of the word, viz.: "If the feoffor doth not pay the sum due at the day limited, then the land which is put in pledge upon condition for the payment of the money is taken from him, and so dead to him upon condition." This derivation is the one usually adopted; though the former has been sometimes preferred, not only because the idea which it conveys of the mortgage, or vadium mortuum., is directly opposed to that of the vadium vivum, an old form of security no longer in use, in which the accruing rents were applied to diminish the debt, but also because it illustrates the intention which mortgages were first probably designed to effect.
For in the times when the exaction of interest was esteemed usurious and was prohibited by the law, this conditional alienation was devised, not at all with the design of depriving the mortgageor of his property if he failed to repay the money, but that the mortgagee might in the mean time receive the rents to his own use in lieu of what he would otherwise have received as interest. - A mortgage was generally created by a conveyance of lands from a debtor to his creditor, with a condition that if a sum of money were paid on a certain day the conveyance should be void, and the debtor might have his former estate. But a mortgage might also be made by an absolute deed of conveyance and a defeasance back to the grantor. This defeasance was a separate instrument defeating the principal deed by making it void if the condition was performed. The former mode was by far the more usual. The maxims of the common law were strictly applied to this kind of conveyance; and if the money were not paid at the very day specified in the deed, the lands were absolutely forfeited, nor would a subsequent tender of the money avail the debtor.
But the mortgaged lands were plainly only intended as security for the payment of the money borrowed; and large estates were sometimes pledged for the payment of small debts. A strict forfeiture in such cases was not only inconsistent with the plain principles of justice, but was contrary to the spirit of the contract. For these reasons the court of chancery interposed, and by an equitable construction mitigated the severity of the common law, by holding the condition to be in the nature of a penalty, against which a just relief should be given. This just relief consisted in allowing the debtor, if within a reasonable time he paid the debt with interest, to call on his creditor for a reconveyance of the lands. But on the other hand, chancery gave to the mortgagee, after reasonable indulgence to the mortgageor, the right to call upon the latter for the payment of the debt, or in default thereof to be for ever foreclosed or excluded from any further right of redemption. The right of redemption is considered in equity to be an inseparable incident of every mortgage, and no executory agreement that it shall be forfeited, lost, or abridged on failure to per-form the condition of the mortgage will be sanctioned.
From mortgages, however, in respect to restrictions of the equity of redemption, must be distinguished sales with agreements to repurchase, or, as they are usually termed, conditional sales. In their forms the two transactions are often very similar, and it is difficult to distinguish them. The difference is, that one is only security for a debt, while the other is a regular purchase, for a price paid or to be paid, to become absolute on a particular event. Since this complete recognition of the equity of redemption by the courts, the mortgage has gradually ceased to be looked upon as a conveyance of an estate; and though it still is so in form, the mortgageor is regarded as owner subject to a lien on the land for the amount of the mortgage debt, and he may sell or mortgage again subject to such lien; the land may be taken on execution against him; it is subject to dower and curtesy, and on his death passes to his heirs. On the other hand, the interest of the mortgagee is personalty, and may be sold as such, and the mortgage lien passes on a sale of the debt whether formally assigned or not. One important incident usually pertaining to ownership, however, still attaches to the mortgagee's right; namely, that he may demand and obtain possession even before his debt is due.
This right, however, is taken away by statute in some of the United States. The lien of the mortgagee is terminated by payment, without any formal discharge, though an instrument to go upon the record of the mortgage as evidence of the fact is usually required and given. A tender of the amount due will also discharge the lien, even though not accepted. - The equity of redemption can only be cut off by some species of foreclosure. Possession of the mortgagee may ripen into foreclosure, if he occupies the land for a period after the debt is due equal to the time required at law to bar a right to lands under the statute of limitations, and in some states for a much shorter period after formal entry as provided. If the mortgage, as is usually the case, contains an authority to the mortgagee to sell the land to satisfy the debt, he may foreclose by the exercise of this power at public auction, without resort to suit. Statutes regulate the process, and usually require a previous published notice for several weeks or months. The most usual process of foreclosure is by suit in equity, or analogous proceedings, in which decree or judgment will be entered that unless payment be made by a short day named, the land shall be sold by the proper officer of the court for its satisfaction.
Sometimes, though only under peculiar circumstances, a decree for strict foreclosure is made; that is, it is decreed that unless payment is made by the day fixed the equity of redemption shall be barred, and the title of the mortgagee be established. Usually the mortgage secures the personal obligation of the mortgageor, evidenced by bond, note, or other form of promise; but sometimes it is given without, the mortgageor simply conveying the land with a condition that the conveyance shall be void if a certain sum shall be paid at a time named. Such a mortgage leaves it to his option to pay or not, and the mortgagee's remedy is confined to the land if he fails to pay. But when a mortgage is given to secure a personal obligation, the mortgagee will pursue his remedy by suit on such obligation or by foreclosure, as he may prefer; and if he elects the latter process and fails to realize sufficient to satisfy the debt, he may then resort to the personal responsibility of the mortgageor for the deficiency. It should be added that mortgages may be conditioned for the performance of any other legal promise besides the payment of money; but the rules above given are equally applicable to all cases. - Something may here be said of equitable liens in the nature of mortgages.
In England, where the borrower of money depots with the lender the title deeds of an estate, he is regarded as charging the estate in equity with a lien for the security of the loan, and this is called an equitable mortgage, because the courts of equity take notice of and enforce it, though it is not recognized at law. This principle is unknown in the law of the United States. Hut the similar lien of the vendor of lands for unpaid purchase money is recognized both here and in England. (See Lien'.) - Many of the rules applicable to mortgages of real property are involved also in those of personal property, but the difference in the subjects introduces some differences into the law. Any personal property, and any profits arising out of personal chattels, may be the subjects of mortgage. But the articles must be such that they are capable of being specifically designated and identified by written description. The mortgagee has the legal title subject to be defeated by redemption, and, un-less otherwise agreed, the right to the immediate possession.
As between the parties, the mortgage is valid without a change of pos-session; but as to subsequent purchasers and creditor.; the continued possession by the mortgagor is prima facie but not conclusive evidence of fraud; the burden of proof rests on the mortgagee to explain the transaction, and it is for the jury to decide upon the facts. The mortgage must be generally recorded upon a public register; but a full actual notice, such a notice, says the court in Massachusetts, as would have been given by the instrument of mortgage, may preclude a subsequent purchaser or creditor from availing himself of the omis-sion of registration. Under the usual statutory provisions the mortgage must be recorded in the town where the mortgageor lives. In these mortgages the property passes so completely to the creditor that, unlike the equity of redemption in mortgages of real property, it cannot be seized on execution or attached as the property of a mortgageor. This rule is modified by statute in some of the states. As to assignment and extinguishment of the mortgage by payment, the same general principles apply as to mortgages of real property. The same remark may be made of the distinction between mortgages and conditional sales.
The legal doctrine respecting the mortgagee's inter-est being strictly maintained, a failure to pay the debt at the time appointed vests in him an absolute title, unless where the statutes of the state in which the transaction took place provide an equity of redemption. In other cases, however. this right may be given by courts having equitable powers.