A mortgage is an instrument creating a lien, or something that resembles a lien, upon the land of the mortgagor. A. desires to borrow money of B., who does not feel safe in making A. a loan unless A. gives him some security. B. makes A. a loan of $10,000, A. giving B. a mortgage on A.'s farm, to secure the note for $10,000.

Just what is this mortgage? In most states to-day, it is, for nearly all practical purposes, a mere lien upon A.'s farm, with a power in B. to cause the sale of A.'s farm in the event of default by A. in the payment of the note secured by the mortgage. Originally a mortgage transferred to the mortgagee the legal title in the land, the mortgagor retaining merely a right to redeem the land by paying the debt, which right he might enforce in a court of equity, if the mortgagee refused to permit him to redeem. This "legal title theory" of the mortgage still prevails in a number of states, though, even in such states, the mortgagor is now treated by the law, in many ways, as if he were the true owner of the land. To-day, if he wishes to enforce his mortgage, the mortgagee, in most, if not all, states, must bring suit for foreclosure in a court of equity and have the property sold at a foreclosure sale had under order of the court. Out of the proceeds of this sale the mortgagee is paid his debt, and if there is anything left above the debt and costs, this surplus goes to the mortgagor, while, if there is a deficiency, there is a judgment rendered against the mortgagor for the amount of such deficiency.

A real estate mortgage may be of land or of any interest in land. A. may mortgage to B. A.'s fee-simple title, or ownership, of land; or A. may mortgage to B. A.'s life estate in land; or A. may mortgage to B. A.'s reversion in land, that is, A.'s right to have certain land come back into A.'s possession at some time in the future, after the expiration of a lease or of a life term.

A mortgage, like a collateral pledge, may be given to secure future advances, but, like a collateral pledge, would not cover such advances unless it is so stipulated. Also, if a first mortgage is given to secure future advances, the general rule is that the advances, when at last made, do not carry with them the security of the mortgage, as against a second mortgage intervening between the time of the first mortgage

and the time of the advance, if the second mortgage is known to the first mortgagee at the time he makes the advance.

"Recording acts" of the various states make it prudent and almost necessary to file each real estate mortgage in the office of a designated county officer for record. When once the mortgage is recorded, all the world is taken to have notice of the mortgage, and it follows that persons later purchasing the land, or taking a subsequent mortgage on it during the life of the mortgage, take subject to the rights of the person holding the prior recorded mortgage.1

In deciding whether one will loan money on a mortgage on certain real estate, many things must be considered. A. requests a loan of B. on a mortgage on A.'s real estate. If B. is accustomed to such business, he will first decide whether, on the basis of the value of A.'s property, he can safely make such a loan. After allowing for possible depreciation in the value of A.'s property during the period of the loan, will its value safely cover the principal, the interest, court costs of foreclosure, and attorney's fees? If not, it is not entirely safe to make the loan. Many lenders of money arbitrarily require security in twice the amount of the principal, which, as a practical matter, does not always give sufficient protection to the lender, but actually leaves in some cases an unnecessarily wide margin of safety. B. lends A. $500, secured by a mortgage on a piece of real estate worth $1,000. Where the amounts are so small as these, B.'s security may prove wholly inadequate. Circumstances might arise in which more than the $500 margin would be required to cover foreclosure costs and attorney's fees. On the other hand, a $10,000 piece of property would, in most cases, prove more than adequate security for a loan of $5,000, as it is very unlikely that court costs and attorney's fees will eat up the $5,000 margin.

But, even after deciding the preliminary matter of value, B. will always insist that an abstract of title to the property be submitted for examination by his attorney. In many instances, it is agreed between. A. and B. that A. is to bear the cost of examining this abstract. If the title is in an unsatisfactory condition, the attorney will state to B. the defects therein, and the loan will not be made until such defects are remedied.

Some of the common defects making trouble in such cases are mortgages that remain unreleased of record, because the mortgagee has neglected to execute a release, or because the mortgagor has failed to get such a release recorded in the office of the county recorder; defective proceedings in probate or administration; divorce proceedings that have not terminated the rights of the spouse of the then owner; failure of a wife to relinquish dower; failure of deeds of conveyance to show whether grantor was bachelor, a married man, a spinster, a

1 In Wyman's Cases on Mortgages the origin of the mortgage in the pledge concept is made evident by two early cases: Lands of Thomas Archbishop (Domesday Inquisition, 1085) Placita Anglo-Normania, 58; and Hinton et ux. v. Morton et al. (King's Bench, 1201) Select Civil Pleas (Selden Society), p. 36. In the former case, it is said that "this land was put in pledge by Raynerus of Brimon for III pounds."

married woman, etc.; and errors in spelling the names of grantors and grantees.

Also, before making the loan, B. should ascertain certain facts which will not be shown in the record. B. should ascertain whether any easements exist on the property, such as a right of way across it, or an easement in a party wall on one boundary. If X., a third party, holds some easement in the land, B. must, in a foreclosure suit, make X. a party. On account of X.'s interest, the foreclosure suit may be much more complicated and drawn out and expensive. Therefore many lenders will not lend money at all on property in which a third party has an easement.

Another reason why B. must make some investigation of the premises is that he ought to ascertain who is in possession, and by virtue of what right he is in possession. A usually prudent bank once lent $15,000 on a farm, to which the borrower and mortgagor had a title that looked perfectly good on the record; but, without the knowledge of the bank, X., a third person, was then in possession of the farm, and had been in possession so long that he had a good title by adverse possession under the laws of the state. The bank's cashier, before making such a loan, should have ascertained the physical fact of X.'s possession and the further fact that X. had title by adverse possession.

A real estate mortgage to-day usually takes one of two forms: First, a regular mortgage-that is, a deed conveying the premises from the mortgagor to the mortgagee, the deed being defeasible under a "defeasance clause," which provides that, upon the payment of the amount of the note secured, the deed shall be of no effect; second, a deed of trust, conveying the land to a third person as trustee for the purpose of securing the note.

In states where the trust deed is permitted, it is the common preferred form, for several reasons: First, inasmuch as the trustee is trustee for all the purposes of the trust in connection with the note secured, the trustee can, without the assignment of the trust deed by the payee to his indorsee of the note secured, do all acts necessary to the enforcement of the trust deed, when the indorsee desires action on the part of the trustee for the enforcement of the terms of the trust deed; second, inasmuch as the records of the county reveal only the names of the maker and payee of the note and of the trustee, and the trustee can act for the indorsee without any further formalities, without the indorsee's name appearing in the record of trust deeds in the county at all, it tends to keep private the business of the indorsee and keep the general public from knowing that he now owns the note. In many places, personal property taxes consume a large part of the interest on notes, and, because of the secrecy as to the present ownership of a note secured by a trust deed, unscrupulous holders of such notes have found it easy to evade the personal property tax thereon.

Some trust deeds, give a power of sale to the trustee, so that, in the event of the nonpayment of the note at maturity, the trustee may sell the land. Such powers are, in some states, rendered ineffective by

modern statutes. A power of sale in a mortgagee or in a trustee, it is submitted, is against the whole spirit of modern equity, as its unlimited enforcement would virtually mean a return to the ancient and harsh policy of strict foreclosure.

Following is a form of trust deed:

This indenture witnesseth: That the grantor, George Cable, a bachelor, of the Village of Oak Park, in the county of Cook, and state of Illinois, for and in consideration of the sum of ten dollars, in hand paid, conveys and warrants to Thomas Keeley, of the City of Elmhurst, county of Du Page, and state of Illinois, the following described real estate, to wit: Lots two (2) and three (3) in block one (1) of Harding's addition to the city of Elmhurst, situated in the county of Du Page, in the state of Illinois, hereby releasing and waiving all rights under and by virtue of homestead exemption laws of the state of Illinois, and all right to retain possession of said premises after default in payment or a breach of any of the covenants or agreements herein contained, in trust, nevertheless, for the following purposes:

Whereas, the said George Cable, grantor herein, is justly indebted upon one certain promissory note bearing even date herewith, payable to the order of John Scott, in one year, in the amount of fourteen thousand dollars ($14,000), with interest at six per cent. (6%) from date until paid:

Now, if default be made in the payment of the said promissory note or of any part thereof, or the interest thereon, or any part thereof, at the time and in the manner above specified for the payment thereof, or in case of waste or nonpayment of taxes or assessments on said premises, or of a breach of any of the covenants or agreements herein contained, then and in such case the whole of said principal sum and interest, secured by the said promissory note, shall thereupon, at the option of the legal holder or holders thereof, become immediately due and payable; and on the application of the legal holder of said promissory note, or either of them, it shall be lawful for the said grantee, or his successor in trust, to enter into and upon and take possession of the premises hereby granted, or any part thereof, and to collect and receive all rents, issues and profits thereof; and in his own name, or otherwise, to file a bill or bills in any court having jurisdiction thereof against the said party of the first part, his heirs, executors, administrators and assigns, to obtain a decree for the sale and conveyance of the whole or any part of said premises for the purpose herein specified, by said. party of the second part, as such trustee or as special commissioner, or otherwise, under order of court, and out of the proceeds of any such sale to first pay the costs of such suit, all costs of advertising sale and conveyance, including the reasonable fees and commissions of said party of the second part, or person who may be appointed to execute this trust, and one hundred dollars attorney's and solicitor's fees, and also all other expenses of this trust, including all moneys advanced for insurance, taxes and other liens or assessments, with interest thereon at 7 per cent. per annum, then to pay the principal sum of said note, whether due and payable by the terms thereof or the option of the legal holder thereof, and all interest due thereon, rendering the overplus, if any, unto the said party of the first part, his legal representatives or assigns, on reasonable request, and it shall not be the duty of the purchaser to see to the application of the purchase money.

When the said note and all expenses accruing under this trust deed shall be fully paid, the said grantee or his successor or legal representatives shall reconvey all of said premises remaining unsold to the said grantor or heirs or assigns, upon receiving his reasonable charges therefor. In case of the death, resignation, absence, removal from said Du Page county, or other inability to act of said grantee, then Josef Mulcahy, of said Elmhurst, in said Du Page county, is hereby appointed and made successor in trust herein, with like power and authority, as is hereby vested in said grantee. It is agreed that said grantor shall pay all costs and attorney's fees incurred or paid by said grantee or the holder or holders of said note in any suit in which either of them shall be plaintiff or defendant, by reason of being a party to this trust deed, or a holder of said note, and that the same shall be a lien on said premises, and shall be included in any decree ordering the sale of said premises and taken out of the proceeds of any sale thereof.

Witness the hand and seal of said grantor this 1st day of May, A. D. 1925. George Cable. [Seal.]

State of Illinois, County of Cook-ss.:

I, William Coleman, a notary public in and for said county, in the state aforesaid, do hereby certify that George Cable, a bachelor, personally known to me to be same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed, sealed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth, including the release and waiver of the right of homestead.

Given under my hand and notarial seal, this 1st day of May, A. D. 1925. William Coleman, Notary Public.

[Notarial Seal.]

SPENCER v. WATERMAN.

(Supreme Court of Errors of Connecticut, 1870. 36 Conn. 342.)

Bill in equity. The petition alleged that the respondent Waterman, on the 4th of April, 1866, mortgaged to James Jennings, another of the respondents, a piece of land in the town of Danbury of which he was the owner in fee, containing half an acre with buildings thereon, to secure a debt of $250; that the petitioner on the 29th of August, 1868, levied an execution which he held against Waterman on the equity of redemption in the mortgaged premises, and had an undivided portion of the same set off to him according to law, the whole premises being appraised by the appraisers legally appointed at $639.50, and such proportion being set off to him as an undivided interest at $49.83, the amount of his execution, bore to the value of the whole, alleging that the premises were so situated that they could not be divided, and praying that they might be sold under an order of the court and the proceeds divided among the parties interested.

The respondents demurred to the petition, and the superior court held it sufficient and passed a decree that the premises should be sold by a person appointed for that purpose, and that a return of the sale should be made to the court for its further order with regard to the proceeds of the sale. The respondents filed a motion in error and brought the record before this court for revision. * *

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