at 6 per cent., and by a separate deed the mortgagor covenanted to convey to the mortgagee, if he (the mortgagee) thought fit, ground-rents at twenty years' purchase to the value of 16,000., on bill filed to redeem on the usual terms of payment of principal, interest, and costs, the defendant insisted on the agreement, but the Master of the Rolls decreed according to the prayer of the bill. (4.) Right of Pre-emption. So careful is equity to protect the debtor against the oppression of his creditor, that it will not allow the mortgagee to enter into a contract with the mortgagor, at the time of the loan, for the absolute purchase of the lands for a specific sum, in case of default made in payment of the mortgage-money at the appointed time, justly considering that it would throw open a wide door to oppression, and enable the creditor to drive an inequitable and hard bargain with the debtor, who is rarely prepared to discharge his debt at the specific time (e). But we must be careful to distinguish between the last-mentioned rule and a case with which it may be confounded, viz., an agreement by the mortgagor, in case of sale, to give the mortgagee a preference of pre-emption, which, if claimed within a reasonable time, will be enforced (ƒ). And although at first view this may seem to be within the objection raised by equity, viz., that of giving the creditor a collateral advantage over and above his principal and interest, yet on closer inspection it will be found clear of the rule. The option of sale is still left with the mortgagor; he may redeem or sell, nor is he tied down to price; all that is stipulated for is, that if he thinks fit to sell, he shall give the mortgagee the refusal. In Willett v. Winnell (e), and Bowen v. Edwards (e), the sale was compulsory and the price stipulated. Rights of pre-emption, however, are construed strictly (f). (5.) Conditional Purchase distinguished from Mortgage. The rule must be further distinguished from the cases in which the Courts have considered the agreement not to amount to a (e) Price v. Perrie, 2 Freem. 258; Willett v. Winnell, 1 Vern. 488; Bowen v. Edwards, 1 Rep. in Ch. 221. (f) Orby v. Trigg, 2 Eq. Ca. Abr. 599, 24; 9 Mod. 2; re Edwards, 11 Ir. Ch. R. 367. See Dawson v. D., 8 Sim. 346; Cookson v. C., ib. 529. mortgage, but to be a conditional purchase, in which instances the vendor will be kept to his contract. Of this class is the case of an agreement for the purchase of the equity of redemption, entered into bonâ fide and subsequently to a mortgage which was made and concluded without reference to any such agreement, followed by a subsequent agreement between the parties, that the mortgagor might have the estate on payment of principal, interest, and costs (g); and also the case of a release of the equity of redemption, with a collateral agreement to reconvey on repayment of the purchase-money (h). And in this class also is the case of Sabine v. Barrell (i). A sale or release to a mortgagee of the equity of redemption Release of equity of will be supported, unless there is fraud or pressure; undervalue redemption. alone is not sufficient to set it aside (k). The onus of proving fraud or misrepresentation rests on the mortgagee (1). The right to set the release aside may be purchased from the mortgagor's assignee (1). Where the purchase-money of an estate was paid by a third person on behalf of the purchaser, and a further sum also advanced, and it was agreed that the estate should be conveyed to such third person, and that, if the purchaser repaid the sums with interest by a future day, then the agreement was to be void, and if not, then the sale was thereby confirmed absolutely to the other party; it was held that the agreement constituted a conditional purchase (m). So in Williams v. Owen (n), it was held that if the parties intended an absolute sale, a contemporaneous agreement for a re-purchase not acted upon will not of itself entitle the vendor to redeem (o). The Lord Chancellor seemed to attach some weight to Goodman v. Grierson (p), in which Lord Manners held, that the (g) Cotterell v. Purchase, Ca. t. Talb. 61, but see Sevier v. Greenway, 19 Ves. 413; Ogden v. Battams, 1 Jur. N. S. 791, V. C. Wood. (h) Ensworth v. Griffith, 15 Vin. Ab. 468, pl. 8; 2 Eq. Ca. Abr. 595, pl. 6; 5 Bro. P. C. 184; Bac. Abr. Mortgage B. 623, 7th ed.; Gossip v. Wright, 9 Jur. N. S. 592, 11 W. R. 632, V. C. Kindersley; Lincoln v. Wright, 4 De G. & Jo. 16. (i) 1 Vern. 268. (k) Ford v. Olden, 3 Eq. 461, V. C. Stuart (but see 2 Dav. Conv. 864, 3rd (1) Melbourne Banking Co. Limited v. (m) Perry v. Meadowcroft, 4 Beav. (n) 10 Sim. 386; 5 My. & Cr. 306. (p) 2 Ba. & Be. 274. General principle. Rate of interest. fair criterion to ascertain whether a transaction be a mortgage or not is, whether the remedies are mutual and reciprocal (q). An agreement, if a sum then lent (without security) was not repaid by a specific day, to assign the lease of a farm without further consideration, and to purchase the furniture and crops at a valuation was enforced as a conditional purchase and not a mortgage (r). Where a time is fixed for the re-purchase, and the terms depend on the result of an account which has not been rendered by the other party, a reconveyance will be decreed (s). It is not, however, always easy to discriminate between a mortgage and a sale qualified by a power of re-purchase (t). The rule of law is that primâ facie an absolute conveyance, containing nothing to show the relation of debtor and creditor, does not cease to be an absolute conveyance and become a mortgage, merely because the vendor stipulates that he shall have a right to re-purchase. In every case the question is what, upon a fair construction, is the meaning of the instruments (u), and the absolute conveyance will be turned into a mortgage if the real intention was that the estate should be held as a security for the money (x). The deed may be absolute in form but still a mortgage (y), and the absence of a proviso for redemption will not prevent its being a mortgage (z). If the bargain is an oppressive one, the Court will set it aside, but not after a lapse of years (a). An absolute conveyance, obtained under circumstances of surprise and oppression from a person intending only to borrow, was treated as a mortgage (b). Where an absolute interest is turned into a security and the money is to be repaid, the Court in its discretion will allow 5 per cent. interest (c). (a) Goodman v. Grierson, 2 Ba. & Be. 274, cited by L. C. in Williams v. Owen, 10 Sim. 386; 5 My. & Cr. 306. (r) Tapply v. Sheather, 8 Jur. N. S. 1163; 11 W. R. 12; 7 L. T. N. S. 298. (s) Ponsford v. Hankey, 9 W. R. 358. (t) Dav. Prec., vol. ii. p. 544, 3rd ed.; Fee v. Cobine, 11 Ir. Eq. Rep. 406; Waters v. Mynn, 14 Jur. 341, V. C. E.; Murphy v. Taylor, 1 Ir. Ch. 92; Ogden v. Battams, 1 Jur. N. S. 791. (u) Alderson v. White, 2 De G. & J. 105; 4 Jur. N. S. 125, reversing V. C. Stuart, 3 ib. 1316; Shaw v. Jeffry, 13 Mo. P. C. 432. (x) Douglas v. Culverwell, 4 De G. F. & Jo. 20; 6 L. T. N. S. 272; varying 8 Jur. N. S. 29, 3 Giff. 251. (y) Barnhart v. Greenshields, 9 Mo. P. C. 18; Holmes v. Mathews, ib. 413; 3 Eq. R. 450, by French. (z) Bell v. Carter, 17 Beav. 11. (c) Unsworth's Trusts, 2 Dr. & Sm. 337; Douglas v. Culverwell, sup.; Carter v. Palmer, 6 C. & F. 657; Macleod v. Jones, W. N. 1884, 53, Pearson, J. repurchase. The right of repurchase is a privilege and is only to be exercised Right of upon a strict performance of the terms (d), unless the terms are waived (e). The payment of interest will be evidence that the transaction was intended to be a mortgage (ƒ). settlement. Similarly a conditional settlement has been held to be a security Conditional for money; as a settlement that upon payment of a sum of money in a certain event the prior limitation should cease and the lands go to the heirs and assigns of the settlor; upon the happening of the event, it was held only to be a security for the money, and to be redeemable after the time limited, and that not merely by the heir or executor, but also by a creditor (g). (6.) Conditional Satisfaction of Mortgage. On a similar principle, where a mortgagee agrees to take a portion of his debt in satisfaction of the whole upon payment on a given day, the Court will not relieve against the effect of its nonpayment on that day (h). As to the validity of stipulations for the acceptance of a smaller, in satisfaction of a larger, sum if paid within a specified time, see (i). (7.) Instalments. The strict condition has also been upheld where time was allowed for payment of an existing debt upon security being given for payment of it by instalments, on the failure of any one of which the whole debt was to become payable (k); but under a proviso that if the interest was regularly paid the principal was not to be called in for five years, the bankruptcy of the mortgagor within the five years justified a sale though no default had been made (1). (d) Gossip v. Wright, 9 Jur. N. S. 592; 11 W. R. 632, V. C. Kindersley; Joy v. Birch, 4 C. & F. 58, 10 Bl. N. S. 201. (e) Pegg v. Wisden, 16 Beav. 239. (f) Allenby v. Dalton, 5 L. J. K. B. 312. (g) Frederick v. Aynscombe, 2 Eq. Ca. Abr. 594, note at B., 1 Atk. 392; and see Sir Thomas Mans' case, cited Freem. Ch. 206; Earl Winchelsea v. Wentworth, 1 Vern. 402; Same v. Norcliffe, ib. 430. (h) Ford v. Earl of Chesterfield, 19 (k) Sterne v. Beck, 32 L. J. Ch. 682; (1) Exp. Bignold, 3 Deac. 151; 3 M. & Ayr. 477. After default in payment and subsequent receipt of interest, the proviso for continuance of the loan was held to be still binding on the mortgagee (d). Giving time after default without some consideration is no waiver (e). The form of the security in these cases is to make the whole debt payable at an appointed, and not distant, date, with a proviso explaining the real intent of the parties for payment by instalments, or at a distant day if the payment is punctual (ƒ). An agreement that the mortgagee will not call in the debt during the life of the mortgagor is binding, though the interest falls in arrear (g); but in settling such an agreement, the Court will insert a condition that the interest shall have been punctually paid, and if leasehold, that the covenants have been performed (). (8.) Defeasible purchases distinguished from mortgages. A further distinction, respecting which the authorities do not seem to be very clear, has been also made between mortgages and defeasible purchases (as they are called) subject to repurchase within a limited time, where the interest is taken by way of rent-charge; for it is said that in the latter cases the stipulations made between the parties must be strictly adhered to, or the estate of the grantee will become absolute. The cases on which this doctrine rests are Floyer v. Lavington (i), and Mellor v. Lees (k). In Davis v. Thomas (1), the mortgagor released to the mortgagee his equity of redemption, and the mortgagee granted him a lease for ninety-nine years determinable on lives at a rent, with a proviso, that, if he paid the rent regularly, he might redeem within five years, and in default the agreement was to be void; it was held that the privilege of redemption was lost, on non-payment of the rent at the periods fixed for that purpose. In these cases the absence of a covenant to pay was deemed explanatory of the intention, and a trust deed for creditors, in (d) Langridge v. Payne, 2 J. & H. 423. (e) Williams v. Stern, 5 Q. B. D. 409, overruling Albert v. Grosvenor Co., 3 L. R. Q. B. 123. (f) 2 Dav. Conv. 594, 3rd ed.; 49, ed. 4. (g) Burrowes v. Molloy, 2 Jo. & Lat. 521. (h) Seaton v. Twyford, 11 Eq. 591, V. C. Bacon. (i) 1 P. Wms. 268. () 1 Russ. & M. 506, and see Joy v. Birch, 10 Bl. N. S. 241; Williams v. Owen, 5 My. & Cr. 303, reversing 10 Sim. 386; Saint John v. Wareham, cited 3 Sw. 631. |