MEMORANDUM OF DEPOSIT. The deposit of title deeds accompanied by a memorandum of deposit, as security for a loan or overdraft, is an equitable mortgage.
Deeds may be deposited as security without any document of charge, and form a good equitable mortgage. (See EQUITABLE MORTGAGE.) A memorandum of deposit, however, is evidence of the purpose for which the deeds were deposited. Without such a document, a borrower might say that the deeds were lodged for some purpose other than as security, or that they were not deposited to cover advances already made as well as future advances, but with the memorandum such contentions could not be maintained. It has been held that where there is no memorandum a deposit of deeds will prima fade be considered only as a security for a debt then due.
The memorandum would also be good evidence of the depositor's intention to charge a certain property, even if it should turn out that all the deeds had not been lodged with the banker.
If a customer holds deeds, as an equitable mortgagee, from a third party, and the cus tomer deposits those deeds with his banker (the operation being thus an equitable mort gage of an equitable mortgage), it is advisable (though not strictly necessary) that the docu ment of charge should be lodged along with the deeds, so that the banker can ascertain the customer's right to deposit them. The banker should give notice to the equit able mortgagor of his charge and ascertain how much is still owing upon the security. The mortgagor should, after receipt of such notice, make all payments, in reduction of his loan, direct to the banker, unless the banker sanctions the payments being made direct to his customer.
If the property belongs to several persons the memorandum should be signed by all of them.
A memorandum of deposit may be under hand, or under seal, and as a rule the banker's usual printed forms will be used, but any writing from the person depositing the deeds as security will be sufficient. Even
a letter simply stating that " I enclose the deeds of my house 23, King Street, to be held as security for my account " should, in the absence of anything better. be preserved as a memorandum of deposit. But evidence of deposit in any other way than by signing the banker's printed form should be discouraged.
A memorandum does not form part of the chain of title, and when the document has served its purpose it is cancelled. A legal mortgage, however, forms a link in the chain, and is preserved with the other deeds or title.
A memorandum under hand, or under seal, of the deposit of title deeds is not statute barred until twelve years after the date when the right of action thereon first accrued (Real Property Limitation Act, 1874).
The Statutes of Limitations do not apply to a deposit of share and stock certificates.
The printed form of memorandum of deposit in use by different bankers varies a little in the actual words used, but the general scope of it is practically the same in most cases.
A memorandum by a customer depositing his own deeds for his own account may include the following points :— 1. I have deposited the documents named in the Schedule, with the British Banking Co., Ltd.
2. and charge all my estate and interest in the property 3. with payment of all moneys now due, or which shall at any time hereafter be due, in any manner whatsoever, to the Banking Company, 4. from me, either alone or in conjunc tion with any other person or persons whomsoever, 5. with interest and commission or other lawful charges.
6. The agreement to be a continuing security, 7. and I agree to execute a valid legal mortgage of the property whenever requested by you, in such manner as you may lawfully require, to secure the repayment on demand of all moneys, 8. and I declare that the documents de posited are all that are in my possession or control, and 9. that the property is not charged or encumbered in any way whatever.