If a second mortgagee obtains the title-deeds of the estate, this will not give him a preference over a prior legal mortgagee, unless the prior mortgagee has parted with or failed to get possession of the title-deeds for fraudulent purposes, or through gross negligence. But though the second mortgagee has no priority, when there is neither fraud nor negligence, he will not be compelled to give up the title-deeds to the first mortgagee, unless the first mortgagee pays him his debt and interest.
A legal mortgage is effected by an instrument which transfers the legal estate. When a mortgagor makes a second mortgage, and uses the form of a legal conveyance, this also is called a legal mortgage, though there is no transfer of any legal estate, for the legal estate is already conveyed to another person. This kind of mortgage may be called a mortgage of an equity of redemption, by way of distinguishing it from the equitable mortgage next mentioned. An agreement in writing to transfer an estate as a security for the repayment of a sum of money, is called an equitable mortgage, because it gives the intended mortgagee a right to have a legal mortgage, and in a court of equity gives him in fact all the rights of a legal mortgagee. A deposit of the title-deeds of an estate, or of the copy of court-roll, as a security for a debt contracted at the time of the deposit, or previously to the deposit, constitutes an equitable mortgage. An equitable mortgagee, by deposit of title-deeds, has a preference over a subsequent purchaser or mortgagee who obtains the legal estate with notice of the equitable mortgage.
It the mortgagor is not seised in fee, but has only a limited interest in land, as a lease for years, the mortgagor by taking an assignment of the lease, becomes liable for the rent, and to the covenants contained in the lease, though he has never taken possession of the premises included in it. The same rule was for a time held to apply to an equitable mortgagee by deposit of title-deeds [LEasE] ; but in a recent case it was decided that the equitable mortgagee is not liable to such covenants (Moores v. Choat, 8 Sim. 508), and so the matter stands at present. See also Moore v. Greg, 2 Phill., 724.
The preceding remarks apply to mortgages of land only, in which there are many peculiarities which arise from the condition of legal ownership of land in this country. But other kinds of property may be mortgaged, such as chattels personal, a life-interest in a sum of money, or a policy of insurance, or a ship, or shares in a ship. The subject of pawning or pledging of goods is treated under PLEDGE, and also the rules of the Roman law as to Hypotheca and Pignus. The equitable lien on land, which is classed among mortgages by some writers, is briefly noticed under LIEN ; and mortgages of ships under SLIM No attempt has been made to lay down all or the greater part of the rules applicable to mortgages. The explanation of these rules would fill a large volume. The general principles of all mortgages are however here laid down, and the reader must consult professional books for particular cases.