This rule has been modified in the United States by statutes universally adopted requiring mort gagees and pttrchasers of property generally to record their documents of title in order to protect them against claims of purchasers without notice% When the intention of an agreement is to create a mortgage, although it is not in effect a conveyance and ciniseqnently not a legal mort gage. equity will enforce the agreement against the mortgagor or third parties having notice of the agreement as though it were a valid mortgage.
Thus where the owner of real estate deposited his title deeds of the property with another for the purpose of scuring a debt or obligation, the English courts of equity have recognized in the transaction a valid mortgage. This doctrine of creating a mortgage by pledge of title deeds has not been recognized in the United States. (See LIEN.) When a conveyance is absolute on its face, equity, disregarding the parol-e•idence rule, will inquire into all the circumstances of the tran.sfe• of title, and if it appear that the transfer was made only for the purpose of giving security, equity will treat the whole transaction as a mortgage and allow the grantor to redeem the property upon payment of the mortgage in debtedness. All mortgages, however, whether ex press or implied from the circumstances, are to be distinguished from conditional sales, which are agreements to sell and transfer title to the property upon the happening of a certain event. It will he observed that the position of a mort gagor is closely analogous to a conditional ven dor who has agreed to sell property upon payment of a certain sum. There is, however, one im portant distinction between the two relations. In the case of conditional sales there is no ex isting indebtedness. The vendee is under no obligation to hay money to the vendor before electing to purchase. while the mortgage• is so bound. In determining in any given case whether the transaction is a conditional sale or a mort gage, courts will scrutinize the evidence with great care, and in of doubt the tendency is to hold the transaction to be a mortgage. From the nature of mortgage it seems prohable that a legal liability independent of the mort gage itself is not essential to its validity. out in general all mortgages are accompanied by some form of legal obligation for the pe•fornmance of which the mortgage is given as security. This is usually a promissory note or bond payable to the mortgagee. and when the purpose is to issue numerous bonds secured by one mortgage, the practice is to make the mortgage or conveyance to a trustee, who holds the property as security for all the bondholders. Railroad mortgages are
usually made in this manner. If the note or bond is illegal or there is any illegality in the mortgage transaction. the mortgage is invalid.
Mortgages are sometimes given to secure future advances to be made by the mortgagee. Such mortgages arc valid and enforceable as between the mortgagor and mortgagee, but in some States they are held not to be valid against third parties, except as to advances actually made, of which the third party has actual or constructive notice at the lime of acquiring an interest in the property. In a number of States, statutes provide that mortgages for future advances shall have DO validity against third persons.
Any legal property, either real or personal, may be mortgaged, even including future or in choate property, :IA crops planted but not yet grown, which the common law regards as being capable of present ownership. Ihnt a mortgage of property not yet acquired by the mortgagor could have no validity at eommon law. Mortgages of this character as well as mortgages of equitable interests were recognized and enforced by equity when the rights of innocent third parties were not involved. Such mortgages are now generally regarded as valid between mortgagor and mort gagee, but there are a variety of views held in the several States as to their validity against third parties—some courts, as those of Massa chusetts, holding that they can have no validity against even creditors of the mortgagor unless the mortgaged property is delivered to the mort gagee, and sonic, as those of New Jersey, hold ing that they are valid against all parties having notice of the mortgage.
The mortgage. besides a description of the mortgaged property and the mortgage indebted ness, may, and usually does, contain clauses pro viding that the whole debt. shall become due and payable upon failure to pay interest. or taxes and assessments upon the mortgaged property. The mortgage may also include a power of sale enabling the mortgagee to sell the mortgaged property without foreclosure upon the mort gagor's failure to pay the debt. In many States such a provision is made inoperative by statutes which require foreclosure of the mortgage ex clusively by judicial proceedings. A stipulation that the mortgagor shall have no right to redeem will he disregarded by the mulls upon the same principle that courts of equity disregarded the condition of the common-law mortgage.