EQUITABLE MORTGAGE. A lien created on property, either real or personal, without transferring the title thereto to the person in tended to be secured. It is of the essence of the mortgage proper in the common-law system that the legal title to the property mortgaged shall pass to the creditor and remain in him until pay ment or foreclosure. But the equity tribunals have given the effect of a mortgage to a variety of transactions in which no property is actually transferred, but where it is the intention of the parties that it shall be pledged or subjected to a lien in favor of the creditor, in order to secure the payment of his claim.
The most striking example of the equitable mortgage is the lien upon land created by the deposit of title deeds to secure a loan or other obligation. This is in common use in England, and occurs occasionally in a few of the United States. Everywhere, however, a mortgage deed which, through defective execution, fails to take effect in the manner intended, is treated as creat ing an equitable mortgage. and the same effect is given to any written agreement for a mortgage intended to have a present effect. An oral agree ment to subject land to a mortgage lien is only prevented from producing a similar result by the Statute of Frauds, which renders void all agree ments concerning lands which are not committed to writing; but under some circumstances effect is given by courts of equity even to these.
Similar to mortgages arising out of mere writ ten agreements, as distinguished from convey ances, is the familiar security known as the mort gage on after-acquired property, as upon a fluc tuating stock of goods in a store, upon machinery to be added to the equipment of a mill or factory, upon the future rolling stock of a railroad. etc. The familiar rule that no one can grant that which he does not have deprives such mortgages of any common-law validity beyond the property actually possessed at the time of the transaction. As to the property described in them which is afterwards acquired by the mortgagor, the de scription operates only as an agreement to sub ject it to the lien as and when it becomes the property of the mortgagor. There is eonsiderable diversity of judicial opinion as to the effect of such a mortgage; hut the prevailing view, which obtains in England and in most. of the United
States, is that it creates an equitable mortgage on the after-acquired property valid as against the mortgagor, his heirs and creditors, and against purchasers with notice or without con sideration. In New York a curious doctrine has been is rked out by the ..ourts, the pro] ertv being I roteeted a,ainst p with ti an'l such as acquire the property without nsidcration, but not z-gainst tae clam s at ta creditors. Itailrosd mortgages on atter a.quired property, whet r real r personal. se. by reason ci their exceptional character. univer sally held to be valid, even in jurisdictions in which such mortgages, as between private indi viduals. are not generally recognized.
As already indicated. in all cases of equitable ortage the legal title to the property remains in the mortgagor. as well as the right of posses sion. the interest of the a mere lie n w bleb is enforceable only in equity and wl kit is not protected by any common-law proc c—. But as such a mortgage in general, priority over the claims of creditors of the mort gagor. as well as over the right- of subsequent purchasers and with notice, and as the recording of such an instrument under the recur ling acts in the United States gives con structive notice to all intending purchasers and lienors, it furnishes adequate security to cred itor- intended to be protected thereby. Strictly speaking. the remedy by foreclosure, which is the usual and proper process for the enforcement of a legal, nr ordinary. mortgage, is not appro priate to a mortgage of this type. It is enforced by a bill in equity, praying for the sale of the property under the authority of the court, and for the payment of the mortgage debt out of the proceeds. As this process does not differ mate rially from the modern statutory proceeding em ployed in New- York and some other States to foreclose a legal mortgage. the term foreclosure is. in such jurisdictions, also applied to it. Sec Fali IT NIILE ESTATE; FORECLOSURE; MORTGAGE: an I the authorities cited under the last of these title,.