Who may redeem. Foreclosure. pay six months' interest in lieu of notice (m). The mort- The right to redeem may exist even where the deed contains no express power of redemption; for it may be inferred from the nature of the transaction (0). If the mortgage deed were to stop after the proviso for redemption, it would entitle the mortgagee to his most characteristic remedy for the non-payment of the mortgage debt and interest, namely, foreclosure (M. L. R. P. 203). This is obtained on application to the High Court (in the Chancery Division) (p), which orders the mortgagor to pay principal and interest on a given day, generally six months from the date of the certificate by the Master (formerly Lockhart, 10 Sim. 420; Smith v. (m) Johnson v. Evans, (1889) cannot redeem on an earlier day (n) Tarn v. Turner, 39 Ch. D. 457. (p) Or to the county court RIGHT TO REDEEM. called "Chief Clerk ") finding what amount is due; and declares that "in default of such payment he shall be debarred and foreclosed of and from all right title and equity of redemption;" in other words, that the land shall belong to the mortgagee, free from redemption. The right of foreclosure is incident not only to a mortgage properly so called, but also to an equitable mortgage, made either by a formal mortgage of the equity of redemption or by a deposit. of the deeds, with or without a written memorandum (q). 66 151 redeem reserved 'It sometimes happens that by the language of the Right to proviso for redemption the right to redeem is limited to a person who had either no interest or a partial interest only incorrectly. in the land at the time of the mortgage; and that from the circumstances it becomes doubtful whether the person to whom the equity of redemption is thus limited does not acquire under the limitation the beneficial ownership of the equity of redemption; or, at least, a greater interest in it than he had in the land before the mortgage" (Butler's note 106 to Co. Lit. 208 a). For instance, if a mortgage is made of a wife's land to secure her husband's debt, and the equity of redemption is limited to the husband: the question, which is sometimes of great nicety, arises, is the title to the equity of redemption altered or not (r) ? If it is really intended to change the title to the equity of redemption, a recital to that effect should be inserted (see form, 2 K. & E. 87): but there is little risk of changing the title contrary to the intention, merely by reserving the equity of redemption in fee to some person, who conveys or concurs in the conveyance, not being the owner in fee. Group IV. The propriety of the insertion of these clauses Group IV. depends upon the circumstances of each case; the more important clauses of the group provide― (a) For reduction of interest on punctual payment. (9) M. L. R. P. 226; and see Backhouse v. Charlton, 8 Ch. D. 444; James v. James, L. R. 16 Eq. 153; Lees v. Fisher, 22 Ch. D. 283. (r) Jackson v. Innes, 1 Bli. 104 ; Reduction of interest on punctual payment (t). (b) For the continuance of the loan for a time certain. (c) For repayment by instalments. (d) For putting the mortgagees, if more than one, on the footing of joint tenants as regards the receipt of the mortgage money. Clauses (a), (b), and (c) are sometimes framed as covenants by the mortgagor or mortgagee as the case requires. (See Dav., passim.) There is some advantage not only in brevity, but also in avoiding the risk of clerical error in framing them as an agreement and declaration. (See 2 K. & E. 31 et seq.) Where, in a clause framed as an agreement and declaration, it is stated that a person is to do a thing, he alone is bound to do it (s). It follows that the effect of the clauses, in whichever form expressed, is the same. (a) The object of the provision for reduction of interest on punctual payment is to induce prompt payment. Such a provision is extremely convenient, and its insertion should generally be stipulated for by a prudent mortgagee. It provides that, if the mortgagor pays interest at the reduced rate, on or within a specified time after each day appointed for payment of interest, the mortgagee shall accept such payment in satisfaction of the interest due on such day. For example, if it be intended that interest should be paid at 4 per cent., the mortgage would be drawn making it payable at 5 per cent., and then the proviso would make only 4 per cent. payable on punctual payment. The converse agreement, that a higher rate of interest shall be paid if the interest be not paid punctually, is regarded in the light of a penalty, and is relieved against in Equity (u). Care should be taken to make it apparent whether the reduced interest is to be accepted as often as paid within the time named, or whether the neglect on any one occasion (s) Ramsden v. Smith, 2 Drew. 308. See Interp. 426. (t) "Punctual' means on the day; Leeds and Hanley Theatre, dc. v. Broadbent, (1898) 1 Ch. 343. (u) Lady Holles V. Wyse, 2 Vern. 289; Herbert v. Salisbury & Yeovil Ry. Co., L. R. 2 Eq. 224; see Wallis v. Smith, 21 Ch. D. at p. 260; Leake, Contr. 939. CONTINUANCE OF LOAN. is to deprive the mortgagor of the benefit of the reduction on all future occasions. The provision should be framed so that interest at the reduced rate does not become payable unless the mortgagor observes all his covenants other than those for payment of principal and interest, so as to secure the due performance of the covenants. (See form, 2 K. & E. 32.) 153 ance of (b) The provisions for the continuance of the loan for a Continucertain time are always made conditional on the regular for a payment of interest and performance of covenants by the time mortgagor, and are generally followed by a declaration that the mortgagor shall not be entitled to pay off the money before the time fixed. (See forms, 2 K. & E. 33.) On the question which sometimes arises, whether trustees who invest on mortgage are justified in lending the money for a time certain, see Vickery v. Evans, 33 Beav. 376. (c) The intention of the provisions for payment of the loan by instalments is that the instalments shall be regularly paid, and that in default of regular payment the mortgagee shall be at liberty to call in the unpaid part of the mortgage money. The most convenient mode of effectuating this intention is to insert the usual covenant for payment of the principal and interest at the end of six months, and then a proviso that, if the instalments be paid punctually on certain days, together with interest on the unpaid part of the mortgage money, the mortgagee will accept payment by the instalments, and will not call in the part not paid off. (See form X., 2 K. & E. 33.) A different plan is sometimes, though rarely, adopted. The primary covenant for payment is for payment by instalments (see form, 2 K. & E. 11); the proviso for redemption is that the mortgaged property shall be redeemable upon payment of the principal money and interest "by the instalments, at the times, and in manner hereinbefore mentioned, and pursuant to the covenant in that behalf hereinbefore contained." Then follows a proviso giving power to the mortgagee to call in the whole of the money in case the instalments and interest are not regularly paid. certain. Loan paytalents. able by in Declara tion that moneys belong to mortgagees on a joint account. The advantage of the former scheme is that, when the draftsman adopts it, he can use the ordinary clauses and provisoes, the meanings of which are well known, and he can then qualify them by a single proviso; the effect being that, if the instalments are not regularly paid, the mortgagee is remitted to all the rights which he would have had if the proviso had not been inserted; and this generally carries out the intention of the parties. (d) As to the declaration that the moneys are advanced on a joint account and shall belong to the survivor.—Suppose several persons to join in lending money on mortgage. If the mortgage was made before 1882, they were at law entitled jointly to the mortgage debt; but in Equity it would be presumed, in the absence of a "joint account clause," that they were entitled to separate shares of it, so that after the death of one of them the mortgagor paying off the debt was obliged to get a discharge from the personal representatives of the deceased person in respect of his share. This rule was inconvenient when trustees lent money on mortgage; for the surviving trustees, being the persons to perform the trust, ought to have power to give a discharge for the mortgage money. If the mortgage deed had disclosed the trust, and shown that, in accordance with the trust, the survivors could give a receipt, this difficulty would not have arisen; but there was a formidable objection to a deed in this form, as, it appearing on the face of the deed that the mortgage money was trust property, the title of the mortgaged property might become affected by the rights of persons claiming under the trust. To avoid this, the trustees lent as if they were absolute owners (v), and a declaration was inserted that the money belonged to them on a joint account. In such cases the Court has always refused to make any inquiry into the trusts, though it is known that the presence of a joint account clause indicates that the mortgagees are probably trustees; see per Pearson, J., Re Harman & Uxbridge de. Ry. Co., 24 Ch. D. (v) Carritt v. Real and Personal Advance Co., 42 Ch. D. at p. 272. |