MORTGAGE OF CHOSE IN ACTION. 195 1. The date. 2. The parties. 3. The recitals (a) of the bond. (b) of the state of the bond debt. 4. The consideration and receipt. 5. The assignment "by the said [assignor] as beneficial owner" to the said [assignee] of "all that the herein before recited bond, and the principal sum of £- and all interest [now due and] henceforth to become due for the same." 6. [The power of attorney.] 7. The habendum. if it is a debt, of chose in action. When an assignment of a chose in action is made by way Mortgage of mortgage only, it must be remembered that possibly the original debt may be paid off before the mortgage debt. To provide against this contingency, clauses were formerly inserted authorising the mortgagee to give receipts for the whole debt (for otherwise the original debtor would have to pay part to the mortgagee, and part to the mortgagor, and might have at his own risk to ascertain the state of accounts between them), and declaring that the moneys, when received by the mortgagee, should be held by him upon trust, after retaining his costs and all moneys due on the security, for the mortgagor; the two clauses being similar to clauses 5 and 6 in a power of sale in a mortgage of freeholds (ante, p. 166). In mortgages since 1881 the clauses may safely be omitted in reliance on the C. A. 1881, s. 22. But the mortgagee cannot enforce payment to himself of a larger sum than is due to him on his security (r). It must be also remembered that the mortgagee would be bound, in the absence of a stipulation to the contrary, to do everything in his power for the purpose of obtaining payment of the chose in action mortgaged. He may, generally speaking, be trusted for his own sake to do so; (r) See Hockey v. Western (1898), 1 Ch. 350. Mortgage of life policy (s). for, if he does not, he may lose his mortgage debt. The mortgagee's indemnity clause protects him against the consequences of an accidental omission in this respect. Where money is to be advanced on the security of a policy of life assurance, an existing policy may be assigned to the mortgagee; or a new policy may be effected in the name of the mortgagor, and assigned to the mortgagee; or it may be effected in the name of the mortgagee (see forms, 2 K. & E. 96); in which latter case the mortgage deed necessarily contains no assignment, and as it creates a charge, it is a "mortgage" within the C. A. 1881 (see s. 2 (v.)), so that the statutory power of sale is conferred by it. In either case the deed contains the proviso for redemption and other usual clauses of a mortgage deed, and provisions for the purpose of keeping up the value of the policy. For the latter purpose a series of clauses are inserted in the group V. (ante, p. 15) to the following effect: Covenants by the mortgagor. (a) Not to do anything by which the policy may become void (as, for instance, by going to the tropics contrary to the terms of the policy). (B) To restore it if it becomes voidable. (y) To effect a new policy in the name of the mortgagee if the original policy becomes void. (8) That the new policy shall be subject to the present security. (e) To pay the premiums on any new or substituted policy and deliver the receipts to the mortgagee; with power to the mortgagee to pay the premiums on default by the mortgagor in paying them. (3) To repay on demand the moneys so paid by the mortgagee and his expenses with interest, such moneys until repayment to be a charge on the mortgaged premises (t). (s) See as to policies on life, (t) See Re Leslie, 23 Ch. D. 552. M. L. P. P. 137. MORTGAGES OF LIFE INTERESTS. 197 creditor life with Occasionally a creditor insures his debtor's life without Case of any bargain on the subject; and in this case the question insuring may arise whether the policy belongs to the creditor absolutely debtor's or is redeemable by the debtor. The general rule is that, in out any the absence of contract express or implied, a policy effected bargain. on the life of another will belong to the person who effects it. But this presumption is rebutted if the debtor pays the premiums, or is with his assent (Bruce v. Garden, L. R. 8 Eq. 430, 5 Ch. 32) charged with them in account; in either of which cases the policy becomes the property of the debtor on payment of the debt (u). A newly effected policy of assurance is not in itself of much value as a security, but it is of considerable value when it is combined with the mortgage of something else, such as a life interest, which will afford a fund out of which the interest and premiums may be paid. of life Mortgages of life interests in realty (ante, p. 180) or Mortgages personalty are often combined with mortgages of policies. interests. In mortgages of life interests in personalty power should be given to the mortgagee to require the trustees of the mortgaged fund to pay the income to him (see form, 2 K. & E. 102). It is usual to insert a declaration that he shall apply it in payment of all costs incurred "in the execution of the trusts or powers of these presents," which would authorise him to pay the premiums on the policies; and, in the next place, in payment of the moneys for the time being due on the security; and that he shall pay the surplus to the mortgagor; but the declaration may be omitted in reliance on the C. A. 1881, s. 22. of choses As already pointed out, there are some exceptional cases Mortgage in which choses in action can be transferred at law. No in action remarks appear to be necessary in this place with respect assignable to absolute assignments of them; but mortgages of them and of certain other interests in personal property, which are not strictly choses in action, will present some difficulties (u) See Marquis of Northampton v. Pollock, 45 Ch. D. 190; S.C. sub nom. Sult v. Marquis of North- at law. Transfers in to the student. Although the methods next pointed out are those adopted where formal mortgages are given, they are rarely used. More commonly some scheme is adopted, under the advice of a stockbroker, which may or may not be effectual. A scheme which is often used by stockbrokers, but which blank (a). is generally ineffectual, is a "transfer in blank." In such a case the mortgagor executes transfers of the shares leaving Where liability is not incurred. Where liability is incurred. 1 a blank for the name of the transferee, the intention being that the mortgagee may, if occasion require, fill up the blank either with his own name or with the name of a purchaser. It need hardly be said that, in cases where a deed is necessary to transfer the shares, this scheme entirely fails of effect; for a conveyance to an unnamed person is entirely inoperative. The person who has executed such a conveyance of shares remains the legal owner of the shares, and the holders of the transfers acquire no right at law, though they may acquire an equitable right to have the shares transferred to them (y). If the property be of such a nature that its ownership does not involve any liability in respect of it (as for example if it be a railway debenture), the mortgage is effected by a transfer in the appropriate manner to the mortgagee; and a deed containing the proviso for redemption, and, if necessary, the trusts of the moneys to be received in respect of the mortgaged property (unless the latter clause is omitted in reliance on the C. A. 1881, s. 22). It should be observed that, as the deed creates a charge, it is a mortgage within the meaning of the C. A. 1881, so that a power of sale is implied. On the other hand, if the ownership of the property involves liability, a different course is adopted. In this case the mortgagee is not made the legal owner, and consequently he incurs no liability as owner; but provisions have (x) See note, 2 K. & E. 173. 20; Powell v. London & Provincial Bank (1893), 1 Ch. 610; 2 Ch. 555. STOCKS-SHARES-DEBENTURES. to be made for the purpose of enabling him either to become the legal owner without any further act on the part of the mortgagor, or to make a transfer at law without himself first becoming the legal owner, to any person to whom he may sell under the power of sale. The first object is carried into effect in different manners, according to the subject-matter of the security. If it be of such a nature that the mere execution of the deed of transfer by the mortgagor does not cause the transferee to become the owner or to incur any liability, until some additional act is performed by him, a formal deed of transfer is executed by the mortgagor; but the additional act is not performed. For example, where shares in a company are to be mortgaged, a transfer of the shares is executed by the mortgagor but not by the mortgagee, and the name of the mortgagee is not entered on the register of the shareholders; so that, although he does not become the legal owner of the shares, he can, if he think fit, complete his title by executing the transfer and registering himself at any moment (2). Notice of the transfer should be given to the company so as to preserve priority as against any subsequent assignment by the mortgagor (a), and the share certificates should be delivered to the mortgagee (b). The mortgage deed will, in addition to the usual clauses, contain a declaration of trust by the mortgagor in favour of the mortgagee, with power to the mortgagee to appoint a new trustee at any time; and a power of attorney authorising the mortgagee on any sale of the shares to execute transfers of them to the purchaser in the name of the mortgagor, by which means the mortgagee can make a transfer direct to the purchaser without becoming the legal owner, and therefore without incurring any liability as owner. The mortgagor, remaining the registered owner, can receive the dividends; but power should be given to the mortgagee to receive them, if he should think fit. 199 |