security over such a holding to be illegal and void (r). An equitable mortgagee by deposit in such a case, e.g., as a banker's advance, is not entitled to six months' notice (rr) before he is bound to accept a tender of the amount due, or to six months' interest in lieu of notice; but the words "balance which will be due" in a memorandum of deposit in such a case mean the floating balance, and will entitle the bank to a charge for the final balance due (ss). II. Mortgage of Leaseholds. Leasehold estates also frequently form the subjects of mortgage. In such case, if the mortgage be under the old system of conveyancing, the term of years of which the estate consists is assigned by the mortgagor to the mortgagee, subject to a proviso for redemption or re-assignment on payment, on a given day, by the mortgagor to the mortgagee, of the sum of money advanced with interest; and with a further proviso for the quiet enjoyment of the premises by the mortgagor until default shall be made in payment. The principles of equity as to redemption apply to such a mortgage equally as to a mortgage of freeholds; but, as the security, being a term, is always wearing out, payment will not be permitted to be so long deferred. A power of sale also is frequently inserted in a mortgage of leaseholds, and the statutory powers given to mortgagees by the Conveyancing and L. P. Act (s) extend also to leaseholds. From what has been said in the last chapter it will appear that, as the mortgagee is an assignee of the term, he will be liable to the landlord, during the continuance of the mortgage, for the payment of the rent and the performance of the covenants of the lease. (r) 48 Vic. No. 18, s. 121. (rr) Fitzgerald's Trustee v. Weltersh, 1892, 1 Ch. 385. (ss) Re King, 16 N.S.W.R., Bcy. 86. (s) Act No. 17, 1898, s. 91 sqq. Against this liability the covenant of the mortgagor is his only security. In order therefore to obviate this liability, when the rents or covenants are onerous, mortgages of leaseholds are frequently made by way of demise or underlease. By this means the mortgagee becomes the tenant only of the mortgagor, and consequently a mere stranger with regard to the landlord. The security of the mortgagee in this case is obviously not the whole term of the mortgagor, but only the new and derivative term created by the mortgage (t). If the leasehold be under the Real Property Act it may be mortgaged in like manner as a freehold, and what has been already said as to the creation of a mortgage under the Act, the covenants therein, and registration thereof, with the respective rights of mortgagees and mortgagors will be applicable generally to mortgages of leaseholds. It should be noticed, however, that any mortgagee, or any person claiming through him, will after entry be liable during possession to the lessor of the land to the same extent as the lessee was previously liable (u). Also, the Act provides (v) that, upon the bankruptcy of the registered proprietor of any lease subject to mortgage, registration of the official assignee's refusal to accept such lease, made upon the application of the mortgagee, will operate as a foreclosure; and, failing such application by the mortgagee, a similar entry made upon the application of the lessor will operate as a surrender. Leaseholds under the Crown Lands Acts may also be mortgaged, but in the case of settlement and homestead leases it is specially required that the mortgage shall be (t) See as to fixtures on the land, In re N.S. W. Co-operative dc. Co., 12 N.S.W.R., Eq. 87; A.J.S. Bank v. Colonial Finance dc. Corporation, 15 N.S.W.R., 464. (u) Act No. 25, 1900, s. 64. (v) s. 91. bona fide (w). The regulations under those Acts provide forms for the mortgage of such leases (x). Where conditions have to be performed by the lessee, as, e.g., residence, the performance is at the risk of the mortgagee (y), and persons dealing in such leases should search in the Lands Office, Sydney, and in the RegistrarGeneral's office, in order to ascertain whether the lease is still current, or whether it has been forfeited or cancelled. III. Alienation of the mortgaged property. The alienation of the mortgagor's remaining interest may be effected by way of further charge, or by a sale. 1. Further Charge. This may be created by mortgage of the equity of redemption, or by subsequent memorandum, according as the land is under the general law or under the Real Property Act. The (1.) Mortgage of equity of redemption. equity of redemption which remains to the mortgagor may be again mortgaged by him, either to the former mortgagee by way of further charge, or to some other person. In order to prevent frauds it was provided by the Statute of Clandestine Mortgages (z), that a person twice mortgaging the same lands, without discovering the former mortgage to the second mortgagee, shall lose his equity of redemption. Unfortunately, however, in such cases the equity of redemption is, after payment of both mortgages, generally worth nothing. And, if the mortgagor should again mortgage the lands to a third person, the act will not deprive such third mortgagee of his right to redeem the two former mortgages (a). Tacking. When lands are mortgaged, as occasionally (w) 58 Vic. No. 18, s. 43. s. 3; see Kennard v. Futvoye, 2 Gif. 81. (a) 4 & 5 Wm. & M. c. 16, s. 4. happens, to several persons, each ignorant of the secu rity granted to the other, the general rule is, that the several mortgages rank as charges on the lands in the order of date. But as the first mortgagee alone obtains the legal estate, he has this advantage over the others, that if he takes a further charge on a subsequent advance to the mortgagor, without notice of any intermediate second mortgage, he will be preferred to an intervening second mortgagee (b). And if a third mortgagee, who has made his advance without notice of a second mortgage, can procure a transfer to himself of the first mortgage, he may tack, as it is said, his third mortgage to the first, and so postpone the intermediate incumbrancer (c). For, in a contest between innocent parties, each having equal rights to the assistance of the Court, the one who happens to have the legal estate is preferred to the others; the maxim being, that when the equities are equal, the law shall prevail. The effect of the general rule respecting tacking is, however, almost, if not entirely, obviated by the provision of the Registration of Deeds Act that the date of registration shall determine the order of priority (d). (2.) Subsequent memorandum of mortgage. The legal estate which remains in a mortgagor under the Real Property Act may be again charged by him. In the event of default being made, and the land being sold by the prior mortgagee, subsequent mortgagees are entitled to payment in order of priority after the expenses of sale and the prior mortgage debt have been (b) Goddard v. Complin, 1 Ch. Ca. 119; Fisher Mtges. 559 et seq. (c) Brace v. Duchess of Marlborough, 2 P. Wms., 491; Bates v. Johnson, Johnson, 304. (d) Act No. 22, 1897, s. 12. See the Chapter on Title, as to registration of deeds in general. discharged (e), the order of priority being determined by the date of registration (ƒ). Mortgage to secure further advances A mortgage may be made not only for a present advance, but also to secure the payment of money which may thereafter become due from the mortgagor to the mortgagee. It has, however, been decided that, where a mortgage extends to future advances, the mortgagee cannot safely make such advances, if he have notice of an intervening second mortgage (g). Neither can an attorney take from his client a mortgage to secure future costs (h), whether such costs are to be incurred generally, or only in some specific action or suit (¿). 2. Sale. The purchaser of an equity of redemption, unless he is a mortgagee, or is paying off a mortgage out of the purchase money, will stand in the position of the mortgagor; but if he is a mortgagee, or in the position of one by payment off of a mortgage, he cannot set up his mortgage against any of the subsequent incumbrances of which he had notice (j). If, however, a prior mortgage be kept on foot against the estate it may be used by the purchaser of the equity of redemption as a protection against the intervening incumbrances. Consolidation. There is another doctrine relating to redemption which may affect a purchaser or mortgagee (k) of an equity of redemption. If one person should mortgage lands to another, and subsequently (e) Act No. 25, 1900, s. 58 (3). (f) s. 36 (3). (g) Rolt v. Hopkinson, 9 H.L.C. 514; London & County Banking Co. v. Ratcliffe, 6 A.C. 722. See also Menzies v. Lightfoot,, L.R. 11 Eq. 459; Cowell v. Stacey, 13 V.L.R. 80. (h) Exp. Davidson, 2 N.S.W.R. 276. (i) Jones v. Tripp, Jac. 322; Uppington v. Bullen, 2 Dr. & W. 184. (j) Toulmin v. Steere, 3 Mer. 210; notes to Marsh v. Lee, 1 Wh. & Tu. L.C.; see also Anderson v. Pignet, L.R. 8 Ch., 180; Adams v. Angell, 5 Ch. D. 634. (k) Beevor v. Luck, L.R. Eq. 537. |