Equitable mortgage, a mortgage under which the mortgagee does not get the legal estate. The following mortgages are equitable:-
(1) Where the subject of a mortgage is trust property, which security is effected either by a formal deed or a written memorandum, notice being given to the trustees in order to preserve the priority. As a rule these mortgages include mortgages (not being mortgages of a legal estate) under a trust for sale or settlement which are not registrable under the (English) L.C. Act, 1925, s. 10, Class C.
(2) Where the subject of the mortgage is an equity of redemption, which is merely a right to bring an action in the Chancery Division to redeem the estate. Now under the (English) L.P. Act, 1925, Sched. I., Parts VII. (1), (3), and VIII. (1), (3), and see ss. 85, 86, ibid., a mortgagor retains a legal estate in fee simple or for a term of years, and the first and subsequent mortgagees out of that estate each have a legal mortgage.
(3) Where mortgages created before 1925 and whether of the equity of redemption of a legal estate or otherwise affecting the legal estate not being protected by a deposit of documents or by registration have been converted into legal mortgages (infra) by the L.P. Act, 1925, and have not been registered as a land charge since 1925 under the (English) L.C. Act, 1925, they are to be deemed to remain an equitable estate as against a purchaser in good faith without notice [(English) Law of Properties Act, 1925, Sch. I, Pts. VII and VIII]. Registration not being compulsory [(English) L.C. Act, 1925, s. 10(1), Class C and (7)] until transfer, proper disclosure of such mortgages is required and ordinary notice will affect a purchaser, even in the absence of registration. [(English) L.P. Act, 1925, s. 199]
(4) Where there is a written agreement only to make a mortgage, which creates an equitable lien on the land.
(5) Where a debtor deposits the title-deeds of his estate with his creditor or some person on his behalf, without even a verbal communication. The deposit itself is deemed evidence of an executed agreement or contract for a mortgage for such estate.
This transaction, which appears to be a judicial repeal of the (English) Statute of Frauds (29 Car. 2, c. 3, s. 4), is extensively resorted to, and is known in practice as an equitable mortgage by deposit of title-deeds. Its validity has long been established beyond all question, Bank of New South Wales v. O'Connor, (1889) 14 App Cas P 282.
An equitable mortgage being a contract for a mort-gage, the mortgagee might file a bill or claim in Equity, either for a legal mortgage, a foreclosure and conveyance, or a sale; and may now bring an action for the same purpose in the Chancery Division of the High Court. [(English) Jud. Act, 1873, s. 34(3); 1925 Act, s. 56]
Equitable mortgages are amongst the documents which must be stamped within thirty days after execution, by virtue of s. 15 of the (English) Stamp Act, 1891, re-enacting s. 18 of the Customs and Inland Revenue Act, 1888. See STAMP DUTIES, and as to priorities dependent on the order of registration, see LAND CHARGES, PRIORITIES.
For further information on this subject, consult Coote or Fisher on Mortgages, and see Russel v. Russel, (1783) 1 Bro C C 269; 1 W&TLC.