Opinion ID: 2626405
Heading Depth: 4
Heading Rank: 1

Heading: The history of equitable redemption

Text: While this appeal concerns the extent of a statutory right, we must begin with a brief detour into the history of mortgages. The mortgage was created by the early English court as a transfer of title from the mortgagor to the mortgagee, generally as security for a loan by the mortgagee to the mortgagor. Once the mortgagor repaid the loan proceeds, title to the property would return to him. [11] If, however, the mortgagor failed to pay the mortgage by the due date, called the law day, he would forfeit all interest in the property. This deadline applied without exception, even if the mortgagor could not find the mortgagee to pay him, [12] or if the borrower was robbed on his way to Law Day, [13] and thus often resulted in injustice. In response to these injustices, the Court of Chancery created the remedy of equitable redemption. Equitable redemption allowed the borrower to come into court after default, and if he told a convincing story, he was allowed to force a reconveyance of the land. [14] When mortgagors began to take advantage of this remedy, sometimes redeeming the property years after law day, the Court created the remedy of foreclosure to end the period of equitable redemption so that the new owner could be sure that his title was secure and the previous owner could not redeem the land. [15] Thus, a mortgage is said to carry with it an equity of redemption, the right, until the foreclosure sale, to reimburse the mortgagee and cure the default. [16] But this (mortgagor's) remedy of equitable redemption is limited by the (mortgagee's) remedy of foreclosure. While at common law the execution of a mortgage required transfer of title, most American jurisdictions, Alaska included, now recognize mortgages under the lien theory, which treats the mortgage as merely a security interest in the property and confers no right to possession of that real estate on the mortgagee. [17] Accordingly, the mortgagor has the right to possession until there has been a valid foreclosure. [18] We stated, in Brand v. First Federal Savings & Loan Ass'n of Fairbanks: [19] In light of our territorial precedents, likely reliance thereon, and the provisions of AS 09.45.680, we believe that the territorial view that mortgages in Alaska convey to the mortgagee only a lien, not any sort of title, should be retained. [20] The lien theory, we noted, is said to mark `a distinct advance in legal ideas' over the `crude conception' of the title theory. [21] Mortgages under the lien theory continue to carry the equity of redemption. Alaska has partly codified the mortgagor's right of redemption. Under AS 09.35.250, The judgment debtor or a successor in interest may redeem the property before confirmation of sale on paying the amount of the purchase money, with interest and any taxes due. Alaska has also enacted a procedure for redemption by the debtor within a year after confirmation of the foreclosure sale. [22] This statutory enactment does not occupy the field, however, as we continue to recognize judicially the right of equitable redemption. [23] This view is in line with the Restatement, which declares that a performance in full of the obligation secured by a mortgage . . ., by one who is primarily responsible for performance of the obligation, redeems the real estate from the mortgage. . . . Performance may be made prior to the time the obligation is due . . . or may be made at or after the time the obligation is due but prior to foreclosure. [24]