Opinion ID: 2176933
Heading Depth: 1
Heading Rank: 4

Heading: Recording Statute Equitable Mortgages

Text: The priority of mortgages in Delaware is governed by statute. 25 Del.C. § 2106. Section 2106 provides: A mortgage, or a conveyance in the nature of a mortgage, of lands or tenements shall have priority according to the time of recording it in the proper office, without respect to the time of its being sealed and delivered, and shall be a lien from the time of recording it and not before. Id. Handler contends that because the CoreStates mortgage was not executed under seal, it did not satisfy the statutory requirements for a sufficient form of mortgage under Delaware law. See id. § 2101(a). Therefore, according to Handler, the CoreStates mortgage did not constitute a mortgage or a conveyance in the nature of a mortgage for the purposes of Section 2106. Consequently, Handler argues for the priority of its mortgage under Section 2106, as the first recorded valid mortgage. Handler's argument is inconsistent with the undisputed historical fact that there are two types of mortgages, legal and equitable. A mortgage is a conveyance of an estate, by way of pledge for the security of debt, and to become void on payment of it. 4 Kent, Commentaries on American Law . See Fox v. Wharton, 5 Del.Ch. at 226. The sine qua non of a mortgage is not the form of the document but the intention of the parties to secure a debt with a pledge of real property. Hall v. Livingston, 3 Del.Ch. at 374. The form of mortgage, either legal or equitable, is only determinative of the court in which the document may be enforced. Monroe Park v. Metropolitan Life Ins. Co., 457 A.2d at 736. In fact, the Delaware form of mortgage statute explicitly states that documents not conforming with its prescribed pattern may nevertheless be valid and fully effectual. 25 Del.C. § 2101(c). [6] In Monroe Park this Court expressly recognized the Court of Chancery's equitable power to disregard defects in the execution of a mortgage, pursuant to the principles that (1) equity regards substance rather than form, and that (2) equity regards that as done which in good conscience ought to be done. Monroe Park v. Metropolitan Life Ins. Co., 457 A.2d at 737. Consequently, although the absence of a seal on the CoreStates mortgage is a technical defect that precludes the enforcement of the document as a mortgage at law in the Superior Court, it does not affect either the validity of the document as an equitable mortgage or its enforceability in the Court of Chancery. Id. at 736. The Delaware statute establishes the priority of mortgages according to the time of recording and without regard to their form, i.e., legal or equitable. 25 Del.C. § 2106. As the Missouri Supreme Court has held, [a] mortgage may be irregular where the seal is omitted, or not in accordance with law, but it will nevertheless be valid to create a lien, a trust for the benefit of the creditor, which can be enforced in equity. Dunn v. Raley, 58 Mo. 134, 135 (1874). In this case, the Court of Chancery properly found that the CoreStates equitable mortgage was a valid lien on Hitchens Farm and entitled to priority under Section 2106, according to the time of its recording, to the same extent as a mortgage under seal.