Opinion ID: 2176933
Heading Depth: 1
Heading Rank: 2

Heading: Equitable Mortgages Nature and History

Text: The Anglo-Saxon/American history of the law regarding mortgages reflects the equitable nature of its present principles, many of which find their origin in Roman civil law. Those equitable tenets were developed over centuries by courts of equity, in response to what were perceived to be the shortcomings of legal rules on the subject. See Fox v. Wharton, Del.Ch., 5 Del.Ch. 200, 225-26 (1878). The Delaware Court of Chancery has characterized the law of mortgages as one of the most splendid instances in the history of our jurisprudence, of the triumph of equitable principles over technical rules, and of the homage which those principles have received by their adoption in the courts of law. Id. at 226 (quoting 4 Kent, Commentaries on American Law ). A knowledge of that history is essential to an understanding of the powers which are now vested in the Delaware Court of Chancery in equitable foreclosure proceedings. The Roman civil law recognized two kinds of transfers of property as security for debts: the pignus and the hypotheca. 2 Story, Commentaries on Equity Jurisprudence § 1005 (Bigelow, 13th ed. 1886). The pignus, or pledge, involved the pledge of real or personal property for money lent, and the possession of the property was passed to the creditor upon the condition of returning it to the owner when the debt was paid. Id. The hypotheca involved the pledge of real or personal property in which the thing pledged was not delivered to the creditor, but remained in the possession of the debtor. Id. The hypotheca provided that upon default of the debtor hypotheca, the creditor was entitled to an actio hypothecaria, an action in rem to obtain possession of the encumbered property. Id. § 1007. The debtor, however, was entitled to due notice and opportunity to satisfy the debt and retain the property before his rights were extinguished, and the pledge could not be sold without protracted notice or a judicial decree. 4 Kent, Commentaries on American Law  n. (a) (Barnes, 13th ed. 1884). The common law of mortgages can be traced back to the gage of land or chattels of the Saxon and early Norman periods, involving the transfer of possession to creditors to secure the payment of debts. Walsh, A Treatise on Mortgages 1 (1934). Several references to such gages can be found in the Domesday Book. Id. (citing Domesday Book 137, 141, 217). In his twelfth century treatise on the common law of the King's Court, Glanville described the distinction which had developed between a mortuum vadium, or mort gage, and a vivium vadium, or vif gage. Id. [4] By the fifteenth century, the common law form of mortgage in England had evolved into the form of a conveyance in fee to the mortgagee subject to payment of the debt as a condition subsequent, performance of which gives to the mortgagor a right to re-enter restoring his estate. Id. at 4. Conversely, a default in such payment was used to make the title of the mortgagee absolute. Id. Thus, the term mortgage described a gage which is dead to the mortgagor because if he fails to pay the debt on the due day, he loses his land forever. Id. The impetus for the adoption of equitable doctrines in the Courts of Chancery arose from the harsh rules by which the death of the gage was determined in the English law courts. [T]he mortgagor was subjected to great hardships and inconveniences if he did not strictly fulfill the conditions of the mortgage at the very time specified; as he thereby forfeited the inheritance or the term ... however great might be its intrinsic value compared with the debt for which it was mortgaged. 2 Story, Commentaries on Equity Jurisprudence § 1012. Consequently, the rights which had originated in an actio hypothecaria were developed by the English High Court of Chancery into the doctrines of the mortgagor's equity of redemption and the equitable power of foreclosure. See id. § 1013. The equitable doctrines established by the English High Court of Chancery were consistent with the hypotheca in Roman civil law: the mortgage was held to be a mere security for the debt due to the mortgagee; the mortgagee held the estate as a trust for the mortgagor; and the mortgagor had an equity of redemption, which he might enforce against the mortgagee, as he could any other trust, if he applied within a reasonable time to redeem, and offered a full payment of the debt and of all equitable charges. Id. The English law courts had also developed strict, technical rules concerning the form of mortgages. The English High Court of Chancery responded by enforcing any conveyance as an equitable mortgage, between the parties, so long as it was the intention of the parties that the conveyance in question provide security for a debt. See 4 Kent, Commentaries on American Law -44. As to what constitutes a mortgage there is no difficulty whatever in Courts of Equity, although there may be technical embarrassments in Courts of Law. The particular form or words of the conveyance are unimportant; and it may be laid down as a general rule subject to few exceptions that wherever a conveyance, assignment, or other instrument, transferring an estate, is originally intended between the parties as a security for money or for any other incumbrance, whether this intention appear from the same instrument or from any other, it is always considered in equity as a mortgage and consequently is redeemable upon the performance of the conditions or stipulations thereof. 2 Story, Commentaries on Equity Jurisprudence § 1018 (emphasis added) (footnotes omitted). Thus, irrespective of form, a conveyance intended as a mortgage has been regarded as enforceable between the parties as an equitable mortgage, thereby preserving the mortgagor's equity of redemption. Hall v. Livingston, Del.Ch., 3 Del.Ch. 348, 374-76 (1869). See also 2 Fonblanque, A Treatise of Equity  n. (h) (Laussat, 3d ed. 1831). Some examples of equitable mortgages that have been recognized originally by the English High Court of Chancery and subsequently by American courts of equity are (1) deposits with a creditor of title deeds intended as security; (2) a deed absolute on its face intended as security; (3) equitable lien of a vendor of real property for unpaid purchase money; and (4) documents defective on their face as mortgages at law but otherwise evincing an intent to establish security for a debt. See 2 Story, Commentaries on Equity Jurisprudence § 1020; 4 Kent, Commentaries on American Law -54; 9 Thompson, Commentaries on the Modern Law of Real Property § 4669; 1 Glenn, Mortgages, Deeds of Trust, and Other Security Devices as to Land §§ 9-18.1 (1943).