CHAPTER V.

MORTGAGES OF STOCK IN THE FUNDS; OR TO SECURE LOANS OF STOCK; OF SHARES IN OR BY PUBLIC COMPANIES; OF POLICIES OF ASSURANCE UPON LIVES; UPON DEBTS, AND PERSONAL SECURITIES, JUDGMENTS, LEGACIES, INTERESTS IN SHIPPING; OF HOUSEHOLD FURNITURE AND OTHER MOVEABLE EFFECTS; AND ALSO OF MIXED KINDS OF PROPERTY, BONDS AND WARRANTS OF ATTORNEY.

I. MORTGAGES OF STOCK IN THE PUBLIC FUNDS, OR TO SECURE LOANS OF STOCK.

1. Mortgages of stock.

2. Where a loan of stock is secured by a mortgage of real

estate.

3. Where a loan of stock is secured by bond.

II. MORTGAGES OF SHARES IN OR BY PUBLIC COMPANIES.

1. Mortgages of shares in public companies.

2. Mortgages of shares by public companies.

III. MORTGAGES OF POLICIES OF ASSURANCE UPON LIVES; OF DEBTS, BILLS OF EXCHANGE, PROMISSORY NOTES, AND OTHER PERSONAL SECURITIES, Judgments, and LEGACIES.

IV. MORTGAGES OF INTERESTS IN SHIPPING.

V. MORTGAGES OF HOUSEHOLD FURNITURE AND OF OTHER MOVEABLE EFFECTS.

VI. MORTGAGES OF MIXED KINDS OF PROPERTY.

VII. BONDS AND WARRANTS OF ATTORNEY FOR SECURING THE PAYMENT OF A DEFINITE AND CERTAIN SUM OF MONEY.

I. MORTGAGES OF STOCK IN THE PUBLIC FUNDS, OR TO SECURE LOANS OF STOCK.

1. Mortgages of stock.

2. Where a loan of stock is secured by a mortgage of real estate. 3. Where a loan of stock is secured by bond.

1. Mortgages of Stock.

Stock not often made the subject-matter of a mortgage security.]-Stock in the public funds is not often resorted to as a mortgage security, as the fundholder has usually the means of raising the money at less trouble and expense by selling out a sufficient amount of stock to raise the required sum. Where mortgages of property of this kind most frequently occur, is where the party requiring to raise the money has only a life estate, or some other limited or contingent interest, in the stock. Still, where the funds happen to be in a very depressed state, or the stock itself is shut, and so incapable of being sold out, and there is some pressing exigency for the money, it may be advantageous to resort to a mortgage of the stock, the incidental expenses of which are far less heavy than in a mortgage of real estate, where lengthy abstracts of title have often to be prepared and a long title investigated and perfected and a vast deal of business to be gotten through before the mortgage assurance can be completed.

Mortgages of stock, how usually effected.]—Where the mortgagor has an absolute interest and power of disposition over the stock, a mortgage of it is usually effected by a transfer of such stock into the name or names of one or more trustee or trustees, upon trust to re-transfer upon payment of principal and interest, with a proviso that the mortgagor shall be permitted to receive the dividends until default.

Transfer of the stock, how to be made.]-The transfer may be made by the mortgagor either in person, or by means of a power of attorney given by him for that purpose. The transfer usually precedes the execution of the mortgage deed, the latter of which, after reciting the transfer, declares that the trustees or trustee into whose names the transfer has been made, shall stand possessed of the stock upon trust to re-transfer into the mortgagor's name upon payment of principal and interest, but upon trust to sell in default of such payment. The mortgagor then enters into general

covenants, that he has good right to transfer, and that the stock so transferred shall be held upon the trusts therein declared, free from incumbrances, and for further assurance; with qualified covenants from the mortgagees that mortgagor shall receive the dividends until default; and that the trusts for sale shall not be carried into effect without giving him due notice, concluding with a power to change trustees: (see the form 2 Con. Prec., Part V., Section V., No. I., pp. 232, 237, 2nd edit.)

Mortgagee of stock has a power of sale, without any express words to that effect.]-Although it is the usual practice to insert a power of sale in mortgages of stock, still this is not essential; because a mortgagee of stock, who takes a transfer from the absolute owner, may at any time after default in payment of the mortgage debt and interest sell out the stock for the purpose of discharging the mortgage, without either a trust or power to that effect being expressed in the mortgage deed: (Tucker v. Wilson, 1 P. Wms. 261; Lockwood v. Ewer, 2 Àtk. 303.

As to mortgages of life interests in stock.]-Life interests in stock standing alone afford a very poor mortgage security, and may possibly become worthless by the mortgagor's death before any dividends become payable, in which case the mortgagee would get nothing whatever from the stock. Assurances of this kind are therefore almost invariably accompanied by the assignment of a policy of assurance upon the borrower's life, and when this is the case, a mortgagee of a life interest in stock stands in as good, if not a better plight, as far as receiving his interest is concerned, than any other mortgagee of a life interest, as the time and amount of the payment of the dividends is certain and unchangeable, however fluctuating the value of the principal may be, on account of the rise or fall in the price of the stock.

How mortgage of a life interest in stock should be prepared.] -The mortgage deed of a life interest in stock should recite the settlement, will, or other instrument under which the mortgagor acquires his estate and interest in the stock; the fact of the policy of assurance having been effected upon his life previously to the mortgage should be recited, followed by the recital of the agreement and terms of the loan. The mortgagor must then assign his interest in the stock, and also the policy of assurance, to the mortgagee, subject to a

proviso for redemption on payment of principal and interest, which the mortgagor enters into a general covenant to pay; as also that he has a right to assign; for quiet enjoyment, freedom from incumbrances, and for further assurance, and a further covenant to keep up the policy, with power for mortgagee to renew in default. The mortgagee usually enters into qualified covenants that mortgagor shall receive the dividends until default: (see the form 2 Con. Prec., Part V., Section V., No. II., pp. 238, 242, 2nd edit.)

2. Where a Loan of Stock is secured by a Mortgage of Real Estate.

Loan of stock sometimes secured by mortgage of real estate.] -A loan of stock is sometimes made upon the mortgage security of real estate, in which case the usual practice is for the proviso for redemption to be upon the condition that the mortgagor will, on some specified day, transfer the same amount of stock into the mortgagee's name, and also to pay a sum equivalent to the dividends accrued during the interim; with a covenant from the mortgagor to make such transfer and payment accordingly: (see the form of mortgage of this kind, 2 Hughes Pract. Mort., Prec. K., No. V., p. 72.)

Mortgagee's remedies in case of mortgagor's default.]—In case the mortgagor makes default in transferring the stock at the appointed time, the mortgagee may proceed against him at law for the recovery of the value of the stock, in which action he will be entitled to recover the value of the stock at the time of the transfer, although the price of the stock may be much lower at the time of the trial: (Sanders v. Kentish, 8 T. R. 162.) And it has been held, that in estimating the amount of damages in an action at law for breach of an engagement to replace stock on a given day, it is not enough to take the value of the stock on that day, if it has risen in value in the meantime, but the highest value that it stood at at the time of the trial, there being no offer of the defendant to replace it in the intermediate time when the market was rising: (Shepherd v. Johnson, 2 East, 211; Payne v. Burke, 2 East, 213.) But it has also been held, that in an action upon a bond for not replacing stock, the obligee is not entitled to special damage for what he might have made if it had been sooner replaced, unless he shows that he demanded payment for that express purpose: (M'Arthur v. Leaforth, 12 Taunt. 257.) And in a still

more modern case (Harrison v. Harrison, 1 Car. & Pay, 412), the rule adopted on a writ of inquiry upon a bond to replace stock was to take the price at the day of trial, or the preceding day, and not at the option of the plaintiff at that day, or the day on which it ought to have been replaced: (see also Downes v. Back, 1 Stark. N. P. C. 318.)

Remedies in equity.]—In equity, it seems to have been considered that the lender of the stock is entitled to the value of it at the time of transfer, with interest at five per cent. from the time of the Master's report; upon the principle that the fair measure of the damage sustained by the breach of the condition for not transferring the stock at the time appointed, in consequence of which the penalty of the bond became forfeited at law; and also on the habit of the court as to compensation where a trustee improperly sells out, in which case the cestui que trust has an opportunity either to have the stock, or the money produced by it, with interest: (Forrest v. Elwes, 4 Ves. 497.)

Practical suggestions.]-To prevent any questions from arising upon this subject, it has been a common practice in loans of this kind to give the lender the option of taking the amount of the price of the stock at the time of the loan, or at the time appointed in the proviso for redemption for discharging the mortgage debt.

How proviso should be framed.]-The best way of preparing a proviso of this kind, is to provide that in case the borrower or his representatives shall, on a certain day therein appointed, if the request thereinafter mentioned be not made within one week thereof, pay unto the lender the amount (specifying the sum) of the price of the stock at the time of the loan, or shall, on such day as aforesaid, at the request of the lender, and costs of the borrower, purchase or transfer into the lender's name the same amount of stock as was originally borrowed of him, with interest at the rate reserved on the amount of the original price of the stock, then the lender will reconvey the mortgaged premises, &c. To this proviso should be added a covenant from the borrower to make such payment or transfer as the lender in his option may appoint; with powers of sale in default, followed by the other usual mortgage covenants as in other ordinary mortgage assurances.