CHAPTER XLVI

MORTGAGES

521. Definition. A mortgage is an instrument conveying property upon condition as security for the payment of some debt or the performance of some act, and is to become void upon payment or performance. The person giving the mortgage is called the mortgagor, and the person in whose favor it is drawn is called the mortgagee. The mortgage conveys to the mortgagee the legal title to the estate.

522. Equity of redemption. The equity of redemption is the right that remains in the mortgagor to redeem the estate conveyed by payment of the debt. When the debt is paid the mortgage becomes void and the legal estate returns to the mortgagor. A person may give as many mortgages as other parties are willing to take. A mortgage first recorded is called first mortgage; second recorded, second mortgage, etc., and when foreclosure is made, if the proceeds of the sale are exhausted in satisfying the first mortgage, the second mortgage will remain unsatisfied. The first mortgagee is entitled to have his claim fully satisfied notwithstanding the pressing demands made by the other mortgagees of the same property that their claims should receive some consideration.

"Recording" is the act of placing on record, or transcribing into the official records. A Recorder is a county or state officer with duties of keeping and recording deeds, mortgages and other papers required by law to be placed in the public records.

523. Possession. It is the rule in this country that the mortgagor retains possession of the mortgaged premises. When he does he takes the rents and profits free of any claims of the mortgagee, but he is not permitted to commit waste. If the mortgagee takes possession he must apply the rents and profits to the debt secured by the mortgage.

524. Insurable interest. Both the mortgagor and the mortgagee have insurable interests in the property. If the mortga

gee insures at his own expense he is entitled to the insurance money free of the debt, i.e., he need not apply the insurance money to the debt. If the mortgagor insure, and without any agreement that it is for the benefit of the mortgagee, he is entitled to the insurance money free from any claim of the mortgagee.

525. Foreclosure. If the equity of redemption be lost or barred by a failure to make payment the mortgagee has a right of foreclosure. This consists in filing a bill in a court of equity asking for a decree requiring the property covered by the mortgage to be sold and that the proceeds of the sale be applied to satisfying the mortgagor's debt. The court will issue a decree requiring the property to be advertised for sale, and to be sold at public auction. After a ratification of the sale by the court the proceeds will then be applied to the mortgagee's claim. If anything remain of the proceeds of the sale it is returned to the mortgagor. This procedure is known as an equitable foreclosure and is the one universally adopted by the states. The other method of foreclosure is when the court orders the. title to be made absolute in the mortgagee. In this case the mortgagee takes possession of the premises as his own. This is known as a strict foreclosure, and is very unpopular in this country, because in many instances, the mortgagee acquires property worth many times the value of the debt.

526. Statutory regulations. It is not deemed advisable in a work of this nature to give further details as to the execution, recording, release, assignment, etc., of mortgages, as it is regulated by statutes, which vary in the different states. Furthermore, not even the shrewdest and most prudent business man would ever attempt to trust these matters to his own knowledge, because they abound in technicalities and formalities which are understood only by lawyers and real estate conveyancers, who have made a special study of them, and it is not our purpose to prepare students taking a commercial course to do their own conveyancing. The following form illustrates a mortgage.

THIS INDENTURE, Made this twenty-fourth day of January A.D. 1915 between Mary A. Smith in her own right, and John C. Smith, her husband, of Douglas County, in the State of Illinois, party of the first part, the TREVETT-MATTIS BANKING COMPANY, of the City of Champaign, State of Illinois, party of the second part:

WITNESSETH, That the said Mary A. Smith and John C. Smith are justly indebted to the party of the second part, as per one certain Note of even date herewith, executed by the said Mary A. Smi h and John C. Smith for the sum of Three Thousand ($3,000) Dollars, borrowed money, payable to the order of said TREVETT-MATTIS BANKING COMPANY, Five years after February 1st, 1915, with interest thereon at the rate of Five per cent, per annum, payable annually, according to the tenor of Five interest coupons to said Note attached; said Note shall bear interest after maturity at the rate of Seven per cent, per annum, until paid, and both principal and interest payable at THE FOURTH NATIONAL BANK, NEW YORK CITY, NEW YORK, in and by which said Note it is agreed that if default be made in the payment of any interest installment that may become due on said Note, as aforesaid, or any portion thereof, for the space of ten days after the same shall become due and payable according to the tenor and effect of the said Note, as aforesaid, then all said principal and interest Notes, except interest for unexpired time, shall at the option of the owner or holder of said Note at once become due and payable, and may be demanded and collected immediately hereafter, anything therein before contained to the contrary notwithstanding.

NOW, THEREFORE, THIS INDENTURE WITNESSETH, That the said party of the first part hereby mortgage and warrant unto the said party of the second part, and its successors or assigns forever, all the following described real estate, (together with all the rents, issues and profits thereof), situate in the County of Douglas and State of Illinois, to-wit:

The West Half of the East Half of the South West Quarter and

the East Half of the South West Quarter of the South West Quarter of Section Twenty-nine (29), Township Sixteen (16) North-Range Eight (8) East of the Third Principal Meridian and containing Sixty (60) Acres.

TO HAVE AND TO HOLD the same, together with all and singular the tenements, hereditaments, privileges and appurtenances thereunto belonging, or in anywise appertaining (with said rents, issues and profits), unto the said party of the second part, and its successors or assigns forever, and hereby expressly waiving and releasing all right under and benefit of the exemption and homestead laws of the State of Illinois, which parties of the first part have in and to said premises or the proceeds of the sale thereof.

IT IS HEREBY COVENANTED AND AGREED, That if default be made in the payment of said principal sum of money, or any interest installment that may become due thereon, or any part thereof, when the same becomes due and payable, or in case of waste, or non-payment of taxes or assessments, or neglect to procure or renew insurance as hereinafter provided, or in case of a breach of any of the covenants or agreements herein contained, then and in such case the whole of the principal and interest of said Note shall thereupon, at the option of the said party of the second part, or its successors or assigns become immediately due and payable; anything herein, or in said Note and coupons contained to the contrary notwithstanding. And this Mortgage Deed may then be immediately foreclosed without further notice, and it shall be lauful for the party of the second part, or its successors cr assigns, to enter into, and upon the premises hereby granted, or any part thereof, and to receive all rents, issues and profits thereof.

And it is further provided that if any tax shall be levied or assessment made against the owner or holder of said Note, under these presents, under and by virtue of the laws of the State of Illinois, for or on account of said Note, or the debt hereby secured, the said debt and Note shall, at the election of the owner or holder of said Note under these presents at any time thereafter, immediately become due and payable, less interest for unexpired time, anything herein or in said promissory Note to the contrary notwithstanding, and the said mortgagee may proceed as though the time for the

payment of said debt had expired by its own limitation, without giving notice of such election.

And, also, upon the maturity of said indebtedness hereby secured, whether the same becomes due by maturity or by option of the legal holder of said Note either in term-time or vacation, to consent to the appointment of the said party of the second part, or any suitable person, as receiver; and that said receiver be authorized, directed and empowered to take possession of the said premises hereby conveyed, and all crops thereon, and to collect the rents of said premises, and to do and perform such other acts as may be required by order of the said court or judge making such appointment.

And in case of the employment of an attorney or solicitor to foreclose this Mortgage Deed, or in the event of any suit or proceedings at law or in equity wherein the said party of the second part, or its successors or assigns, shall be made party to any suit or proceedings at law or in equity by reason of its relation to or interest in this obligation or debt secured thereby, either as complainant, plaintiff or defendant, it or its successors or assigns, shall be allowed and paid reasonable costs, charges and One Hundred Dollars attorney's and solicitor's fees in such suit or proceeding by said party of the first part or his assigns, and the same shall be a further charge and lien upon said premises under this deed.

And the said party of the first part, for themselves and their heirs, executors, administrators and assigns covenant and agree to and with the said party of the second part, its successors or assigns, that they will in due season pay all taxes and assessments on said premises; and will keep all buildings that may at any time be on said premises during the continuance of said indebtedness insured in such company or companies and for such an amount as said party of the second part, may from time to time direct, the policy or policies of such insurance to be so drawn that the loss, if any, shall be payable to said party of the second part, and be held by it as additional security hereto. And in case of the refusal or neglect of the said party of the first part or assigns, or either of them, thus to insure or to pay taxes, said party of the second part, or its successors or assigns, or the owner or holder of said Note, or either of them, may procure such insurance or pay such taxes,