X.

It must be realized, therefore, that according to the more modern notions the mere fact of some collateral advantage is not fatal in itself unless it can be shown to be a fetter upon the equity of redemption as well. The ruling case to this effect is Biggs v. Hoddinott. This was the case of a mortgage of his hotel by the defendant Hoddinott to the plaintiff Biggs, a brewer, to run five years, with a covenant by the mortgagor that during the continuance of the security he would deal exclusively with the mortgagee for all malt liquors sold on the mortgaged premises. The mortgagor having ceased to purchase beer of the mortgagee, he moved for an injunction, which was granted. In the Court of Appeal Lord Lindley, then Master of the Rolls, stated the modern law thus:

"The proposition stated in Jennings v. Ward is too wide. If properly guarded, it is good law and good sense. A mortgage is regarded as a security for money, and the mortgagor can always redeem on payment of principal, interest and costs; and no bargain preventing such redemption is valid, nor will unconscionable bargains be enforced. There is no case where collateral advantages have been disallowed which does not come under one of these two heads. To say that to require such a covenant as that now in question is unconscionable is asking us to lay down a proposition which would shock any business man, and we are not driven to it by authority."

1 [1898] 2 Ch. 307.

2 2 Vern. 520.

3 Another point was urged unsuccessfully in Biggs v. Hoddinott, supra, which seems a curious contention in modern times. In the first enthusiasm for redemption it seems to have been thought that an agreement between mortgagor and mortgagee that the loan was to run for some extended period, no reconveyance to be made until a repayment on that day, might be a clog upon the equity of redemption. Talbot v. Braddel, 1 Vern. 393 (thirty years); Cowdry v. Day, 1 Giff. 316 (twenty years). The only truth there can be in this notion is that the circumstances including such postponement may be so extraordinary as to cause the whole arrangement to be considered unconscionable. Otherwise, until the passing of the legal right to redeem created by the parties, there is no reason for the interposition of the equity of redemption. And it should be said that the doctrine finds little favor in the modern English cases. Brown v. Cole, 14 Sim. 427; Guardians of the Poor v. Metropolitan Life Assurance Soc., [1897] A. C. 647. No American case, so far as the writer knows, has ever considered mere length of time as inconsistent with a mortgage transaction; indeed we have countless corporate mortgages to secure bonds ranging in duration from twenty to one thousand years. See Philadelphia & R. Ry. Co's App., 4 Am. & Eng. Ry. Cas. 118. Moreover it seems plain that mere stipulation for a long investment is not

See

Emboldened by this success, counsel brought to court another case much more complicated; and in Santley v. Wilde1 a clever scheme was presented for approval. The sum of £2000 was loaned to the lessee of a theatre, and the borrower agreed not only to repay that sum with interest in five years, but also to give the lender one-third of the net profits during the term of the lease. And the mortgage executed upon the lease secured by its terms not only the repayment of the debt and interest in the five years, but the payment of one-third of the net profits for the whole ten years. It would seem that this device was too plain an evasion of the rule to pass examination, but so ably was the case argued to the Court of Appeal that they held the whole transaction valid, Lord Lindley making this dubious distinction:

"Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption and is therefore void. It follows from this, that once a mortgage always a mortgage; but I do not understand that this principle involves the further proposition that the amount or nature of the further debt or obligation the payment or perperformance of which is to be secured is a clog or fetter within the rule.”

If Biggs v. Hoddinott and Santley v. Wilde had both persisted as accepted law for any time, there would have been an end of the greater part of the accepted doctrine against the clog on the equity of redemption; and indeed many acclaimed its downfall as wholly in accordance with modern enfranchisement. But the doctrine against fettering the equity of redemption has such firm foundations in mortgage law that it was not shaken by these decisions; and as will be seen presently, while it is generally supposed that Biggs v. Hoddinott is good law, Santley v. Wilde is distinctly overruled. And the writer believes that this differentiation probably is good law for modern conditions. The real test in the matter is not whether the mortgagor is subjected to various burdens during the currency of the mortgage, unless indeed the price extorted from him for the hire of the money is really unconscionable; but the true inquiry, it is submitted, is whether after repayment

an improper advantage for the mortgagee to take. The only possible legal objection that can arise to long-time mortgages would seem to come from the rule against remoteness, to which, probably, they form a necessary exception. See Gray, Rule Perp., 2 ed., §§ 562-570.

1 [1899] 2 Ch. 474.

of his loan the mortgagor is free from interference with his enjoyment again of full ownership.

XI.

We come at length to the two recent cases in the House of Lords in which this whole matter was threshed out to a conclusion which should be accepted as final wherever our law prevails. In Noakes & Co., Ltd. v. Rice1 the facts were that a mortgage upon a lease of a public house made by the publican to his brewers provided in usual form that when the borrower should repay all sums due to the lender the mortgaged premises should be reconveyed, with the further stipulation so framed as to run with the land that, whether any money should or should not be owing on the security, all malt liquors sold upon the premises should be bought of the brewers. When the publican came with his bill to redeem, all the English courts in succession held this stipulation void. And indeed this would seem to be the typical case of a clog on the equity, wherever this rule is developed in full, a fetter which is designed to outlast redemption. To quote the pithy statement of Lord Davey:

"Once a mortgage always a mortgage, and nothing but a mortgage. The meaning of that is that the mortgagee shall not make any stipulation which will prevent a mortgagor who has paid principal, interest, and costs, from getting back his mortgaged property in the condition in which he parted with it."

Yet doubts were left unsettled by Noakes v. Rice because its facts made out so strong a case of clog on the equity of redemption, by reason of the fact that it was assumed by most of the judges, though not all, that the covenant if valid would create. a hold upon the property itself even in the hands of a vendee. But in Bradley v. Carrett,2 in the next year, the House of Lords had to deal with a case of a covenant in regard to the property designed to outlast redemption, which could not be said to be specifically enforceable. A holder of shares in a tea company mortgaged the shares to secure a loan and agreed to use his best endeavors to secure that "always thereafter " the mortgagee should have the sale of all the company's teas as broker, and, in the event of any of the company's teas being sold otherwise than through the mortgagee, to pay him the amount of the commission he would

1 [1902] A. C. 24.

2 [1903] A. C. 253.

have earned if the teas had been sold through him. After the mortgage was paid off the company employed other brokers, and this was a suit for breach of covenant. The lower courts held the agreement valid, but the House of Lords reversed them upon grounds thus stated by Lord Macnaghten:

"My Lords, I do not think it is necessary that there should be any hold upon the property, direct or indirect. I think, as I ventured to say in Noakes v. Rice, that equity will not permit any device or contrivance designed or calculated to prevent or impede redemption. And I think your Lordships gave sanction to that proposition when you approved the decision in the Irish case of Browne v. Ryan.' Can you impose on the equity of redemption a fetter operating indirectly, when you cannot, as it is admitted, impose a fetter which operates directly? My Lords, I should have thought that that question answered itself you cannot do indirectly that which you must not do directly."

The meaning of these decisions should be obvious, whether or not one agrees with the policy that dictates them. In order to have that which is forbidden as a clog on the equity of redemption we must have this situation created, that the debtor who has mortgaged his property will not upon repayment to his creditor emerge from the transaction as free in his ownership as he was before. That he has to pay high for his money is not enough, so long as by the repayment of everything due, every incumbrance that there is upon his property will be wiped off. And there is in the eye of equity a fetter upon his property if the covenant he has been induced to make will, after redemption, hamper him in the full enjoyment of his property or hinder him in the disposition of it. It is enough, that is, to constitute a clog upon the equity of redemption if the covenant will affect the mortgagor after redemption as an owner of the res.2

1 [1901] 2 Ir. 653.

2 The law as thus settled in the beginning of the twentieth century seems to be nearly the same as the law at the beginning of the nineteenth century. There was a correspondingly large number of decisions within a few years about that time, most of them concerning the validity of the terms of the mortgages of West Indian estates to London factors. In Bunbury v. Walker, I Jac. & W. 225, it was properly held that an agreement that the lender should be the consignee of the borrower during the currency of the mortgage was valid, and the warning was properly given that a covenant of this sort was unenforceable in so far as it attempted to secure to the lender the position of consignee after repayment of the debt. Cox v. Champney, Jac. 576, has a dictum to the same effect, making the same distinction. To be sure, Chambers v. Goodwin, 9 Ves.

254, suggested that such collateral profits could not be taken, but that was a case of

XII.

Considered in a broad way, this rule against clogging the equity of redemption is one of the many instances of the setting aside of the deliberate bargains of the parties upon the ground that they are contrary to the policy of the courts. The right of men to hold such contracts as they can get is subject to many limitations imposed for the common good. But especially when it is a case, as this one is, where the contract of the parties comes into real opposition with a fundamental doctrine, its fate is certain at the hands of a court vigilant to protect its own. Since it is all a matter of policy, it cannot be expected that all men will agree as to the propriety of such interference. But to the writer the doctrine against the clog on the equity of redemption seems one of the striking examples of the great truth that the ethical standard of our law is often higher than the average morality of the commercial community.

Bruce Wyman.

mortgagee in possession, as was Leith v. Irvine, 1 Myl. & K. 277, and the court treated a mortgagee in possession to that extent as a trustee in both cases.