Commercial Law

Pro

n order to make the transaction valid against third persons, record in the Registry of Deeds in the county where the land is situated is also requisite. Unless a contract for the sale of real estate is recorded, a subsequent conveyance to a purchaser, for value and without notice, will destroy the right of the buyer under the first contract to get the land, though he will still have an action for damages against the seller. So, in many jur

t to repudiate the contract, as by selling the land to another, the buyer need not wait for the time for performance, but may at once give notice that he rescinds the contract. Unless the seller has expressly contracted to convey by warranty deed, his obligation is generally satisfied by a quit claim deed. It is well, therefore, for a purchaser, when he contracts to purchase a piece of real property, to insert in the contract a clause to the effect that the seller agrees to convey by a sufficient warranty deed. The seller is also bound not to commit waste on the premises between the time of the contract and the time of performance. The rule in regard to accidental injury is stated hereafter, but as to intentional or negligent injury of the premises, the law is clear that such an injury is a breach of duty by the seller. The buyer's duty is to pay the price according to the terms of the

give an unencumbered title to real estate unless his wife joins in the conveyance. Similarly a husband was entitled at common law to a life interest in the lands of his deceased wife if they had had a child born alive. This was called the estate by curtesy. Its extent, it will be observed, is not the same as that of dower. The husband's life interest extended to all the lands of the wife, but on the other hand,

it is of a character which rapidly fluctuates in value, time is said to be "of the essence;" that is, the failure of either party to perform at or about the agreed day is fatal to his rights to enforce the contract; but in the case of

and pay the full price. This rule has been much criticized, and it is not universally in force; for example, it is not the law of Massachusetts. In some other States the loss will not fall upon the buyer unless possession of the premises has been delivered to him under the contract, but in New York, and probably a majority of the States, even though the seller still has possession, as well as title, the risk of accidental loss rests upon the buyer. Where risk of destruction of the premises is thrown on the buyer, immediately after he has made a contract to purchase, it is of obvious

onal property, damages are generally considered adequate, but contracts for the sale of a painting or a race-horse would be specifically enforced. Sometimes the seller is unable fully to perform his agreed contract. He may not be able to give a title free from encumbrances, or he may have committed waste on the premises. In such a case, though the buyer need not carry out the contract unless he wishes, he can if he chooses get a conveyance decreed to him and an allowance deducted from the price commensurate to the injury caused by the encumbrance or waste. Specific performance will be granted not only against the seller, but if the seller in violation of his contract has conveyed the land to a third person who had notice of th

satisfy his claim for the purchase money unless the land has been conveyed, before proceedings are brought to enforce the lien, to a purchaser for value without notice that the original ven

popular understanding the mortgagor owns the mortgaged premises but the mortgagee will take or sell them if the debt is in default. The theory of the common law, however, was that the mortgagee became the owner of the premises as soon as the mortgage was made, but that the mortgagor was entitled to re-acquire the owners

longer that the mortgagee has title to the property, but that he has only a lien on it, which he may enforce if the debt is not paid. The difference in actual results under the two theories, however, is less than might be supposed. Where the mortgagee is still regarded as having the title, his power to make use of that title is limited so that

d to the payment of taxes by the mortgagor and the keeping of the premises insured for a certain amount, are usual and important provisions. There is also commonly contained in a mortgage a power of sale; that is an authority or agency given to the mortgagee to sell the premises free of the mortgagor's right of redemption in case default of payment is made, or in case such default continues

lies. It is important to ascertain whether a seal is necessary in that State, and the instrument must ordinarily be acknowledged before a notary public having a seal, or before a commissioner of deeds for the State in which the land lies. There is in every State a recording act by virtue of which unrecorde

. The principles here involved, however, are not different from those generally governing the acts of agents and corporations. The same may be said in regard to mortgages by husband or wife, by a partnership, or by trustees. In the case of mortgages executed by any such person it is necessary to take special precautions. A mortgage by husband or wife should generally be

d by the mortgagor, have generally been held to attach to the property when acquired by the mortgagor, and then to gi

y are given to secure. A mortgage may be given to secure a past debt if the mortgagor, when he makes the mortgage, is solvent. If he is then insolvent, to give such a mortgage would be a preference, which is an act of bankruptc

and interest he ought to be satisfied. Accordingly if the mortgagor was in default in the payment of the debt, he was allowed to redeem the property by payment of the debt and interest until the time of tender. If the mortgagee refused to accept his debt and interest, the mortgagor could bring a suit in equity to redeem the property and the court would order the reconveyance to him of the property on payment of the debt. Because of this right on the part of the mortgagor, his interest in the property came to be called an equity of redemption, and it is often so called at the present day. The position taken by courts of equity, permitting redemption, might work a hardship on the mortgagee because he could never feel sure of his title to the property, however long the debt might remain unpaid. Thi

e title passed to the mortgagee, it was subject to a condition subsequent which would revest the title in the mortgagor if payment of the debt was made at maturity. By mere operation of law, therefore, payment of the mortgage when due revested title in the mortgagor without reconveyance. After a default

btor has given the mortgage does not in any way limit the rights of the mortgagee as an ordinary creditor. He may sue on the mortgage debt when it is due, in the same manner as if there were no mortgage. It is his option whether he will foreclose the mortgage, as a means of collecting his claim, or whether he will get judgment on the debt, and seek to collect that judgment in the same way that an ordinary judgment creditor would. This rule is changed by statute in Cal

interest can not be so seized. The mortgagee's creditors must reach his interest by means appropriate to realize upon the debt, not upon the land. The mortgagor's interest being regarded as real estate will give rise to the same estates of dower in favor of the wife of the deceased mortgagor or curtesy in favor of the husband of a deceased mortgagor, as are allowed by the law in the case of real estate generally. The mortgagor may, while in possession, deal with the property in any way in which an owner may, except that he will not be permitted to imperil the mortgagee's security by any kind of waste. The mortgagor may, subject to the mortgage, lease, sell or devise it. He may collect the rents an

trument may be negotiated to the purchaser in the ordinary way, and with the ordinary effects of such instruments. If the mortgaged debt is not represented by a negotiable instrument, the assignment of the debt is an assignment of a chose in action. Where the common law view of mortgage still prevails, that the mortgagee has the legal title, he can only transfer it to an assignee by a deed executed with the same formalities necessary for the transfers of real estate. As, however, the law recognizes that it is the debt which is the es

for the seller that the grantee shall assume and agree to pay the mortgage while it is desirable for the buyer that he shall buy the premises merely subject to the mortgage without assuming it. The difference between the two transactions is this: In either event the grantee receives the premises burd

roperty, should sue the mortgagor directly on the debt, the latter would be compelled to pay. Even if the sale to the mortgagor's grantee had been made merely subject to the mortgage, the mortgagor on paying the debt would be subrogated to the mortgage and would himself be enabled to foreclose the property. But if the property failed to realize enough to reimburse him for the payment of the debt, he would lose this deficiency unless the grantee had assumed and agreed to pay the mortgage. Whether the mortgagee may sue directly a grantee of mortgaged premises who has assumed and agreed to pay the mortgage, is a question which has bee

ority or power of sale given in the mortgage itself, but sometimes it is made under authority of a decree of court in foreclosure proceedings. Where a mortgage contains a power to the mortgagee to sell on default of the mortgagor, he is acting not simply on his own behalf but as agent for the mortgagor in transferring title to the property. The proceeds will be applied first to the payment of the debt with interest and the expenses of the sale. Any surplus will be held by the mortgagee in trust for the mortgagor and must be paid

ion of his loan, that the premises shall be conveyed to a third person as trustee, achieve the result that the mortgagor at least is no longer the legal owner of the premises. Essentially the situation is the same under a deed of trust as under a common law mortgage. In both cases the legal title is held merely to secure the debt, and t

he accepts it and pays the purchase price. In New York City to-day, and in some of the other large cities of the country, most of the title searching has passed out of the hands of the lawyers into the hands of the title companies. The title company makes the search now, the same as the lawyer formerly did, with an added advantage. Suppose I am to buy Blackacre, and employ attorney Blackstone to search the title. He reports it as being free and clear. I take possession and pay the purchase price. Six months later the wife of the grantor appears on the scene. When the grantor conveyed, he stated in the deed that he was single. The

at each sale, and he would make a search back to the earliest deed. After a title company has made its search, the result is in its records and the next time it is on the same piece of property, the search would simply be what is called a continuation, which would carry the search from the

all land is in the State, theoretically, the same as under the English common law. The King, in those days, owned all the land. This is more than theory, even to-day. If a man dies, leaving no heirs and no will, his real proper

luding New York. When such laws are on the statute books, generally the business of a title company will be legislated out of existence. For that reason