Real Property: Mortgages: Equitable mortage

Equitable mortgage

• EX: O owns Blackacre. Creditor lends O a sum of money. The parties understand that Blackacre is the collateral for the debt. However, instead of executing a note or mortgage, O hands creditor a deed to Blackacre that is absolute on its face. This is called = an equitable mortgage.

• As between O and Creditor – parole evidence is freely admissible to show the true intent of the parties.

• If Creditor proceeds to sell Blackacre to bona fide purchaser X, X owns the land. O’s only recourse is to proceed against Creditor for fraud and to recover the proceeds of the sale.