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the interest and principles will be paid; otherwise probably not. The safe rule cannot be mistaken; it is to take no such chances, but rather to place our means in the surer investments which will be fully explained in the succeeding pages of this volume.

There is a general class of investment corporations, which is of comparatively recent origin, and which, because of the apparent feasibility of the claims of such corporations, and the widespread damage and loss of which such corporations have been the means, is deserving of special though by no means of flattering mention.

These organizations, acting frequently under imposing and grandiloquent names, and protected in some of the States by laws, or adjudications which ought not to exist, vary considerably in the details of management. The general principles of this class of corporations, may, however, be described as follows:

The various investors place their money in the hands of the particular corporation with the understanding and solemn agreement that the funds are to be loaned upon first-class real-estate mortgages only, not in sums corresponding to the particular amounts which are subscribed by the different investors, but in such lump sums as may be most advantageous. The different investors, therefore, cannot receive the actual mortgages as evidences of security for their money, but receive instead shares of stock or bonds issued by the corporation, and upon which the corporation agrees to pay rates of interest which are considerably higher than are consistent with real safety. In many cases the funds are loaned upon farm-lands in far-away States, and for this reason alone, though the affairs of such a corporation may be carried on with fair discretion and with absolute honesty, the chances will be largely in favor of loss and failure. And when the opportunities for rascality, which such methods will not fail to offer, shall be taken into consideration, the large amounts of money which corporations of this kind have been able to obtain (and often, as far as the investors are concerned, to lose) will indeed be surprising.

An application, however cursory, of the rules which have been explained will at once condemn this entire class of corporations as extremely dangerous. Indeed, ordinary intelligence ought to suggest that such corporations are often. originally dishonest. But the persuasive powers of the talented promoters of such enterprises have often availed for the subjugation of reason. Investors have been informed that in this way only can small amounts be loaned with perfect safety and with high rates of interest; that such large corporations have exceptional facilities for obtaining good loans and for properly estimating the qualities of securities; that the officers and managers of the corporations are men of large means and experience who are themselves heavily interested in the corporations; and that the shares of stock or bonds are merely forms which are necessitated by the characters of the corporations, while the actual effect of the arrangements is to make the investors, not speculators in these stock of corporations, but bona fide holders of first-class mortgages. And so, many worthy persons, forgetting the plain facts that mortgages over which the mortgagees have no control are mortgages only in name, and that actual evidences of the investment of funds in the manners which are promised are indeed difficult to obtain, have suffered ruinous losses, only to enrich the ingenious and unprincipled managers of these loan-corporations.

Still another general class of investment corporations which has laid special claims to a treatment different from that which is accorded to ordinary corporations, because of the peculiar and apparently substantial characters of investments, must be noticed. Reference is intended to the land companies, in which the land, instead of being the subject of mortgages only, is the actual property of the corporations. The theory of such corporations rests upon the familiar proposition that a concentration of similar interests will be able to accomplish what the separated interests cannot. For the purposes of the corporations in question, various parcels of land are appraised by experts and are deeded to the corporations by the several owners, who receive for their lands shares of stock in the

corporation corresponding, in par values, to the appraised values of the parcels of land.

The corporations are then presumed to employ extraordinary energies for the development of the cities or villages in which the lands shall be situated, and for the consequent enhancement of the values of the lands, whereby handsome profits will be realized for the shareholders. In certain respects, enterprises of this nature may be considered to be promising speculations for alert and skilful dealers in real estate. There are at least some securities for the funds of the corporations, and if there can be proper assurances that affairs will be wisely and honestly managed, there will be probabilities that the securities will be adequate in the long run. But the transactions of such land companies cannot, with propriety, be considered as investments. They are speculations in every precautious sense of the word. Moreover, they will not bear the scrutinizing application of the rules which have been so often mentioned. Such corporations must therefore be declared to be unsafe for the purposes of investors. Other forms of corporations claiming to accomplish the purposes of investments are to be found, and it cannot be doubted that future years will bring forth still others which will develop methods and principles which will then appear to be novel and practicable. But it will invariably appear, only the more conclusively by the careful examination of special cases, that the faithful employment of the simple and convenient rules by which the safety of investments is to be determined will safely guide investors around the pitfalls which will always beset their ways, and into the comparative serenity which may thus happily be attained.

TH

MORTGAGES

HE word "mortgage" signifies a dead pledge, the name being derived from the fact that the mortgagor holds possession of the mortgaged land, while in the vivum vadium, or living pledge of former times, the mortgagee held possession of the land and applied the rents and profits to the payment of the debt.

A mortgage is a lien upon real estate which is given to secure the payment of a debt, usually money. It is, in form, an absolute conveyance of the land by the debtor (the mortgagor) to the creditor (the mortgagee) with an agreement to the effect that, if the borrowed money shall be repaid according to the terms which are specified, and if certain other agreements shall be fulfilled, the conveyance shall be void, otherwise to be in full force and effect.

Strictly speaking, the legal effect of such an agreement will be to forfeit all claims of the mortgagor upon the mortgaged land as soon as any default shall be made by the mort gagor; or, in other words, the slightest failure on the part of the mortgagor to perform his agreements will deprive him of his land and give it outright to the mortgagee. And such, in fact, was formerly the law. But the courts, recognizing the great severity of the law in this respect, gradually overcame it, and finally decreed that the mortgagor shall have the right to redeem the mortgaged land, by the payment of the borrowed money and the necessary expenses, at any time after default, until such right of redemption shall have been cut off by regular process of law. This right to

redeem the land after default has been made is called the mortgagor's equity of redemption, and the proceeding, on the part of the mortgagee, which finally destroys the equity of redemption is called the foreclosure of the equity of redemption, or simply foreclosure.

For all practical purposes, then, a mortgage may be described as an agreement between a debtor and a creditor, to the effect that the debtor will repay the borrowed money at a certain time, with interest at a certain rate, and that, in case of his failure so to do, the mortgagee may, by process of law, sell a certain designated piece of land and, out of the proceeds, repay the debt with the interest which has been agreed upon, and the expenses of the proceeding.

It will be observed that two principal elements are present in the transaction of mortgaging a piece of land; first the debt, which is the foundation of the transaction, and second the lien upon the land which is created for the purpose of securing the debt. The lien upon the land is created by the mortgage deed (commonly called simply the mortgage) which is placed upon record in the county where the land is situated, as a notice to the public, and the debt is created by the delivery of the borrowed money to the debtor. For the purpose of evidencing the debt, however, the debtor executes and delivers to the creditor a bond, which is a legal and binding acknowledgment of the debt and a promise to repay the same with interest. Thus the transaction has come to be termed an investment in bond and mortgage.

In some States the evidence of the debt accompanying the mortgage is a promissory note instead of the more solemn bond, but the effect is practically the same in either case.

In all cases there is, or at least is presumed to be, a margin or an excess in the value of the mortgaged land over and above the amount which is secured by the mortgage; this margin or excess of value is termed, rather ambiguously, the mortgagor's equity in the land. To illustrate, let us suppose that a person who is the owner of a piece of land which is worth ten thousand dollars, shall borrow five thousand dollars from another person, and shall mortgage the land for the