Definition
A general mortgage bond is a debt instrument issued by a corporation and secured by a mortgage on the corporation's entire property or undertaking, including portions of that property already encumbered by one or more prior, senior mortgages. Because prior liens take precedence, holders of general mortgage bonds occupy a junior secured position relative to those earlier encumbrances, but retain a security interest in all corporate assets not otherwise carved out from the lien.
The term is most commonly encountered in the context of railroad and utility financing, where complex capital structures layered multiple mortgage instruments — first mortgage bonds, consolidated mortgage bonds, and general mortgage bonds — against the same underlying physical plant.
Common Confusion
GENERAL MORTGAGE BOND vs. FIRST MORTGAGE BOND: The distinction is one of priority, not scope. A first mortgage bond is senior and takes precedence in any foreclosure or reorganization. A general mortgage bond may cover equally broad or even broader property, but its holders are paid only after first mortgage bondholders are satisfied. Historical documents sometimes use "general mortgage" to suggest superior or comprehensive security; the term in fact signals junior standing.
GENERAL MORTGAGE BOND vs. CONSOLIDATED MORTGAGE BOND: A consolidated mortgage bond typically superseded and paid off prior lien obligations, creating a new first-priority instrument over the entire property. A general mortgage bond was issued alongside — and subordinate to — existing prior mortgages, leaving the prior lien structure intact.
Why It Matters in Research
The key research trap with general mortgage bonds is the word "general," which implies breadth of coverage but says nothing about priority. A researcher encountering this term in historical corporate records, indenture agreements, or reorganization proceedings must immediately ask two questions: what prior liens exist, and what is the practical value of the security given those senior claims?
In railroad reorganization cases from the late nineteenth and early twentieth centuries — the period when this instrument was most heavily litigated — general mortgage bonds frequently became the focal point of equity receivership proceedings precisely because their holders stood behind first and second mortgage bondholders in the priority queue. Understanding the bondholder class structure is essential to reading those cases accurately.
The term also appears in historical state legislative records and corporate charter documents authorizing specific bond issuances. In those contexts, "general mortgage bond" may be used loosely to describe any broadly secured bond rather than in the technical sense of a junior lien instrument, so context must govern interpretation.
Researchers working with consolidated mortgage bonds should be careful not to conflate that instrument with a general mortgage bond. A consolidated mortgage typically retired prior lien bonds and replaced them with a single senior obligation; a general mortgage bond, by contrast, sits on top of — and behind — existing prior encumbrances without extinguishing them.
Historical Dictionary Support
Bouvier's Law Dictionary offers a concise and accurate baseline: a bond secured upon an entire corporate property, parts of which are subject to one or more prior mortgages. This definition captures the essential structure — broad collateral coverage combined with subordinate priority — but does not address the practical implications for bondholders in insolvency or reorganization, which is where the instrument most frequently generated litigation.
Bouvier does not distinguish between a general mortgage bond and a blanket mortgage bond, terms that were used somewhat interchangeably in practice. Historical legal dictionaries generally give thin treatment to the instrument because its significance was principally commercial and transactional rather than doctrinal. The richest definitional material on these bonds is found in railroad finance treatises and corporate reorganization scholarship of the 1880s–1920s rather than in the standard law dictionary tradition.