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English Mortgage, Mortgage by deposit

of title deed and Anomalous Mortgage
4. English Mortgage:

Where the mortgagor binds himself to repay the mortgage money on a certain date, and
transferred the mortgage property, absolutely to the mortgagee, but subject to a proviso
that he will re-transfer is to the money as agreed, the transaction is called an English
mortgage.

Essentials:

• Mortgagor binds himself to re-pay the mortgagee on a certain date.

• The property is absolutely transferred to the mortgagee.

• Transfer of property should be subject to the proviso that the mortgagee will recover the
property to the mortgagor on the payment.

5. Mortgage by deposit of title deed:

It is also known as equitable mortgage and is defined as;

“Where the person specify in his behalf, delivers to a creditor or his agent documents of title
to immoveable property, with intent to great a security thereon, the transaction is called a
mortgage by deposit of title deed.

Essential:

• Document of titled deed is deposit as security.

• There is a debt.

• On the payment of mortgage money, the title deed is returned to the mortgagor.

6. Anomalous Mortgage:

A mortgage which is not a simple mortgage, mortgage by conditional sale, a Usu-fructuary

mortgages and English mortgage by deposit of title deed is called Anomalous Mortgage.

Remedies for mortgagor:

Mortgagor has following remedies.

• Suit for sale.

• Suit for money.

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Marshalling and Contribution

1. Marshalling:
According to Section 81 of the Transfer of Property Act, 1882;
1) If the owner of two or more properties mortgage them to one person and mortgages one
or more properties to another,
2) The subsequent mortgagee is, in the absent of contract to the contrary, entitled to have
the prior mortgage debt satisfied out of the property or properties not mortgaged to him, so
far as the same will extend.
3) But not so as to prejudice the rights prior mortgagee or of any other person who has for
consideration acquired an interest in any of the properties.

The Doctrine of Marshalling:

Marshalling is based on the ethical maxim “sic utere tuo ut alienum non-laedas” which
means that you should exercise your right as not unnecessarily to prejudice that of your
neighbour. Marshalling in common parlance means arranging (assets or securities) in the
order in which they are available to meet various demands.
The doctrines of marshalling had evolved from the principle of equity and natural justice.
The doctrine of marshalling is an old equitable remedy that can be traced back as far as the
mid-seventeenth century. The modern root of the doctrine can be found in the often cited
English case of Aldrich v. Cooper (Aldrich), where Lord Eldon stated the doctrine as follows;
“A person having two funds shall not by his election disappoint the party having only one
fund, and equity, to satisfy both, will throw him, who has two funds, upon that which can be
affected by him only, to the extent that the only fund, to which the other has access may
remain clear to him”.

Example:
• X is the owner of property A, B and C. X mortgages all three properties (A, B, C) to Y.
Subsequently, X mortgages property B and C to Z. Hence under the rule of marshalling Y can
satisfy his debt out the property A, B and C. If the debt of Y can be satisfied out of property
A alone then property B and C should be left untouched. However, if Y’s debt cannot be
satisfied out of property A alone then he can proceed to satisfy his debt from property B and
C also.
• A mortgager mortgages his three properties A, B and C to a “mortgagee X” for Rs. 15,000.
He further mortgages only property C to Y for Rs. 500. This section give Y a right to say that
debt of X shall be satisfied out of sale proceeds of properties A and B and not C. In case if
the proceeds of properties A and B is less than 15,000 only then, the property C can be sold.
Therefore, all though Y is subsequent mortgager his claim is not prior to that of X, but he
has the right of marshalling i.e. arranging the securities in his favour as far as possible.

Essential Elements of Marshalling:

i) The mortgages may be two or more persons but the mortgager must be common i.e.
there must be a common debtor.
ii) The right cannot be exercised to the prejudice of the prior mortgagee.
iii) The right cannot be exercised to the prejudice of any other person having claim over the
property.
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(i) Common Debtor:

It is necessary that the mortgager is the same person. Both the prior and subsequent
mortgagee must have given the loan to the same person on the security of his properties.
No marshalling can be exercised unless the mortgagees between whom it is to be enforced
are creditors of the same person and have claims against the property of a common debtor.

(ii) No Prejudice to the Prior Mortgagee:

Marshalling must not be in prejudice to the interest of the prior mortgagee. It being the rule
of equity cannot be enforced so as to work injustice to the prior creditor. The subsequent
mortgagee cannot compel the prior mortgagee to proceed against a security which is
insufficient.

(iii) No prejudice to other encumbrances:

The right of marshalling cannot be exercised so as to prejudice the rights of any other
person, who has, for consideration, acquired any interest in any of the properties.
The leading case on this point is Barness v. Rector;
Example:
(1) A mortgages two properties X and Y to B.
(2) A then mortgages X to C.
(3) A again mortgages Y to D.
If C here insists that B should pay himself wholly out of Y, there might be nothing left for D.
Therefore, the court will apportion B’s Mortgages rateably between X and Y and the surplus
of X will go to C whereas surplus of Y to D.

Contract to the contrary:

The right of marshalling under this section is subject to the contract to the contrary. The
right may be excluded to the mortgage by mutual agreement.
It is necessary that the prior mortgagee must have equal rights over the other two
properties mortgaged to him. Where the rights are not equal there can be no marshalling.
Different fragments of the same property are not considered different properties. Where
one portion of the property already mortgaged is subsequently mortgaged to another
person, they will not be considered as different properties.

2. Contribution:
According to Section 82 of the Transfer of Property Act, 1882;
“If the mortgaged property(s) belongs to two or more persons having distinct and separate
rights of ownership in the property, then the parts or portions belonging to each are liable
to contribute rateably to the debt secured by the mortgage”.
The rate of contribution will be decided as per the value of that portion at the date of the
mortgage and the value of any other mortgage or charge on that portion has to be deducted
from the amount. (In the absence of a contract to the contrary).

The Doctrine of Contribution:

The doctrine of contribution is based on the maxim “Questioncommodum senator
debtedonus” which means that “if one enjoys the benefits he should also enjoy the
burden”.
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If several properties belonging to several persons are mortgaged to secure a debt due to

taking of a loan, the law says that each property should contribute towards the debt
in proportion to its value. This is called the doctrine of contribution.
This law refers to the scheme of rateable distribution. If some persons takes a loan from one
person by mortgaging their separate properties which may be of different values and the
mortgagee/creditor realizes the loan amount from only one of the properties, the owner of
such property can compel the other property owner to contribute in proportion to its value
for the amount realized by the mortgagee.
Example:
• For example if the property X belongs to A and the property Y belongs to B, and A and B
jointly executes a mortgage of both the properties for securing a loan taken from C. Later
C realized the debt from property X alone. In this case B must contribute ratably in
proportion to the value of his property Y. Here A can claim contribution from B.
• X owns property 1 and Y owns property 2, both X and Y mortgages their properties (1 and
2) to C to secure a debt. C cannot realize the value of debt from X or Y alone. Both X and Y
will be liable to contribute rateably in accordance with the value of the properties towards
the debt.

Marshalling supersedes contribution:

The last paragraph of Section 82 provides that marshalling supersedes contribution. If there
is any conflict between the right of marshalling and contribution, the right of marshalling
prevails over that of contribution. Therefore the contribution is subject to marshalling.
Example:
i) ‘A’ owner of property 1 and property 2.
ii) A mortgages property 1 to B,
iii) A mortgages property 2 to C.
iv) A subsequently mortgages both the properties 1 and 2 to D and the mortgages property
1 to E.
Under section 81, E can ask D to recover his debt from property 2 to the whole extent and
then in case of deficit he can resort to property 1. Hence this right of E to marshall will
prevail over contribution.
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Subrogation, Tacking and Prohibition of

Tacking
3. Subrogation:
Subrogation means “Substitution”. This enables a person to pay off a creditor and get into
his shoes and exercise the rights of the creditor.
Right of Subrogation is statutorily recognized and described in Section 92 of the Transfer of
Property Act, 1882.
Subrogation is a right of a person to stand in the place of the creditor after paying off his
liabilities. In case of mortgage, subrogation takes place only by redemption. Therefore, in
order to be entitled to subrogation a person must pay off the entire amount of a prior
mortgage. A partial payment of the mortgage-debt cannot give rise to a claim for a partial
subrogation.

The Doctrine of Subrogation:

The doctrine of subrogation is based on the principles of equity, justice and good
conscience. The essence of the doctrine is that the party who pays off a mortgage gets
clothed with all the rights of the mortgagee.
The doctrine of subrogation applies to the following persons;
i) A person having interest in the mortgaged property or has any right of redemption.
ii) Any creditor of the mortgage.
iii) Also a co-mortgagor.
iv) Moreover also includes a mortgagor’s surety redeeming the mortgage.
Example:
• A mortgages his property to B. D comes and pays mortgage-money to B and steps into his
shoes. Here, D may redeem B in which case D becomes subrogated to B. He has the same
rights as B has.

4. Tacking and Prohibition of Tacking:

• Tacking means “To shift one’s position”. For example, three mortgages are made by A;
i) Mortgage to B.
ii) Mortgage to C.
iii) Mortgage to D.
D may pay off B and get into the shoes of B. With this he gets priority over ‘C’ in respect of
mortgage B and in respect of his own mortgage D. This shifting is the doctrine of tacking.

• Such a shifting is prohibited by Transfer of Property Act, 1882 under Section 93. The rule
relating to prohibition of Tacking is that “No mortgagee paying off a prior mortgage-(with or
without notice of any intermediate mortgage) shall acquire any priority in respect of his
Original security”.
Example of Prohibition of Tacking:
Three mortgages are made by A.
i) Mortgage to B.
ii) Mortgage to C.
iii) Mortgage to D.
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D may pay off B and get into the shoes of B. With this he gets priority over ‘C’ in respect of
mortgage B only and not in respect of his own mortgage D. This shifting is the doctrine of
prohibition of tacking.
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