Henry Williams Challis Henry J. Hood.

The Conveyancing Acts, 1881 & 1882, and the Settled Land Act, 1882, with ... online

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whether *' priority" means priority in point of time or priority in
point of ri^ht, which things do not always coincide. The lessee
could not, m the absence of special stipulation, be compelled to
execute more than one counterpart. If, therefore, the mortgagor
feels any doubt as to the priority of his incumbrancers, he might, in
his contract for the lease, do weU to stipulate for as many duplicate
counterparts as he may think requisite. The question might arise,
for example, in a register coimty, in a case where a first mortgagee
has neglected to register his charge until after registration by a
second.

Delivery of a counterpart cannot be an acknowledgment of a
mortgagee's right within 37 & 38 Vict. c. 57 (Real Property
Limitation Act, 1874), if for no other reason, because the counter-
part would not be a writing signed by the mortgagor.

(12.) A contract to make or accept a lease under

this section may be enforced by or against every person

on whom the lease if granted would be binding.

This sub-section can hardly be intended to be confined to parties
to the contract, because the contract could be enforced as between
them without it. This consideration suggests the following ques-
tions: —

1. Can an intending lessee enforce a mortgagor's contract against

a mortgagee who has taken possession after the contract ?

2. Can a mortgagee, who has meanwhile taken possession,

enforce his mortgagor's contract against the intendiiig
lessee?

3. Can a mortgagee, out of possession, enforce the contract of

his mortgagor in possession, even against the will of the
mortgagor ?

4. Can a mortgagor, out of possession, enforce the contract of



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MORTGAGES. 153

his mortgagee in possession, even against the will of the C A. 1881
mortgagee? Sect. 18. '

There seems to be nothing in the language of this sub-section to

exclude any of these cases ; and, if so, tne mortgagor or mortgagee
in possession cannot release his own contract without the consent of
the mortgagee or mortgagor out of possession respectively. The
forms of judgment appropriate to these cases, especially to the
first two, may perhaps afford a field for some ingenuity. As the
mortgagee and mortgagor can only grant leases while themselves
actually in possession, a change in possession would apparently
effect a change in the person liable to grant the lease, and A. may
be compelled by B. specifically to perform a contract made between
C. and B., although he is not C.'s representative in title.

(13.) This section appKes only if and as far as a
contrary intention is not expressed by the mortgagor
and mortgagee in the mortgage deed, or otherwise in
writing, and shall have effect subject to the terms of
the mortgage deed or of any such writing and to the
provisions therein contained.

An intending lessee, who is aware that he is treating for a lease
of mortgaged property, will do wisely to make inquiry of the
mortgagor and of all the incumbrancers whether there is any
'* expression" of a " contrary intention " contained in any " writing "
extraneous to the mortgage deed.

It is by no means clear that the expression of an intention to
exclude die operation of the section contained in a mortgage deed
will operate to prevent a subsequent mortgagee, in whose case no
such intention happens to be expressed, from exerdsing the power.
The language of the Act rather suggests that the effect of the
expression of a contrary intention is confined to the deed in which
it occurs. See note on sub-s. (2), supra.

The words **by the mortgagor and mortgagee" seem to be
superfluous unless the mortgagor and mortgagee must both execute
the mortgage deed or other writing so as to express a contrary
intention. The case is not analogous to that of a person accepting
and acting upon a deed, because the person to take advantage of a
failure to exclude the power of leasing would be the lessee and not
either of the parties to the deed or other writing.

And it is to be remarked that in the case of yVitham v. Vane^ the
Coiirt of Appeal held that, ** it is impossible to say that a covenant
not executed is the same as a covenant executed, because the person
who ought to have executed it, or who was intended to have
executed it, takes the estate." The judgment of the Ck>urt of
Appeal was afterwards reversed by the House of Lords, but upon .
the ground that there was sufficient evidence of the execution of the
covenant, not upon the ground that it would have been binding
though not executed. The reports of this most important case
(W. N. 1880, p. 108; 1881, p. 79; 28 W. E. 276) are inadequate.

(14.) Nothing in this Act shall prevent the mortgage
deed from reserving to or conferring on the mortgagor
or the mortgagee, or both, any further or other powers
of leasing or having reference to leasing; and any



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154 CONVEYANCING AND LAW OF PROPERTY ACT, 1881.

C. A. 1881, further or other powers so reserved or conferred shall

Sect 18. be exerciseable, as far as may be, as if they were

conferred by this Act, and with all the like incidents,

effects, and consequences, unless a contrary intention

is expressed in the mortgage deed.

Tliifl sub-section would apparently authorize the insertion of a
power to grant mining leases.

Its language, taken in connection with sub-s. (15), tn/ra, suggests
an alarming possibility. If apuisne mortgage should contain a power
to leeuse taking a premium, such premium to be applied in reduction
of the puisne mortgage debt, such lease will apparently bind all
prior incumbrancers, since sudi an exercise of the power would have
bound them if the power had been conferred by the Act. (Sub-s. 2,
supra.) See, however, note on sub-s. (16), infra.

(16.) Nothing in this Act shall be construed to
enable a mortgagor or mortgagee to make a lease for
any longer term or on any other conditions than such as
could have been granted or imposed by the mortgagor,
with the concurrence of all the inciunbrancers, if this
Act had not been passed.

(16.) This section applies only in case of a mortgage
made after the commencement of this Act; but the
provisions thereof, or any of them, may, by agreement
in writing made after the commencement of this Act,
between mortgagor and mortgagee, be applied to a
mortgage made before the commencement of this Act,
so, nevertheless, that any such agreement shall not
prejudicially affect any right or interest of any mort-
gagee not joining in or adopting the agreement.

This sub-section not only prevents the power of leasing from
being extended to the case of a mortgage made before the com-
mencement of the Act, except by specifll agreement between the
parties, but, although its language is far from dear, it will probably
be held to restrict the words " every incimibrancer," in sub-s. (1),
and " all prior incumbrancers," in sub-s. (2), supra, to incumbrancers
whose charges were created after the commencement of the Act.

The sub-section seems designed to leave a mortgagee whose
rights accrued before the commencement of the Act in the same
position as if the Act had not been passed.

It has been held by Ford North, J., that in a mortgage made
after the Act, in pursuance of a contract entered into before the Act
and stipulating that the mortgage should " contain all usual clauses,"
the mortgagee could not insist upon the exclusion of sub-s. (1), supra.
{Re Nugent Sf Riley's Contract, W. N. 1883, p. 147 ; 49 L. T. 132.)
This decision seems gratuitously to attribute a variable intention to
the contracting parties.

(17.) The provisions of this section referring to a
lease shall be construed to extend and apply, as far as
circumstances admit, to any letting, ana to an agree-



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MORTGAGES. 155

ment, whether in writing or not, for leasing or C. A. 1881,
letting. Sect 18.

The power of the mortgagor in possession, which this sub-section
seems to recognize, of makmg parol leases for three years, is not
such a power as a mortgagee would always approve, and under
some circumstances it ought to be excluded.



Sale; Insurance; Receiver ; Timler.

19. — (1.) A mortgagee, where the mortgage is Sect. 10.
made by deed, shall, by virtue of this Act, have the Powers ind-
following powers, to the like extent as if they had o^^rSut
been in terms conferred by the mortgage deed, but mortgagee,
not further (namely) :

The powers contained in this section are in substitution for and
are an enlargement of the corresponding powers contained in
Part n. of the Trustees and Mortgagees (Lord Cranworth's) Act,
23 & 24 Vict. c. 145 ; which is repealed by sect. 71, post.

The principal changes which have been made are —

(1.) The present Act extends to all property, instead of being con-
fined to "hereditaments of any tenure or any interest therein."

(2.) The time for the exercise of the powers after default is much
shortened.

(3.) The power to insure arises immediately after execution of the
mortgage deed, instead of being exerciseable under the same cir-
cumstances as the power of sale, and the amount of the insurance is
now for the first time expressly limited. (See sect. 23, sub-s. 1, post,)
The application of the msurance money, if received by the mort-
gagor, is for the first time defined. (Sect. 23, sub-s. 3, post,) If
received by the mortgagee, the old rules are still in force.

(4.) The power to appoint a receiver is now exerciseable only
when the power of sale has arisen (sect. 24, sub-s. 1, post), instead
of being exerciseable a year after the time appointed for payment of
principal, or on default for six months in payment of interest, or on
neelecib to insure.

(5.) No restriction is now placed on the mortgagee's choice of a
receiver. (Compare sect. 17 of Lord Cranworth*s Act.)

(6.) The power to cut timber is novel.

(7.) The power given by sect. 15 of Lord Oran worth's Act to
the mortgagee, to convey mortgaged property '* for all the estate and
interest merein which the mortgagor had power to dispose of," is
superseded.

If the mortgage is to several persons, the powers will enure by
survivorship ; if to a single mortgagee, to his personal representa-
. tives. Since not only the mortgage debt, but also the legal estate
(see sect. 30, post), even though of inheritance, devolves on the per-
sonal representatives, these are the only persons deriving title under
the original mortgagee. (See sect. 2, sub-s. vi. ante.)

It is conceived that a memorandum of deposit under seal, though
not strictly a deed, will suffice to confer upon the equitable mortgagee
the powers given by this section. But the right to exercise the power
of sale does not necessarily infer power to convey the legal estate,
if any.

m2



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156 CONVEYANCING AND LAW OF PROPERTY ACT, 1881.

C. A. 1881, (i.) A power, when tlie mortgage money has become
Sect. 19. d.ue, to sell, or to concur with any other person

in selling, the mortgaged property, or any part
thereof, either subject to prior charges, or not,
and either together or in lots, by public auction
or by private contract, subject to such con-
ditions respecting title, or evidence of title, or
other matter, as he (the mortgagee) thinks fit,
with power to vary any contract for sale, and
to buy in at an auction, or to rescind any con-
tract for sale, and to re-sell, without being
answ^erable for any loss occasioned thereby ; and

As to mortgages, the money secured by which is repayable by
instahnents, see note on sect. 20, sub-s. (i), post,

(ii.) A power, at any time after the date of the
mortgage deed, to insiu-e and keep insured
against loss or damage by fire any building, or
any effects or property of an insurable nature,
whether affixed to the freehold or not, being or
forming part of the mortgaged property, and
the premiums paid for any such insurance shall
be a charge on the mortgaged property, in
addition to the mortgage money, and witn the
same priority, and with interest at the same
rate, as the mortgage money ; and

These premiums are only a charge upon the property, and cannot
be recovered from the mortgagor as a debt. A mortgage deed,
therefore, should still contain the ordinary covenant for their
repayment.

Before Lord Cranworth's Act, a prior mortgagee could not, as
against subsequent mortgagees, add premiums paid by him to his
security, unless the mortgage deed gave him express power in that
behalf. {Brook v. Stone, 13 W. R 401.) If the mortgage deed
contained a covenant to insure on the part of the mortgagor, but
gave no power to the mortgagee, the premiums might be charged
against the mortgagor but not against subsequent mortgagees. But
premiums were sometimes allowed to a mortgagee in possession, as
''just allowances," in taking the accounts against him.

(ui.) A power, when the mortgage money has become
due, to appoint a receiver of the income of the
mortgage property, or of any part thereof; and

(iv.) A power, while the mortgagee is in possession,
to cut and sell timber and other trees ripe for
cutting, and not planted or left standing for
shelter or ornament, or to contract for any such
cutting and sale, to be completed within any



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MORTGAGES. 157

time not exceeding twelve months from the C. A. 1881,
making of the contract. ^^^' ^^'

It may in many cases be desirable for the mortgagor to exclude
the power of cutting timber, if he can.

As to cutting timber by a mortgagor in possession, see Farrant v.
Lovel, 3 Atk. 723 ; Humphreys v. Harrison, 1 Jac. & W. 681 ; King
V. Smith, 2 Ha. 239 ; Hampton v. Hodges, 8 Ves. 105 ; Hippesley
V. Spencer, 5 Madd. 422. The principle appears to be, that a mort-
gagor in possession may fell timber, if the security is ample, and
the onus of proof that it is insufficient will lie up6n the mortgagee
seeking to restrain him.

As to cutting timber by a mortgagee, in possession under a mort-
gage prior to this Act, see Withrington v. Banks, Sel. Ch. Ca. 30,
where it was laid down that a mortgagee in possession will not be
allowed to fell timber unless the security is shown to be defective.
The same principle applies to the opening of mines ; see Millett v.
Davey, 31 Beav. 470.

(2.) The provisions of this Act relating to the fore-
gomg powers, comprised either in this section, or in
any subsequent section regulating the exercise of those
powers, may be varied or extended by the mortgage
deed, and, as so varied or extended, shall, as far as
may be, operate in the like manner and with all the
like incidents, effects, and consequences, as if such
variations or extensions were contained in this Act,

It is not at all clear that an express power contained in the mort-
gage deed, without any reference to the Act, would come within this
sub-section, so as to ** operate in like manner," &c. Express powers
should therefore either be absolutely complete within themselves,
or they should be declared to be " provisions of the Act. . . .
varied or extended by the mortgage deed."

It is conceived that the insertion of an express power will not of
itself amount to the expression of a " contrary intention" within the
meaning of the next following sub-section.

(3.) This section applies only if and as far as a con-
trary intention is not expressed in the mortgage deed,
and shall have effect subject to the terms of the mort-
gage deed and to the provisions therein contained.

(4.) This section applies only where the mortgage
deed is executed after the commencement of this Act.

20. A mortgagee shall not exercise the power of Sect. 20.
sale conferred by this Act imless and \mtil — Keguiation of

(i.) Notice requiring payment of the mortgage ^^^f^saie.
money has been served on the mortgagor or
one of several mortgagors, and default has
been made in payment of the mortgage money,



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158 CONVEYANCING AND LAW OF PROPERTY ACT, 1881.

C. A. 1881, or of part thereof, for three months after such

Sect. 20. service; or

Where the mortgage money is repayable by instalments, the deed
should provide that the statutory power sh^ become exerciseable
within a specified time after the non-payment of any instalment,
unless the deed contains a provision, that on default in payment of
any instalment the whole of the remaining money shall become due.
(See sect. 19, sub-s. 2, ante.)

(ii.) Some interest imder the mortgage is in arrear
and impaid for two months after becoming
due ; or

(iii.) There has been a breach of some provision
contained in the mortgage deed or in this Act,
and on the part of the mortgagor, or of some
person concurring in making the mortgage,
to be observed or performed, other than and
besides a covenant for payment of the mort-
gage money or interest thereon.

As to regulations made by the Act respecting notice, see sect 67,
post.

Notice to one of several ten«mt8 in common or joint tenants will
suffice as to the whole. It may be doubted whether the enactment
in sub-s. (i) can be safely relied upon for any other purpose.

There is, perhaps, no stronc reason why the pnrase " several
mortgagors" should not apply to several mortgagors having
different interests in the property, «.y., a tenant for life and re-
mainderman ; but in such a case it will be more prudent before
exercising the statutory power to give notice to all.

Although the word " mortgagor" includes a subsequent mort-
gagee (sect. 2, sub-s. vi. ante), it does not follow that the phrase
** several mortgagors" includes the mortgagor proper, and his suc-
cessive assigns, as forming one class. It will be prudent for a
mortgagee to give notice both to the mortgagor and to all subse-
quent incumbrancers of whose charges he has received notice.
(See Hoole v. Smithy 17 Ch. D. 434.) If notice to one subsequent
incumbrancer would suffice, there is nothing in the Act to give a
prior claim to the earliest in date.

The operation of this section may for practical purposes be
varied without sacrificing the statutory power of sale by a declara-
tion embodying the agreed terms of variation. (See sect. 19,
sub-s. 2, ante.)

Sect. 21. 21. — (1.) A mortgagee exercising the power of sale
^d^^r* c^^^^^^ ^y this Act shall have power, by deed, to
on fide. * convey the property sold, for such estate and interest
therein as is the subject of the mortgage, freed from
all estates, interests, and rights to which the mort-
gage has priority, but subject to all estates, interests,
and rights which have priority to the mortgage;
except that, in the case of copyhold or customary land^



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M0RTGAGB6. 159

the legal right to admittance shall not pass by a deed C. A. 1881,
under this section, unless the deed is sufficient other- ^^Qt. 21.
wise by law, or is sufficient by custom, in that behalf.

(2.) Where a conveyance is made in professed exer-
cise of the power of sale conferred by this Act, the title
of the purchaser shall not be impeachable on the
ground that no case had arisen to authorize the sale,
or that due notice was not given, or that the power
was otherwise improperly or irregularly exercised;
but any person damnified by an unauthorized, or im-
proper, or irregular, exercise of the power shall have his
remedy in damages against the person exercising the
power.

(3.) The money which is received by the mort-
gagee, arising from the sale, after discharge of prior
incumbrances to which the sale is not made subject, if
any, or after payment into Court \mder this Act of a
sum to meet anv prior incumbrance, shall be held by
him in trust to be applied by him, first, in payment of
all costs, charges, and expenses, properly incurred by
him, as incident to the sale or any attempted sale, or
otherwise; and secondly, in discharge of tne mortgage
money, interests, and costs, and other money, if any,
due under the mortgage; and the residue of the
money so received shall be paid to the person entitled
to the mortgaged property, or authorized to give
receipts for the proceeds of the sale thereof.

The importance of the question, whether the relation of trustee
and cesiui que trust is established between mortgagee and mort-
gagor, depends chiefly upon the fact, that no claim of a cestui que
trust against his trustee for any property held on an express trust,
is liable to be barred by the Statutes of Limitation. (Jud. Act, 1873,
8. 25, 8ub-8. 2.) It seems that the words in trusty occurring in this
sub-section, suffice to make the mortgagee an express trustee of the
surplus sale moneys. He would be an implied trustee on any exer-
cise of a power of sale, without the occurrence of words expressing
a trust. {Matthison v. Clarke^ 3 Drew. 3). It is true that, in Kirk-
wood V. Thompson, 2 H. & M. 392, V.-C. Wood said that he saw no
difference between the case of an ordinary mortgage and that of a
trust for sale ; and the Court of Appeal, in Locking v. Parker, L. R.
8 Gh. 30, took a similar view. But those cases did not decide that
a trust can be express without being expressed.

The last-cited case shows {ubi supra, at p. 40) that, if words
amounting to an expression of trust occur in the mortgage deed,
the mortgagee will be an express trustee of the surplus sale moneys.

In Banner v. Berridge, 18 Ch. D. 254, at p. 260, Kay, J., drew a
distinction between an ordinary power of sale contained in a mort-
gage and a statutory power, such as that conferred by the Merchant
Shipping Act, 1854 (17 & 18 Vict. c. 104), which merely gives a



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160 CONVEYANCING AND LAW OF PROPBKTY ACT, 1881.

C. A. 1881, power to sell without saying anything about the destination of the
Sect 21. purchase money.

— '■ As to the meaning of the phrase, " express trust," see Banner v.

Berridge, supra, at pp. 262 — 265, and p. 269.

A mortgagee is to some extent a trustee, though not an express
trustee, for the mortgagor and persons claiming under him in
respect to the following matters : —

1 . If he is in possession, he is a trustee in respect of the surplus
rents and profits. {Matthison v. Clarke ^ supra.)

2. If he exercises a power of sale he is a trustee, or in the nature
of a trustee, of the surplus sale moneys.

With respect to any policy moneys received by the mortgagee
under a policy of assurance, in excess of the amount due under the
mortgage, it does not appear that any such relation exists. (See
Dohson V. Land, 8 Ha. 216, at p. 220.)

3. After repayment of the mortgage money, but before re-con-
veyance. Since the trust is not express, the mortgagor can obtain
a possessory title, cmd the legal estate of the mortgagee out of

Ejssession can be extinguished, by the operation of the Statute of
imitations. {Sands to Thompson, 22 Ch. D. 614.)

(4.) The power of sale conferred by this Act may
be exercised by any person for the time being entitled
to receive and give a discharge for the mortgage
money.

(5.) The power of sale conferred by this Act shall
not affect the right of foreclosure.

(6.) The mortgagee, his executors, administrators,
or assigns, shall not be answerable for any involimtary
loss happening in or about the exercise or execution of
the power of sale conferred by this Act or of any trust
connected therewith.

(7.) At any time after the power of sale conferred
by this Act has become exerciseable, the person en-
titled to exercise the same may demand and recover
from any person, other than a person having in the
mortgaged property an estate, interest, or right in
priority to the mortgage, all the deeds and documents
relating to the property, or to the title thereto, which
a purchaser under the power of sale would be entitled
to demand and recover from him.

The provisions of this section agree with those of a similar
character commonly inserted in a mortgage deed. As regards the
trusts of the ultimate balance of the purchase money, they give the
mortgagee no novel protection. As to the circumstances upon
which depends the validity of a sale by a mortgagee under his
power, see Fisher on Mortgages, para. 503 et seq., 797 et seq.; Coote
on Mortgages, 4th ed., p. 251 ; see also Warner v. Jacob, 20 Ch. D.
220.

As to a sale by a mortgagee free from prior incumbrances, which
is referred to in sub-s. (3), supra, see sect. 5, ante.



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I



MORTGAGES. 161

Sub-8. (1), suproy supersedes the eccentric provision in Lord Cran- C. A. 1881,
worth's Act (s. 15), which enabled a mortgagee to vest in a purchaser Sect. 21.

the property sold (not being copyhold) for all the estate and interest :

therein which the person who created the charge had power to dispose



Online LibraryHenry Williams Challis Henry J. HoodThe Conveyancing Acts, 1881 & 1882, and the Settled Land Act, 1882, with ... → online text (page 20 of 53)