CHAP. XLI. Where debts are charged generally on the residuary estate, and the devisee-executor mortgages part of the residuary estate, General charge of the mortgagee is entitled to have the assets marshalled so as to debts. throw the debts on the residuary estate not comprised in the mortgage (o). Where legacies are charged on several estates, one of which Charge of legacies. is mortgaged subsequently, the mortgagee is entitled to have the legacies raised out of the other estates (p). So, if a devisee of two estates charged with legacies mortgages them separately, and the proceeds of sale of one estate are insufficient to satisfy the legacies and the mortgage debt charged thereon, the mortgagee of that estate may, as against the mortgagor or his trustee in bankruptcy, require the other mortgaged estate to be first resorted to, if sufficient also to satisfy the mortgage on that estate, for payment of the legacies, so as to enable his own mortgage to be satisfied (2). tees may The rule is further exemplified by the case of a charge of When legadebts on real estate by will, with a gift of pecuniary legacies, marshal. in which event, if a creditor exhaust the personalty, the legatee will to that amount be entitled to come on the land (r). So in the case of two legacies, one merely pecuniary, and the other charged on land, there is the like marshalling (s). In cases not falling within Locke King's Act (t), so that the personalty is primarily liable to the payment of mortgage debts, the principle of marshalling is applied in favour of creditors (u), and of legatees, whether specific (r) or pecuniary (y), as against a descended mortgage estate, but not as against a specific devisee (z), although the specific devisee be the heir (a), unless the specifically devised estates were charged with the (0) Haynes v. Forshaw, 11 Ha. 93. (p) Finch v. Shaw, 5 H. L. C. 905; 2 Jur. N. S. 25. (2) Exp. Hartley, 2 M. & A. 496. (r) Amb. 129; Haslewood v. Pope, 3 P. Wms. 324, 4th point. But see Spong v. Spong, 3 Bli. N. S. 84. (8) Hanby v. Roberts, Amb. 127; Masters v. Masters, 1 P. Wms. 421; Bligh v. Earl of Darnley, 2 P. Wms. 619. (t) See ante, pp. 753 et seq. (u) Bartholomew v. May, 1 Atk. 487; Lomas v. Wright, 2 My. & K. VOL. I.-R. CHAP. XLI. Lien. Mortgagee of voidable policy of life assurance. Mortgage of policy to assurance company. Doctrine not applied to prejudice of third parties. payment of debts (b); nor against a residuary legatee either before (c) or after (d) the Wills Act. So, where a contract for purchase of real estate is completed after the purchaser's death, and the purchase-money has been paid out of his general estate, a pecuniary legatee will be entitled to marshal against the purchased estate, there being no distinction between a mortgage and the vendor's lien in this respect (e). The doctrine of marshalling will not be extended so as to entitle a life assurance society to require the mortgagee of a policy which is in terms to be void on suicide of the assured, except to the extent of an assignee's interest, to throw the mortgage debt primarily upon other property included in his security, nor to have it apportioned between the policy moneys and the other property (ƒ). So, also, where an assurance company advanced money on the security of a mortgage of certain real estates and of a policy on the life of the mortgagor effected in its own office in similar terms, and the assured committed suicide, it was held that the company stood in no better position than if the policy had been mortgaged to a third person, and could not be allowed to satisfy their debt out of the real estates to the prejudice of the persons interested therein, and accordingly, the policy money being sufficient to satisfy the debt, the real estates were ordered to be reconveyed free from the mortgage (g). iii.—Marshalling not applied to Prejudice of Third Parties.— The doctrine of marshalling will not be applied to the prejudice of third parties. "The right of a subsequent mortgagee of one of the estates to marshal-that is, to throw the prior charge on both estates upon that which is not mortgaged to him—is an equity which is not enforced against third parties, that is, against any one except the mortgagor and his legal represen (b) Paterson v. Scott, 1 De G. M. & G. 531; Rickard v. Barrett, 3 K. & J. 289. (c) Forrester v. Lee, Amb. 172; Scott (d) Collins v. Lewis, L. R. 8 Eq. 708; (e) Sproul v. Prior, 8 Sim. 189: Birds v. Askey, 24 Beav. 618; Lord Lilford v. Powys-Keck, L. R. 1 Eq. 347. (f) Solicitors and General Life Assurance Soc. v. Lamb, 2 De G. J. & S. 251; City Bank v. Sovereign Life Assurance Co., W. N. (1884) 61. (g) White v. British Empire Mutual Life Assurance Co., L. R. 7 Eq. 394. tatives, claiming as volunteers under him. It is not enforced against a mortgagee or purchaser of the other estate" (h). CHAP. XLI. Thus, the Court will not marshal in favour of a second mort- Subsequent mortgagee. gagee as against a subsequent mortgagee, and, accordingly, where there is a first mortgage over two estates, and then a mortgage on one of the estates, and then a mortgage on the other or on both the estates, this right of marshalling will not be exercised in favour of the second incumbrancer against the third, though with notice of the second incumbrance (i). In such case the first mortgage will be apportioned rateably between the two estates (k); and yet the second incumbrancer, or even a third incumbrancer on the one estate (if lending his money without notice), can oust the puisne incumbrancer on the other estate from his security, by subsequently buying in the first mortgage, which covers both estates (7). between estates in In Averall v. Wade (m), in Ireland, where, after judgment Marshalling entered up against the cognisor, he settled one of his two settled and estates on the marriage of his son, with a covenant against unsettled incumbrances, Sir Edward Sugden refused to apportion the cases of judgprior judgment between the settled and unsettled estates, in ments. favour of a subsequent judgment creditor, and threw the whole of such prior judgment upon the unsettled estate, the ground of the distinction being, it seems, that the judgment creditor had not a specific charge. The doctrine will not apply in favour of a subsequent mort- Volunteers. gagee to the prejudice of volunteers where one of the estates has been conveyed by way of voluntary settlement (n). But volunteers have no right to marshal to the prejudice of a prior settlement (o). If, however, the third mortgage is expressed to be made subject to and after payment of the prior mortgages, the second mortgagee will be entitled to marshal against the third. So, (h) Per Kay, L. J., in Flint v. Howard, (1893) 2 Ch. 54, at p. 73, C. A. (i) See infra, p. 788. (k) Barnes v. Racster, 1 Y. & C. Ex. 401; Bugden v. Bignold, 2 Y. & C. Ex. 377; Re Mower's Trusts, L. R. 8 Eq. 110; Trumper v. Trumper, L. R. 8 Ch. A. 870; Re Dunlop, Dunlop v. Dunlop, 21 Ch. D. 583, C. A.; Flint v. Howard, (1893) 2 Ch. 54, C. A. (1) See Bovey v. Skipwith, 1 Ch. Ca. See (m) Ll. & G. t. Sug. 252. Hamilton v. Royse, 2 Sch. & L. 315; Goring v. Farrall, Beat. 472; Lawrance v. Galsworthy, 3 Jur. N. S. 1049; Stronge v. Hawkes, 4 De G. & J. 632, 651; Re Scott's Estate, 14 Ir. Ch. R. 63; Chappell v. Rees, 1 De G. M. & G. 393; 16 Jur. 415. (n) Dolphin v. Aylward, L. R. 4 H. L. 502. (0) Anstey v. Newman, 39 L. J. Ch. 769. CHAP. XLI. Surety. Two funds, one subject to not. where there were three mortgages, the first upon funds A. and B., the second on fund A., and the third upon both funds, but made expressly subject to and after payment and satisfaction of the moneys secured by the prior mortgages, the first mortgagee having exhausted fund A., the second mortgagee was held to be entitled to be paid in full out of fund B. before the third mortgagee (p). Where one has a mortgage upon Blackacre and a collateral charge upon Blackacre and Whiteacre, and takes a subsequent mortgage on Blackacre for a further sum, he can exhaust Whiteacre in satisfying his charge, leaving Blackacre clear for his further mortgage, and cannot be compelled by a puisne incumbrancer on Whiteacre to marshal his securities, notwithstanding his further mortgage contains a covenant against incumbrances, except the first mortgage (9). A surety has no equity to prevent marshalling (»). On the principle that assets shall not be marshalled where by lien, the other so doing another person's rights would be prejudiced, the doctrine of marshalling will not apply where there are different funds as to which different rights exist. So, where creditors had a lien upon a fund, and merely a right of set off as to another fund, a person having a subsequent charge on the former fund was held not to be entitled to compel the creditors to retire from their higher right by virtue of their prior lien, and to resort to the fund in respect of which they had only a right of set off (s). Rights of several mort gagees of Where Blackacre and Whiteacre are mortgaged together to A., and subsequently Blackacre is mortgaged to B., and Whitedistinct funds acre is mortgaged to C., there can be no such marshalling as subject to shall prejudice either B. or C., but, in such a case, their rights prior mortgage. are to require that A.'s debt shall be satisfied rateably out of the two estates so as to leave a proper proportion thereof respectively to satisfy the claims of B. and C., the ultimate surplus arising from both estates being payable to the mortgagor, or those claiming under him (t). Where the several equities of redemption become absolutely vested in different persons by purchase, (p) Re Mower's Trusts, L. R. 8 Eq. 110. (q) Re Roddy, 11 Ir. Ch. R. 369. (s) Webb v. Smith, 30 Ch. D. 192, C. A. (t) Moxon v. Berkeley Building Soc., 59 L. J. Ch. 524. devise, devolution, or otherwise, if one of such persons is compelled to satisfy the debt, he will be entitled to require the owner of the other estate to contribute rateably his proportion of the debt (u). iv.-Application of the Doctrine to Maritime Securities.-The doctrine of marshalling is applied in the Admiralty Division of the High Court so far as is consistent with the rules regulating the priorities of maritime securities (x). Where there are several bottomry bonds, one binding the ship, freight, and cargo, and another on the ship and freight only, the Court will marshal the assets, directing the first claim to be satisfied out of the cargo so as not to disappoint the bondholders who have no charge thereon (y). So, where the master of a ship had given bottomry bonds on ship, freight, and cargo, and had also personally bound himself for payment of the bond, it was held that although, according to the general rule, the master, by so binding himself, had, in strictness, deprived his lien over ship and freight alone of its priority over the bottomry bonds, yet that as the bondholders had the cargo to fall back upon, and the rule existed only for the protection of bondholders, the assets must be marshalled so as to restore the master's priority and entitle him to be paid in the first place out of the proceeds of the ship and freight, leaving the bondholders to get any balance of their claim, not satisfied out of such proceeds, out of the cargo (*). The equity will not be applied to the prejudice of third persons. So claims for wages and other disbursements to which the ship and freight are liable, will not be ordered to be satisfied out of the freight in favour of the holder of a bond on the ship only to the prejudice of third persons interested in the freight (a). The doctrine of marshalling will not be applied to restrain seamen proceeding against the ship for their wages, instead of proceeding on their personal remedy for the benefit of the holder of a bond on the ship (b). CHAP. XLI. |