Mere notice to the mortgagor of the assignment of a mortgage will prevent subsequent dealings between the mortgagor and the mortgagee to the prejudice of the assignee, but will afford no safeguard as to past dealings. It is therefore advisable that the assignee should at the time of the assignment require either the concurrence of the mortgagor in the assignment or his written admission as to the state of the mortgage account. The mortgage debt is a chose in action and in accordance with the general rule, applicable both to equitable assignments and to assignments under the statute, the assignee takes subject to the equities affecting the subject matter, and takes subject to the state of the mortgage account between the original parties (i). Even though the assignee may get the conveyance of the legal estate he can hold it as security only for what is properly owing by the mortgagor at the date of the assignment (j).

It has been held that if nothing had ever been advanced upon a mortgage or the mortgage had been made without consideration the assignee would stand in no better position than the mortgagee (k), but the mortgagor may, as against the assignee, have estopped himself from denying that the money has been advanced. Under the former practice of conveyancers in England the absence of a receipt endorsed on the mortgage operated in effect as notice to the assignee that the mortgage money had not been advanced, notwithstanding that in the body of the mortgage the receipt of the money was acknowledged, but if a receipt was endorsed the assignee for value without notice that the money had not been advaned was entitled to take the mortgage on the footing that the amount acknowledged to have been received was received (I). It is now provided in Ontario by the Conveyancing and Law of Property Act (m) as follows:

(h) R.S.O. 1914, c. 124, s. 75; Gilleland v. Wadsworth, 1877, 1 O.A.R. 82, at p. 91; see chapter 8, The Registry Act, Sec. 73. The same rule applies under the Land Titles Acts. Nioa v. Bell, 1901, 27 V.L.R. 82; cf. Peck v. Sun Life Assurance Co., 1905, 11 B.C.R. 215.

See also Grace v. Kuebler and Brunner, 1917, 56 Can. S.C.R. 1, at pp. 13, 14, 39 D.L.R. 39, at p. 47, affirming 11 A.L.R. 295, 33 D.L.R. 1.

(i) Matthews v. Wallwyn, 1798, 4 Ves. 118, 18 R.C. 243.

(j) Norrish v. Marshall, 1821, 5 Madd, 475; Mangles v. Dixon, 1852, 3 H.L.C. 702, at pp. 736, 737.

6. A receipt for consideration money or securities in the body of a conveyance shall be a sufficient discharge to the person paying or delivering the same without any further receipt being endorsed on the conveyance.

7. A receipt for consideration money or other consideration in the body of a conveyance or endorsed thereon shall, in favour of a subsequent purchaser, not having notice that the money or other consideration thereby acknowledged to be received was not in fact paid or given, wholly or in part, be sufficient evidence of the payment or giving of the whole amount thereof.

In the statute just quoted the word "conveyance" includes a mortgage, charge or encumbrance (n). S. 6 possibly has no application if no payment has been made on a mortgage, but s. 7 applies to such a case. The expression "sufficient evidence" means conclusive evidence (o).

As a result of the statute a purchaser of a mortgage who has no notice (p) actual or constructive that the money acknowledged in the mortgage to have been received has not been received by the mortgagor is entitled to rely on the acknowledgment contained in the body of the mortgage (q), but of course he is bound to know that since the creation of the mortgage the debt may have been reduced (r).

(k) McPherson v. Dougan, 1862, 9 Gr. 258; cf. Gould v. Close, 1874, 21 Gr. 273.

(l) Bickerton v. Walker, 1885, 31 Ch. D. 151.

(m) R.S.O. 1914, c. 109, ss. 6, 7, re-enacting 49 V. c. 20, s. 10, by which in 1886 the similar provisions (ss. 54, 55) of the English Conveyancing Act, 1881, were adopted.

(n) See s. 2 of the statute, quoted in chapter 1, Sec. 5.

(o) Jones v. McGrath, 1888, 16 O.R. 617, at p. 623; Lloyd's Bank v. Bullock, [1896] 2 Ch. 192; Bateman v. Hunt, [1904] 2 K.B. 530.

(p) The receipt is of no avail to an assignee who knows that the money was not advanced. Manley v. London Loan Co., 1896, 23 O.A.R.

Under the Ontario Land Titles Act (s) the transfer of a charge is "subject to the state of account upon the charge between the chargor and the chargee," but it has been held that the assignee is affected only in so far as payments have been made subsequent to the date of the charge and that he is not affected by the fact that the amount for which the charge is expressed to be security was not in fact advanced, if he takes without notice of such fact (t).

The value of the mortgage debt to the transferee will depend on the soundness of the security, and he may purchase the debt and security at less than the nominal amount of the debt; but notwithstanding that he has done so, he is entitled to recover the whole amount owing at the time of the transfer (u), unless he stands in a position which makes this inequitable, as, for instance, if he stands in a fiduciary position towards the mortgagor (v).

139, at p. 145, S.C. affirmed sub nom. London Loan Co. v. Manley, 26 Can. S.C.R. 443.

(q) Bateman v. Hunt, supra. This was an action on the covenant and the decision would seem to exclude the distinction drawn in Patterson v. McLean, 1891, 21 O.R. 221, between the right to sue on the covenant and the right to foreclose. In the latter case it was held that the assignee for value without notice could not enforce the covenant for payment against a mortgagor who had received no consideration.

(r) DeLisle v. Union Bank of Scotland, [1914] 1 Ch. 22, at p. 33.

(s) R.S.O. 1914, c. 126, s. 54. As to provisions of the various Land Titles Acts with regard to the effect of a transfer of mortgage, see Sec. 107, infra.

(t) Dodds v. Harper, 1916, 37 O.L.R. 37, 32 D.L.R. 22; cf. annotation by E. D. Armour, 32 D.L.R. 26 ff. The decision was based upon the Conveyancing and Law of Property Act above quoted. Apparently in provinces where there is no corresponding statute the mortgagor would not be liable in case the money had not been advanced unless he had done some act to induce the assignee to believe that the full amount had been advanced, the acknowledgment of receipt of the money in the mortgage not being sufficient. Swan v. Wheeler, 1909, 2 S.L.R. 269.

In the absence of special words, the transferee of a mortgage is not entitled to rents in arrear at the time of the transfer (w); and where interest is in arrear at the date of the transfer and the mortgagor does not concur, the transferee, on paying the arrears to the transferor, is not entitled to treat them as principal so as to bear future interest (x). The mortgagee and the persons claiming under him cannot, without the privity of the mortgagor, add to what is due or turn interest into principal (y).