It is now provided in Ontario by the Mortgages Act, R.S.O. 1914, c. 112, s. 3, as follows (k).
8.- (1) Notwithstanding any stipulation to the contrary where a mortgagor is entitled to redeem he may require the mortgagee, instead of giving a certificate of payment or reconveying, and on the terms on which he would be bound to re-convey, to assign the mortgage debt and convey the mortgaged property to any third person as the mortgagor directs; and the mortgagee shall be bound to assign and convey accordingly.
(2) The right of the mortgagor to require an assignment shall belong to and be capable of being enforced by each incumbrancer or by the mortgagor, notwithstanding any intermediate incumbrance; but a requisition of an incumbrancer shall prevail over that of the mortgagor, and as between incumbrancers a requisition of a prior incumbrancer shall prevail over that of a subsequent incumbrancer.
(3) This section shall not apply if the mortgagee is or has been in possession.
Sub-ss 1 and 3 are derived from the English statute of 1881, 44 & 45 V. c. 41, s. 15, and sub-s. 2 from the amending statute of 1882, 45 & 46 V. c. 39, s. 12. The words "giving a certificate of payment or" are not in the English statute. As already pointed out, a certificate of discharge when registered operates in Ontario as a reconveyance (I). Sub-ss. 2 and 3 will be discussed later (m).
The leading case in England as to the original statute of 1881 is Teevan v. Smith (n) in which Jessel, M.R., says (o):
"We must remember what the law was before that Act was passed. A mortgagor had only a right to redeem and to have a reconveyance on payment of the mortgage debt, Hence a difficulty arose, for lenders were willing to advance money if they could have a transfer of the mortgage security, but were not willing to take security directly from the mortgagor, dreading intermediate incumbrances. At that time the debt was not transferable, so that a power of attorney was necessary; therefore the old decisions were right in laying down that a mortgagee was not to be required to run the risk of being made liable to costs, which he might be, if he transferred the debt to a third person. Now the difficulty has been got rid of, by making the debt transferable at law, so that no power of attorney is required and all ground of objection on the part of a mortgagee to transfer the security is taken away. It can do him no harm in any way."
(k) By s. 2 (d) it is provided that "mortgagor" shall include any person deriving title under the original mortgagor or entitled to redeem a mortgage, according to his estate, interest or right in the mortgaged property, and "mortgagee" shall include any person deriving title under the original mortgagee.
(I) See chapter 19, Discharge or Reconveyance, Sec. 184. (m) As to sub-s. 2, see Sec. 193; as to sub-s. 3, see Sec. 196. (n) 1882, 20 Ch.D. 724. (o) 20 Ch.D. 724, at pp. 728-9.
The words "where a mortgagee is entitled to redeem" are explained by Jessel, M.R., as follows (p):
"[The section] says, 'where a mortgagor is entitled to redeem.' Every mortgagor is entitled to redeem, but there is a difference in their rights. Where there is one mortgagor and one mortgagee, there, of course, his right to redeem is absolute. But where there are several successive mortgagees the mortgagor can redeem the next to him without redeeming any other; but if he wishes to redeem any anterior mortgage, he must also redeem all those who are between that mortgagee and himself. A puisne mortgage indeed is in rather a worse position than this; for, although he is entitled to redeem those above him, he cannot do so without foreclosing those between himself and the ultimate equity of redemption (q). So that the words 'where a mortgagor is entitled to redeem' really includes every mortgagor, except a mortgagor who is precluded by some special term in his mortgage deed from redeeming within a specific time. For although the law will not allow a mortgagor to be precluded from redeeming altogether, yet he may be precluded from redeeming for a fixed period, such as five or seven years (r). That is why the words 'where a mortgagor is entitled to redeem' are inserted. They mean where a mortgagor is not precluded from redeeming for a certain time by some special stipulation."
A mortgagor who has conveyed away the equity of redemption acquires a new right to redeem if he is sued on the covenant for payment and becomes again a mortgagor "entitled to redeem" within the meaning of the statute if there are no subsequent encumbrancers (s).
(p) Teevan v. Smith, 1882, 20 Ch. D. 724, at p. 729. (q) See chapter 25, Action for Redemption, Sec. 257. (r) See chapter 25, Sec. 252.
The key to the meaning of the statute lies in the words "instead of reconveying." Jessel, M.R., says (t):
"Then [the section] says, 'he shall have power to require the mortgagee, instead of reconveying, and on the terms on which he would be bound to reconvey, to assign the mortgage debt and convey the mortgaged property to any third person.' It is only 'instead of reconveying.' The section assumes two things: first, that the mortgagee is bound to reconvey to the person applying to him, and, secondly, that the transfer is to be instead of a reconveyance. Then see how it works. Where there are first and second mortgagees, and the first mortgagee has notice of the second, when he is paid off he becomes a trustee of the legal estate for him. The word 'reconvey' is the proper word to use; it is strictly a reconveyance. If the first mortgagee is paid off by the mortgagor, he is not bound to reconvey the estate to him; but if he is paid off by the second mortgagee, he he is bound to reconvey it to him. The second mortgagee is a mortgagor under the definition of the Act. He is an assign of the mortgagor and is entitled to redeem. It appears to me that no person can avail himself of [sub-s. 1] who is not entitled to call for a reconveyance of the estate from the mortgagee. The Act never intended to effect any change in the person who was entitled to call for a reconveyance.
"There is another point, which does not arise in the view which I take of the section, but which I may mention. Every person who is behind the first mortgagee is entitled to redeem, and is a mortgagor within the meaning of the section, and if there are several successive mortgagees of the same mortgagor, which of them has a right in priority to the others to call upon the first mortgagee to assign the mortgage? It must be that one who is next to him. The first incumbrancer has the first right to redeem, and it is impossible to suppose that it was intended that a puisne mortgagee was to have the right to call for a transfer of the first mortgage, before one who is prior to himself.
"It is alleged that there was a tender in this case by the mortgagor, but a tender is not payment; and according to my view of the case, it would have been immaterial, even if there had been actual payment by the mortgagor. If before the reconveyance is made the second mortgagee calls on the first to reconvey he must have the prior right. He is the mortgagor of the estate as between himself and all behind him, and he has the prior right to require a reconveyance or a transfer."
(s) Queen's College v. Claxton, 1894, 25 O.R. 282, at p. 289. (t) Teevan v. Smith, 1882, 20 Ch.D. 724, at pp. 729, 730.