The right of consolidation exists only as to mortgages with respect to which the mortgagor has made default and has consequently lost his legal or contractual right to redeem, so that he is compelled to ask for equitable relief. If default has been made on two mortgages from the same mortgagor, and the mortgagee sells under the power of sale in one of the mortgages and realizes a surplus, he may consolidate the mortgages and apply the surplus on account of the other mortgage, even as against the assignee in bankruptcy of the mortgagor (o). But if the mortgaged property is insured in the name of the mortgagor with loss, if any, payable to the mortgagee as his interest may appear, and a loss occurs, the surplus insurance money, after payment of the mortgagee's claim, belongs by law to the mortgagor by virtue of his contract with the insurer, and therefore the doctrine of consolidation does not apply so as to enable the mortgagee to apply the surplus upon another mortgage held by him from the same mortgagor (p).

(g) Pelly v. Wathen, 1851, 1 DeG. M. & G. 16.

(h) See chapter 3, Legal Mortgage in Equity, Sec. 22.

(i) Cummins v. Fletcher, 1880, 14 Ch.D. 699, at p. 708; Johnston v. Reid, 1881, 29 Gr. 293; Silverthorn v. Glazebrook, 1899, 30 O.R. 408. The right to consolidate may be asserted by the mortgagee in the master's office on a reference in a foreclosure action. Ross v. Stevenson, 1877, 7 O.P.R. 126; Merritt v. Stephenson, 1858, 7 Gr. 22. The right may be asserted although the mortgagee has already given notice requiring the mortgagor to pay one of the mortgages. Griffith v. Pound, 1890, 45 Ch.D. 553.

(j) Neve v. Pennell, Hunt v. Neve, 1863, 2 Hem. & M. 170, at p. 183; 21 Halsbury, Laws of England, 210; Silverthorn v. Glaze-brook, supra.

(k) Tassel v. Smith, 1858, 2 DeG. & J. 713.

(l) Watts v. Symes, 1851, 1 DeG. M. & G. 240.

(m) Tweedale v. Tweedale, 1857, 23 Beav. 341.

It has been held that the default under the mortgages sought to be consolidated must be a continuing default at the time when an action is brought in which the right of consolidation might be asserted, so that if a mortgagor, before action brought, pays or tenders the whole amount due on one mortgage, he is entitled to a discharge and the mortgagee has no right to consolidate that mortgage with other mortgages with respect to which the same mortgagor is in default (q).

(o) Selby v. Pomfret, 1861, 3 DeG. F. & J. 595. In this case the Lord Chancellor incorrectly uses the work "tack" in the sense of "consolidate." Pledge v. White, [1896] A.C. 187, at p. 197, 18 R.C. 264, at p. 274.

(p) Re Union Assurance Company, 1893, 23 O.R. 627. The result would have been different if the insurance contract had been made between the mortgagee and the insurer, because in that case the mortgagor's claim to the surplus, if any, would have been virtually that of a cestui que trust as in Selby v. Pomfret, supra.

(q) Scottish American Investment Co. v. Tennant, 1890, 19 O. R. 263. This decision seems to be incorrect on principle, because the mortgagor, having made default, had lost his legal right to redeem, and should not have been allowed to redeem in equity except on equitable terms.

It would seem to follow that if there is no acceleration clause and the mortgagor is in default only as to certain instalments of principal or interest, he may avoid the doctrine of consolidation by paying the arrears before action brought. If there is an acceleration clause in the form given in the schedule to the Short Forms of Mortgages Act (r) and the whole principal has become due by virtue thereof, the result would be the same (s).