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Russel v Russel (1783) 1 Bro CC 269

Depositing title deeds raised presumption of equitable mortgage.

Facts:

A borrower deposited the title deeds to the leasehold with the plaintiff in order that he might obtain a loan from the plaintiff. When the borrower became bankrupt, the plaintiff brought an action before the Court of Chancery in order that he might sell the leasehold estate.

Issues:

The defendants argued that the plaintiff’s case was against the law, as it amounted to creating a legal charge without writing, which was against the 4th clause of the Statute of Frauds at that time. The main issue for the court was whether it could be said that the lease had been deposited with the plaintiff as security for the loan that had been advanced to the borrower.

Held:

The court found for the plaintiffs. Lord Loughborough stated that the lease was valuable consideration in exchange for the loan and that, therefore, this was a case of a contract which had been performed on both sides and the court would supply the necessary formalities. Ashurst, Lord Commissioner stated that this depended, however, on the terms on which the lease was deposited. A jury had found that on the evidence the lease was indeed deposited as a security with the plaintiff. Consequently, the deposit of the title deeds entitled the holder of the deeds to have a charge over the leasehold land, even though there had been no express agreement to this effect. Depositing title deeds with the lender raised a presumption that there was an intention to create a mortgage.


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