Toronto-Dominion Bank v. Young, 2020 SCC 15

In case personal claim is coupled with real property claim and the former is extinguished for which limitation period is less than the real property claim, then one can’t proceed with real property claim as well.

In the present case, ‘A’ had taken mortgage loan first from ‘B’ and then from ‘D’ on the same day with respect to same immovable property (IMP). When A defaulted on loan payment to D, D obtained IMP through forced surrender. Later on, when A defaulted on loan payment to B, B served notice to A and D remedied A in protest. After some time, B served notice on D alone for the exercise of the hypothecary right for balance of due amount and later instituted a suit for the same to which A was not a party. Primary question before the Court was, whether B’s claim against D to acquire IMP was time barred or in other words, prescribed by the time Superior Court heard and delivered its judgement?

The Court reiterated the already well-established position that the mortgage (hypothec) is only an accessory to the obligation it guarantees and is valid only as long as the obligation whose performance it secures subsists. Since, A had taken loan from B by mortgaging IMP, A had obligation towards B to repay that loan and in case he defaults, B’s money is secured by the IMP. Now there is a limitation period within which one has to bring claim to the court for getting remedy. If one doesn’t bring claim within that period, his rights are prescribed. Hence prescription can be understood as a way to gain/lose a right over the time. If one’s obligation is extinguished by prescription then it’s no longer payable.

The mortgage confers a real property right and the action to bring claim for it is prescribed after the expiration of ten years. While obligation (i.e. guaranteed claim, which may/may not be guaranteed by mortgage) is a personal right and the limitation period applicable is three years. A real property right is accessory to personal obligation. If there is no personal obligation, then there is no property right through mortgage. In this case A’s obligation to repay loan to B is guaranteed by the mortgage (IMP). When A defaulted to B, IMP was already with D. Hence, B had money claim towards A and mortgage claim towards D. Without suing A for money, B directly sued D for mortgage claim. For the sake of repetition, money claim is coupled with mortgage claim and always mortgage claim follows money claim and not vice versa. If money claim is extinguished then, automatically, mortgage claim is also extinguished. By the time judge pronounced judgement in the suit between B and D for mortgage claim, B’s right to proceed against A for money claim was extinguished, so ideally, B could not have proceeded against D for recovering IMP.