Marshalling - Definition - Law Dictionary Home Dictionary Definition marshalling

Definition :

Marshalling, the act of arranging or of putting into proper order.

The doctrine of marshalling assets and securities depends upon the principle that a person, having two funds out of which to satisfy his demands, shall not, by his election, prejudice a person who has only one such fund. If, therefore, one who has a claim upon two funds resorts to the only fund upon which another has a claim, the latter stands in his place for so much against the fund to which otherwise he could not have access: the object being that every claimant shall be satisfied as far as, by any arrangement consistent with the nature of the several claims, the property which they seek to affect can be applied in satisfaction of such claims.

In the administration of the estate of deceased persons, marshalling consists of arranging the assets so as to give effect to the priority of debts, as to legal assets on the one hand, and to the order of assets on the other. now that all the assets are liable to be applied for the payment of any debt, marshalling assets in favour of creditors is no longer necessary, but it may sometimes be required between legatees when some of the legacies are charged on the reality and some are not: and when legacies charged and one not charged are given to the same person. these doctrines have not been affected by the vesting of real property in personal representatives (English) (Administration of Estates Act, 1925, s. 2), except that by s. 34, ibid., some alteration in the order of administration of solvent estates is provided for. See ADMINISTRATION; Seton on Judgments; Aldrich v. Cooper, (1802) 8 Ves 308; 1 W. & T.L.C., p. 36; 2 ibid., p. 109 et seq.

The doctrine of marshalling in relation to mortgages results in the general rule that where an owner of several properties has mortgaged them to the same person and afterwards deals separately with the equity of redemption in one or more of the properties either by way of mortgage of otherwise, the person or persons interested in the equities so dealt with are entitled, as against the mortgagor, to require that the first mortgage shall be paid off in the first place out of the property not so dealt with, or if that mortgage is paid off out of the property in which they are so interested, to stand pro tanto in the place of the first mortgagee in regard to the property which has not been resorted to for satisfying his security: Coote on Mortgages.

If the owner of two or more properties mortgages them to one person and then mortgages one or more of the properties to another person the subsequent mortgagee is, in the absence of a contract to the contrary, entitled to have the prior mortgage-debt satisfied out of the property or properties not mortgaged to him, so far as the same will extend, but not so as to prejudice the rights of the prior mortgagee or of any other person who has for consideration acquired an interest on any of the properties. (Transfer of Property Act, 1882, s. 81)