THE JERUSALEM INSTITUTE OF JEWISH LAW 
Rabbi Emanuel Quint, Dean 

Lesson # 89 • Mortgages

The name of this lesson in Shulhan Aruch. Hoshen haMishpat, is “'The Giving Of Security Interest In Fields Or Slaves." The concept as to slaves now being only of historical interest, I have omitted this subject. A security interest, whether an apotica or a mashkanta (as defined below), is not as some people have called them a mortgage in the sense it is known in Anglo-American common law. Even as it refers to rights in a specific property, the property may still sometimes be sold free of the security interest, and other property substituted therefor. 

This lesson deals with the types of security interests one may bargain for; whether the property to which it attaches may be sold; and if so, whether the security interest follows the property; whether a security interest can attach to personal property; and how the debtor can frustrate the rights of the creditor in the secured property. It will also deal with the situation where, after the giving of the security interest, the realty becomes valueless. For example, as when a river charts a new course that puts the secured property permanently under the waters of the river. This lesson deals with creditors who may extend credit or the bride who is owed her kethubah.

The lender or the extender of credit is obviously a creditor of the person to whom the loan is made or to whom credit is extended. The wife at the wedding ceremony receives from her husband a written document called a kethubah. The kethubah obligates the husband to pay a sum certain to his wife in case he divorces her. It also provides that in the event of his death his estate will pay to the wife a sum certain. It may also provide for other undertakings by the husband to the wife. The wife, by receiving the kethubah, has a security interest in the property of the husband, the same as any other creditor of the husband. 

A security interest may be one of three types that I shall designate Type 1, Type 2, and Type 3. Type I may attach to a specific property, but when the time comes for the repayment of the debt, it may be " paid or collected from other property of the debtor, as described below. Type 2 may be repaid only out of a specific property of the debtor and from no other property of the debtor. In Type 3 the creditor may enter upon the secured property until the loan is repaid.

In Type I, the debtor and creditor agree that the creditor "shall collect from this field." If the field became inundated and worthless, ' the creditor may enforce collection of the loan from other realty the debtor now possesses. If he possesses no other assets. collection may even be from realty the debtor had sold to third parties, which the debtor owned at the time the loan was made and a note of indebtedness was written with the requisite witnesses signing there-upon and the requisite delivery of the note to the creditor in the presence of at least two witnesses. There is also the opinion that the sold realty of the debtor may not be levied upon in substitution of the inundated realty, and that the creditor may only levy on the property, whether realty or personal property owned by the debtor at the time that the levy is made. 

If the debtor still owns the realty to which the security interest attaches, there are four possible opinions in the matter. 

1. In favor of the creditor. This view holds that the creditor has the option to enforce his claim against the realty to which the security interest attaches, or he may enforce collection from the type of realty on which he could have levied had he had no security interest in the realty.

2. Neither the debtor nor the creditor may request that the creditor receive payment from realty other than the realty to which the security interest attaches. 

3. Both the debtor and the creditor have the option to exchange the security interest to another field that is bainanith. 

4. In favor of the debtor. The debtor has the option to permit enforcement of collection of the debt to the realty on which there is the secured interest or to any bainanith field of his. Even according to this view, if the debtor dies, the option does not inure to the benefit of the heirs. 

In all events, the debtor, or the heirs, or the purchaser of the debtor's realty may pay the debt with money or the equivalent of money.

There is an opinion that the debtor may not sell the secured realty except with the provision that the sale is for a period of time to terminate when the debt becomes due. This is a minority view. The prevailing view is that the secured realty may be sold. If the debtor sells the realty to which the security interest is attached, then, if he still has other property upon which to levy when the debt is due, the sold property will be exempt from the levy. If when the debtor sells the realty to which the security interest is attached he no longer has other assets to satisfy the debt, and still has no assets when the debt becomes due, then the creditor can levy on the sold property. If when the debtor sells the realty to which the security interest attaches he still has assets enough to pay the debt, but when the time comes to pay the debt he has sold his other assets and no longer has assets to pay the debt, there are opinions both ways. There is the view that the sold secured property may be levied upon by the creditor in the hands of the purchaser, and there is the view that the purchaser can claim that when he purchased the secured property the debtor still had sufficient realty to pay the debt and that the creditor should look to the later purchasers of the debtor's assets.
In Type 2 the debtor and creditor agree that the creditor shall collect his debt "only from this field." The creditor cannot collect the debt from any other property of the debtor, whether sold or unsold.

Even if the realty becomes inundated and worthless, the creditor may not levy on other property of the debtor. If the realty is lost to an prior creditor, the current creditor who holds the security interest has lost the realty on which to make the levy. However, if the debtor never had title to the secured realty, the creditor is not limited to the realty that was taken from the debtor by its rightful owner. 

If the debtor sold the secured realty, and the debtor has other property on which to make a levy, the majority opinion is that the creditor may levy on the secured realty in the hands of the purchaser or may levy on other property of the debtor. Some would limit the creditor to enforcement only out of the unsold property of the debtor. If the debtor has no other property on which to levy, then all would hold that the creditor can levy on the realty in the hands of the purchaser. 

The debtor may at any time, including after the debt became due and prior to the creditor levying on the secured realty, pay off the debt with money and have the realty released from the security interest. Neither the purchaser of the secured realty nor the heirs of a deceased debtor may pay the creditor the amount of the debt, but must give up the realty to the creditor. 

In Type 3, the creditor takes possession of the secured realty. The creditor receives all of the profits from the realty and credits such profits to the debt, either for a specified time or until the entire exact amount of the debt is paid off. By agreement the debtor and creditor can specify if the creditor/possessor is similar to Type 1 above and may collect from other realty in the event of inundating of the realty or if the realty is not worth enough to pay the debt. or is similar to Type 2 above and the creditor may look only to this realty and not to any other. even if the realty becomes inundated. 

Laws of security interest in favor of the creditor against the purchasers from the debtor do not apply to personal property even to a specific chattel with the understanding that the creditor can look only to that chattel for payment. It does not apply even if there was a writing of the security agreement, and even if a purchaser of the chattel from the debtor was aware of the security interest of the creditor. The reason is that there cannot be any impediment to orderly market procedures. There are also no priorities in security interests in personal property. If a subsequent creditor levied on the secured chattel first, his levy will not be disturbed. 

The subject matter of this lesson is more fully discussed in Vol. IV, Ch.118-119 of A Restatement of Rabbinic Civil Law by E. Quint, published by Jason Aronson, Inc. and on sale at local Judaica bookstores. 
Questions to quint@inter.net.il