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Hypothecation

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• Hypothecation

Written document for securing a debt upon property, possession of which is not necessarily delivered to the creditor. The Greek word ὑποθήκη (hypothec) passed into the language of the Mishnah in the form , which afterward, with the omission of the first י, was corrupted, by men unacquainted with Greek, into "apoteḳe," a combination of Hebrew and Aramaic meaning "on this do stand," that is, "this is your security."

The hypothec differs from the deed of pledge (see Pledge), which accompanies the delivery to the creditor of possession of the pledged land. But some medieval authorities (see gloss on "Yad," Malweh, ) held that, nothing appearing to the contrary, a hypothec, like a pledge of land, is accompanied by possession, so that the proceeds go toward payment of the debt.

Hypothecation is treated very sparingly in the Mishnah (Giṭ. 4:4) and Baraita (Giṭ. 41a; B. Ḳ. 11b, 34b; B. B. 44b). Considering that a bond ("sheṭar ḥob") operated as a blanket mortgage on all the lands and slaves of the debtor, there was no great call for a hypothec, except to restrict the creditor's remedy.

Land is the most fitting subject for a mortgage, being bound by a simple bond; bondmen also are subjects, not only for that reason, but because the bondman "has a voice." Realizing that he is hypothecated, he is apt to make the fact known. But an ox has no "voice"; neither has any other chattel; and therefore it can not be hypothecated so as to affect the title of subsequent purchasers or pledgees. And though the lack of a voice is the original reason of this invalidity, it was held afterward that even knowledge of the chattel mortgage on the part of, or express notice to, the purchasers or pledgees does not affect them.

The principal question arising over a hypothec is this: Is the property therein named the only fund for payment of the debt? It is thus put in Giṭ. 41a: "If a man has mortgaged his field to his neighbor for debt (or to his wife for her jointure), saying to him, 'Collect your demand from this,' and a flood washes the field away, the creditor (or wife) may levy on other property of the debtor, unless there is an express provision that outside of the mortgaged land there is no responsibility." Of course a cause of losing the security much more frequent than a flood was the failure of title in the mortgagor; and this was treated in like manner.

Where the owner, after mortgaging his land to wife or creditor, sells it, the land "is sold," subject to the mortgage only so far that if the mortgagee can not find any other property of the debtor to satisfy his claim, he can levy on the mortgaged land and take it from the purchaser. Maimonides sets up a distinction or exception against a "permanent sale," on the meaning whereof his glossarists do not agree, while others (see RMA on Ḥoshen Mishpaṭ, 117, 1) do not recognize the exception at all.

At any rate, if the creditor takes possession of the mortgaged land or other thing, he can not, while in possession, pursue his remedy against other property of the debtor.

R. Simeon ben Gamaliel, moreover, in a baraita, maintains that while a creditor might, a wife should not (having accepted a hypothec) levy on other property of the husband in any case; because when a woman at marriage takes her ketubah, she, having received a named security, does not contemplate carrying on lawsuit after lawsuit to secure her jointure.

Where a master hypothecates his slave, and then manumits him, the manumission takes precedence over the mortgage; but even if the mortgage in so many words limits the remedy to the proceeds of the slave, the master must pay the debt if he can, by reason of the wrong done to the mortgagee bythe act of manumission. According to another opinion, in order to avoid strife and scandal, the mortgagee is compelled to join in the manumission, and the bondman should give him a bond for the amount still due to him.