This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
The true principle (q) deducible from the authorities seems to be, that mere indiscretion or inactivity is insufficient to postpone a purchaser or mortgagee, who has the legal estate: there must, to have this effect, be an intent to facilitate a fraud, or a wilful indifference to a fraud which there was good reason to suspect was about to be committed (r), or such gross negligence as would render it unjust to deprive the prior incumbrancer of his priority (s), and the omission to make any inquiry respecting the deeds, is, in itself, evidence, though not conclusive evidence (t), of this gross negligence or wilful and fraudulent indifference (u) ; and where the contest lies between parties having mere equities, anything which raises a positive equity against the one, "upon the principle which in equity, as distinct from law, is designated by the term ' estoppel' ' (x). will give the other, though his equity is posterior in creation, a better claim on the assistance of the Court (y). If the owner of property clothes a third person with the apparent ownership and right of disposition, not merely by transferring to him, but also by acknowledging that the transferee has paid him the consideration for it, he is estopped from asserting his title as against a person to whom such third party has disposed of the property, and who took it in good faith and for value (s).
General principle as to postponement.
Where, in answer to an inquiry made in good faith for the deeds, a reasonable excuse is given for their non-delivery, their absence does not affect a purchaser with constructive notice that they have been deposited as a security (a) : so, where an actual memorandum of charge was accompanied by a deposit of what were in fact, though not so represented, only the earlier title deeds, the omission to call for the later deeds, which alone showed any title in the mortgagor, was held insufficient to postpone the incumbrancer to a depositee of the later deeds (b).
As to custody of deeds.
(q) Northern Ins. Co. v. Whipp,
(1884) 26 Ch. D. 482; 53 L. J. Ch. 629 ; Garside v. Liverpool By. Bdg. Soc, (1897) 13 T. L. R. 189.
(r) See Hewitt v. Loosemore, (1851) 9 Ha. 449, 458; Hooper v. Harrison, (1855) 2K.&J. 86, 105.
(s) Oliver v. Hinton, 1899, 2 Ch. 264 ; 68 L. J. Ch. 583.
(t) Ratcliffe v. Barnard, (1871) 6 Ch. 652; 40 L. J. Ch. 777.
(u) Hewitt v. Loosemore, sup. ; Brown v. Stedman, (1896) 44 W. R. 458 ; see Oliver v. Hinton, sup., where the cases are fully cited.
(x) Dixon v. Muckleston, (1872) 8 Ch. 155, 160, per Ld. Selborne; 42
L. J. Ch. 210 ; and see Nat. Prov. Bank v. Jackson, (1886) 33 Ch. D. 1.
(y) Waldron v. Slopcr, (1852) 1 Dr. 193, 200 ; Hunter v. Walters, (1871) 7 Ch. 75 ; 41 L. J. Ch. 175; Rice v. B., (1853) 2 Dr. 73, 83 ; Laijard v. Mattel, (1867) 4 Eq. 397; 36 L. J. Ch. 669; Farrand v. Yorkshire Bkg. Co., (1888) 40 Ch. D. 182, 189; 58 L. J. Ch. 238 ; King v. Smith, 1900, 2 Ch. 425 ; 69 L. J. Ch. 598 ; and consider the observations of Lord Cairns in Pease v. Jackson, (1868) 3 Ch. 676, 681 ; see sup. p. 848.
(z) Per Farwell, J., in Simmer v. Webster, 1902, 2 Ch. 163, 173; 71 L. J. Ch. 661.
It was held, that the omission for nineteen years by the assignees of an insolvent to sell or take possession of his copyhold property, or of the copies of Court Roll, or to enter their title upon the Court Rolls, whereby the insolvent was enabled to retain the property as if owner, and mortgage it for value to a person without notice of the insolvency, did not give the mortgagee priority to the assignees (c).
The cases on the effect of negligence in postponing the prior incumbrancer may be summarized as follows:Assignees of insolvent, not asserting their rights for nineteen years, yet not postponed.
First. Where the prior interest is legal, and the other equitable. In this case the prior legal estate will not be postponed to the subsequent equitable estate "on the ground of any mere carelessness or want of prudence on the part of the legal owner " (d). But the Court will postpone the prior legal estate to a subsequent equitable estateThe rule as to the effect of negligence illustrated.
1. Where prior estate is legal.
(a) Espin v. Femberton, (1859) 3 D. & J. 547; 28 L. J. Ch. 311 ; Frown v. Stedman, (1896) 44 W. R. 458.
(b) Roberts v. Croft, (1857) 2 D. & J. 1 ; -27 L. J. Ch. 220 ; and see Thorpe v. Holdsworth, (1868) 7 Eq. 139; 38 L. J. Ch. 194, and cases there cited.
(c) Cole v. 0., (1848) 6 Ha. 517, aff. 524.
(d) Northern Ins. Co. v. Whipp, (1884) 26 Ch. D. 482, 494 ; 53 L. J. Ch. 629, per Fry, L. J. ; Garside v. Liverpool Ry. Fldg. Soc., (1897) 13
T. L. R. 189. See Head v. Egerton, (1734) 3 P. W. 280 ; Hunt v. Elmes, (I860) 2 D. E. & J. 578 ; 30 L. J. Ch. 255 ; Hewitt v. Looscmore, (1851) 9 Ha. 449 ; in all of which the mortgagor was solicitor to the legal mortgagee. Evans v. Bicknell, (1801) 6 Ves. 173, 183; Martinez v. Cooper, (1826) 2 Rus. 198 ; Harper v. Faulder, (1819) 4 Mad. 129; Espin v. Femberton, (1859) 4 Dr. 333 ; 3 D. & J. 547; 28 L. J. Ch. 308, 311 ; Colyer v. Finch, (1856) 5 H. L. C. 905 ; Ratcliffe v. Barnard, (1871) 6 Ch. 652 ; 40 L. J. Ch. 777 ; Agra Bank
(i.) Where the owner of the legal estate has either wittingly or unwittingly "assisted in or connived at the fraud which has led to the creation of the subsequent equitable estate without notice of the prior legal estate; "and evidence of such innocent assistance or connivance may be afforded by the absence of ordinary care in inquiring for or keeping title deeds, and such conduct, if not satisfactorily explained, will be sufficient to postpone the legal estate (e).
(ii.) Where the owner of the legal estate has constituted the mortgagor his agent to raise money, and has for that purpose either left the deeds in his custody (/), or returned them to him (g), and the mortgagor has by means of the possession of the deeds created the equitable estate without notice of the prior legal estate, even though the principal had no intention that his agent should commit a fraud, or knowledge that he was doing so.