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.
Second!//. Where the prior interests are both equitable, it seems that a like degree of negligence on the part of the prior equitable incumbrancer is necessary in order to postpone him as is necessary to postpone the owner of a prior legal estate (It). There must be something done, or omitted to be done, by the prior incumbrancer, which arms the owner of the estate with the power of going into the world under false colours (i). Thus, where B. the solicitor of A., a second mortgagee, put up the property for sale by auction, and professing to have bought it, induced A. to execute a conveyance of the property by which A. purported to convey it to B. under his power of sale : and B. afterwards made an equitable mortgage of the estate to C, representing it to be his own and unincumbered; it was held that A. had by executing the conveyance enabled B. to commit the fraud on C. and must be postponed to him (k); and, on the same principle, a vendor with an equitable lien for unpaid purchase-money will be postponed to a mortgagee from the purchaser who has been allowed to carry away the title deeds and conveyance (l). But the mere fact that a subsequent incumbrancer has got the title deeds does not entitle him to priority, unless there has been some active omission or negligence of the kind above described; and where a person has in good faith relied on a positive statement by the mortgagor that the latter is depositing all the necessary deeds, without any examination into the truth of it, he will not be postponed to a later equitable mortgage who has got important title deeds which the mortgagor had in fact kept back (m).
2. Where both estates are equitable.
V. Barry, (1874) L. R. 7 H. L. 135 ; Manners v. Mew, (1885) 29 Ch. D. 725 ; 54 L. J. Ch. 909 ; He Ingham, 1893, 1 Ch. 352; 69 L. J. Ch. 100 ; Rimmer v. Webster, 1902, 2 Ch. 163, 172; 71 L. J. Ch. 561.
(e) Worihvngton v. Morgan, (1849) 16 Si. 547 ; 18 L. J. Ch. 233 ; Whitbread v. Jordan, (1835) 1 Y. & C. 303; Peto v. Hammond, (1861) 30 Beav. 495 ; 31 L. J. Ch. 354 ; Max-field v. Burton, (1873) 17 Eq. 15; 43 L. J. Ch. 46 ; Clarice v. Palmer, (1882) 21 Ch. D. 124 ; 51 L. J. Ch.
634 ; Lloyd's Banking Co. v. Jones, (1885) 29 Ch. D. 221 ; 54 L. J. Ch. 931.
(f) Perry - Herrick v. Attwood, (1857) 2 D. & J. 21 ; 27 L. J. Ch. 121 ; Me Ingham, sup. ; Simmer v. Webster, 1902, 2 Ch. 163 ; 71 L. J. Ch. 561.
(g) Briggs v. Jones, (1870) 10 Eq. 92 ; Re Ingham, sup.
(h) Sup. p. 848.
(i) Dixon v. Muckleston, (1872) 8 Ch. 155, 160; 42 L. J. Ch. 210.
The Bkcy. Act, 1883, enacts (n) that, subject to the provisions of the Act with respect to the effect of bankruptcy on an execution or attachment (o), and with respect to the avoidance of voluntary settlements (p) and preferences (q), nothing in the Act shall invalidate in the case of bankruptcy any payment by the bankrupt to any of his creditors, any payment or delivery to the bankrupt, any conveyance or assignment by the bankrupt for valuable consideration (r), or any contract, dealing, or transaction by or with the bankrupt for valuable consideration, provided that (1) the payment, delivery, conveyance, assignment, contract, dealing, or transaction takes place before the date of the receiving order; and that (2) the person (other than the debtor) to, by, or with whom the payment, delivery, conveyance, assignment, contract, dealing, or transaction was made, executed, or entered into, has not at the time of the payment, delivery, etc, notice of any available act of bankruptcy committed by the bankrupt before that time.
Protection of purchaser from bankrupt as against trustee.
(A) Hunter v. Walters, (1871) 7 Ch. 75; 41 L. J. Ch. 175; Waldron v. Sloper, (1852) 1 Dr. 193; Re Lambert's Est., (1884) 13 L. R. Ir. 234; Bowie v. Saunders, (1864) 2 H. & M. 242 ; 34 L. J. Ch. 87; King v. Smith, 1900, 2 Ch. 425 ; 69 L. J. Ch. 598.
(I) Rice v. R., (1853) 2 Dr. 73 ; Kettlewell v. Watson, (1884) 26 Ch. D. 501 ; 53 L. J. Ch. 717 ; Simmer v. Webster, 1902, 2 Ch. 163 ; 71 L. J. Ch. 561. So, too, where a mortgagor gives a receipt for more than he has actually received, he will not be allowed to redeem as against a transferee who has taken a transfer on the faith of the receipt, except on payment of the amount advanced by the transferee; Bickerton v. Walker, (1885) 31 Ch. D. 151 ; 55 L. J. Ch.
227 ; French v. Hope, (1887) 56 L. J. Ch. 363.
(m) Roberts v. Croft, (1857) 2 D. & J. 1; 27 L. J. Ch. 220; Thorpe v. Holdsworth, (1868) 7 Eq. 139; 38 L. J. Ch. 194 ; Layard v. Maud, (1867) 4 Eq. 397 ; 36 L. J. Ch. 669 ; Dixon v. Muckleston, (1872) 8 Ch. 155; 42 L. J. Ch. 210 ; and see Spencer v. Clarke, (1878) 9 Ch. D. 137; 47 L. J. Ch. 692; Re Castell and Brown, 1898, 1 Ch. 315; 67 L. J. Ch. 169.
(n) S. 49. See as to effect of omission of words "bona fides" in the section, which were essential in the former Acts, see Williams on Bkcy., 8th ed. 258 ; and, generally, notes to the sections, ib.
(o) Ss. 45, 46.
By s. 44 of the Act the property of the bankrupt divisible among his creditors comprises all goods being at the commencement of the bankruptcy in the possession, order, or disposition of the bankrupt in his trade or business (s), by the consent and permission of the true owner (t) under such circumstances that he is the reputed owner thereof. But the section expressly excepts tilings in action (u), other than debts due or growing due to the bankrupt in the course of his trade or business.
Goods in the order and disposition of the bankrupt divisible among creditors.
All that is strictly necessary in order to exclude the doctrine of reputed ownership is that "the situation of the goods was such as to exclude all legitimate grounds from which those who knew anything about that situation could infer the ownership to he in the person having actual possession " (x). Nor does it seem to be an inexorable rule that, in the case of chattels personal not passing by delivery", the doctrine will not be excluded, unless "the persons, to whom anyone, who took a subsequent conveyance from the person once the owner of the property, would have to apply in order to perfect that title," have knowledge of the equitable title of the first assignee (y). At the same time knowledge in those persons is a sufficient circumstance to prevent reputed ownership (z) ; and it is therefore most important (a) that the purchaser or mortgagee of a reversionary interest, or any chattel personal not passing by delivery, should use every means in his power to fix such persons with knowledge.