Jonathan Hopkinson and Mark Hunter, - Appellants; Petf Rolt, - Respondent

[514] JONATHAN HOPKINSON and MARK HUNTED,-Appellant's; PETF ROLT,-Respondent [Feb. 12, 15, May 30, 1861]. ffl ' [Mews' Dig. i. 365, 1052; iii. 1536; viii. 475; ix. 1418, 1543. S.C. 34 lijfdh. ' 468; 7 Jur. N.S. 1209; 5 L.T. 90; 9 W.R. 900; and, below, 3 De G. and J. 177. Commented upon and explained in Union Bank of Scotland v. National Bank of Scotland, 1886, 12 A.C. 53; Bradford Banking Co. v. Briggs, 1886, 12 A.C. 29; and West v. Williams (1899), 1 Ch. 132.] Mortgage-Priorities-Pleading. A first mortgagee, whose mortgage is taken to cover what is then due and also future advances (within a fixed amount), cannot claim the benefit of such advances in priority over a second mortgagee, of whose mortgage he had notice at the time of its execution, and before he made these new advances. (diss. Lord Cranworth.) The case of Gordon v. Graham as reported, 2 Eq. Gas. Abr. 598, pi. 16; 27 Ven. Abr. 52, pi. 3 discussed and overruled (a corrected report of it is given in the Lord Chancellor's judgment). Where a bill states a mortgage to the Defendant, then a mortgage to the Plaintiff (with notice to each party), and claims for the second mortgage priority over any sums advanced by the first mortgagee after he had notice of the second mortgage, if the first mortgagee means to set up a distinct understanding between all the parties to the first mortgage (of whom the Plaintiff was one), that the first mortgage should be a continuing guarantie for any sums advanced to the mortgagor at any subsequent time, such defence must be distinctly averred and proved. 829 IX H.L.C., B15 HOPKINSON V. ROLT [1861] The Appellants were the registered public officers of " The Commercial Bank of London;" the Respondent, a merchant in London. In the year 1853, Charles John Mare carried on business as a shipbuilder, at premises situated at Blackwall, of part of which he was seised in freehold, and the other part was rented by him under a lease. He had a banking account with the Appellants. The Eespondent was Mare's father-in-law. The offices of each were in the same house, in Clements Lane, and one Joseph Payne, a confidential clerk of the Respondent, was also confidentially employed by Mare. The Appellants were applied to by Mare for advances, and he offered them a [515] guarantie of the Respondent, for loans not to exceed 20,000; but the Appellants were always to retain in their hands a sum of 4000, to constitute a " lodgment account." This guarantie was shortly afterwards given up, the Appellants being satisfied with having the name of the Respondent, or of his firm, to the bills discounted by them for Mare. The lodgment account, however, continued to exist. The transactions became unsatisfactory, and the Appellants refused to make farther advances, except on the security of a mortgage for 20,000. Mare had previously obtained from the Palladium office an advance of money by way of mortgage, and had given to that office, on the 6th January 1855, a first mortgage on his estates in the counties of Chester and Cambridge, to secure the sum of 45,000. A second mortgage was executed by Mare on the. 26th January 1855. This included the previously mortgaged property, and also Mare's property" at Blackwall. It was in favour of the Appellants, was negotiated with the full knowledge of the Respondent, and his own solicitors acted on the occasion as the sole solicitors in the transaction for Mare and for the Appellants. This mortgage recited that which had been given to the Palladium, and was witnessed to be given for effectually securing unto the Appellants the " sum or sums of money which then was and were, or at any time and from time to time thereafter, should or might be due or owing to them " on the balance of the account current of Mare; subject to redemption " on payment to the Appellants on demand of all and every the sums and sum of money which then were or was, or at ,any time and from time to time thereafter, should or might become due or owing" from Mare to the Appellants either for money paid and advanced, or to be paid and advanced by the Appellants unto Mare. Provided that the [516] principal money thereby secured (exclusive of any sums to be paid for insurance) should not exceed 20,000. By a third mortgage, dated 12th February 1855, made between Mare and the Respondent, reciting the two former mortgages, the same premises were mortgaged to secure the repayment from Mare to the Respondent of money then due, or of money which the Respondent should be called on to pay on account of Mare. The Appellants continued to make advances to Mare by way of discounting bills and otherwise. On the 16th July, a sum of 8000 was advanced to him by the Appellants, and carried to his general account; but representations were made to him on the very unsatisfactory state of that account. On the 16th August 1855, an attachment at the suit of other parties was lodged at the Appellants' bank against any property of Mare in their hands. In consequence of this, the account current was closed; but on the 18th August a new account was opened in the name of the Respondent, and with his privity and concurrence. On Saturday, 15th September 1855, the Respondent sent to the bank his clerk, Mr. J. Payne, who there saw the manager, and delivered to him a message, that if Mare should come to ask for any advance on Mr. Rolfs responsibility, it should not be made unless the bank received Mr. Rolfs cheque. Mare did apply for an advance of 7500, to pay the wages of his men, and notwithstanding the message so received from the Respondent this sum was advanced by the Appellants. On 20th September 1855 Mare executed another mortgage to the Appellants for securing to them the sum of 7500 beyond the sum of 20,000 already secured, and also any other sum which then was or might hereafter become due to them from him. On the 18th September 1855, at the request of the Respondent, the [517] Appellants delivered to him an account, headed " Balance of loan account," which was in these terms: 830 HOPKINSON V. ROLT [1861] IX H.L.C. 618 " Loan granted 21 July 1855 : Ships 8,000 Loan granted 15 September 1855 : For wages 7,400 15,400 Less amount of lodgment account . . . 4,300 11,100" On the 25th September 1855 Mare was declared a bankrupt, at which time the sum claimed by the Appellants to be due to them, amounted to 41,000, of which 30,000 were for bills which had been discounted for him, and had not then arrived at maturity. These were afterwards paid by the persons liable thereon, and then 11,000 were claimed as remaining due. On the 13th November the Respondent, who had been called on to pay what was due from him on Mare's dishonoured bills, gave notice to the Appellants that he should, on concluding such payment, require all the securities held by the Appellants to be delivered up to him. In the year 1856, under orders of the Court of Bankruptcy, the estates in the counties of Chester and Cambridge were sold; but they did not satisfy the demand of the Palladium office. The sale of the premises at Blackwall then took place, and the reserved bidding of 55,000 was fixed by the Court of Bankruptcy, a til, [518] with the consent of all parties, it was agreed that if there should be no sale at a sum exceeding that amount, the Respondent should be declared the purchaser of them at that amount. No bidding was made, and he was declared the purchaser. The Respondent afterwards presented his petition to the Court of Bankruptcy, praying that he might be at liberty to retain the whole of the balance of the purchase-money, after payment of what was due to the Palladium. ' The Appellants, as to the sum of 11,000, opposed this petition. This sum was, by consent, ordered to be paid in to a deposit account, to abide the order of the court; the Respondent paid 28,000 to the Palladium office, and the premises were then conveyed to him. The Respondent, in March 1857, filed his bill against the Appellants, stating all these facts, and alleging that he was only a surety under the indenture of the 26th January 1855, and, as such surety, had paid the amount of all the bills and notes secured thereby, and was entitled to the benefit of that security, and to the sum carried to the lodgment account, and that the mortgage to him had priority over all other advances made by the bank; and praying (among other things) first, that it might be declared that he was entitled to the benefit of the mortgage of 26 January 1855, and that the Appellants might be ordered to execute to him a proper and valid assignment thereof; and, thirdly, that it might be declared that the sums due to him upon the security of the indenture of the 12th February 1855, had priority over the sums of 8000 and 7500, etc., and all other sums, if any, advanced by the Appellants subsequent to the date of the said indenture; and for an account of what was due to him under both indentures, and for general relief. The Appellants, by their answer, insisted that they [519] were entitled to the 11,000 as the balance on Mare's account current, secured by the indenture of the 26th January 1855, out of the proceeds of the sale of the Blackwall property in priority to the claim of the Respondent under the indenture of the 12th February 1855. The cause was heard before the Master of the Rolls, and on the 29th May 1858 his Honor made an order declaring the Respondent entitled to priority over the Appellants, and directed accounts accordingly (25 Beav. 461). This...