Phene v Gillan
| Jurisdiction | England & Wales |
| Judgment Date | 01 August 1845 |
| Date | 01 August 1845 |
| Court | High Court of Chancery |
English Reports Citation: 67 E.R. 803
HIGH COURT OF CHANCERY
S. C. 15 L. J. Ch. 65; 9 Jur. 1086. See Hardoon v. Belilios (1901), A. C. 124.
Reports of CASES ADJUDGED in the HIGH COURT OF CHANCERY before the Right Hon. Sir JAMES WIGRAM, Knight, Yice-Chancellor. By THOMAS HARE, of the Inner Temple, Esqr., Barrister-at-Law. Vol. Y. 1845, 1846, 1847-8, 9 & 10 Yict. 1847. [1] phene v. g-illan. July 10, 11, August 1, 1845. [S. C. 15 L. J. Ch. 65; 9 Jur. 1086. See Hardoon v. Belilios [1901], A. C. 124.] Transfer by way of mortgage of shares in a banking company. The mortgagor afterwards paid off the debt apd applied for a retransfer of the shares, but the directors of the bank did not permit the retransfer to be made. In the meantime a creditor recovered judgment against their public officer, and threatened execution against the mortgagee as one of the shareholders. Held that, where the mortgage was made simply as an absolute transfer, subject to redemption, and nothing has passed binding the mortgagor to take a retransfer of the shares, the mortgagor was not liable to indemnify the mortgagee against debts .incurred after the transfer made on the mortgage, and before the mortgage debt was paid off. That the mortgagor having elected to take a retransfer of the shares, the mortgagee became a trustee of the shares for the mortgagor, and the mortgagor was bound to indemnify him against the whole expenses or liabilities which he had properly incurred by holding and maintaining the shares. That the mortgagor, indemnifying the mortgagee in respect of the costs, was entitled to take proceedings in the name of the mortgagee, to compel a retransfer of the shares, and to resist the proceedings against the shareholders under the judgment. The mortgagee has not, in such a case, any right at law against the mortgagor, semble. Whether the directors of the company, preventing the shares from being retransferred, are necessary parties to the suit, in order to give the Plaintiff complete relief, quaere. On the 12th of July 1841 the Plaintiff lent the Defendant £880 upon his promissory note, payable twelve months after that date, and also upon the security, by [2] way of mortgage, of 100 shares in the Western District Banking Company for Devon and Cornwall. The form of the latter security was an authority to transfer the 10.0 shares from the Defendant to the Plaintiff, and an agreement in the following words :- "July 18, 1841. "P. Phene, Esq.-Sir,-I hereby acknowledge the receipt of the sum of £880 from you, for which amount I have given my promissory note in your favour, at twelve months' date from this day ; and as a collateral security I have delivered to you the certificate of my 100 shares in the Western District Banking Company. Now I hereby authorize you to act upon the notice of transfer of my aforesaid 100 803 804 PHENE V. GILL AN . 5 HAKE, 3. shares at any time you may think proper during the said twelve months; and I hereby promise and engage to do every act necessary for completing such transfer on my part.-I am, Sir, your very obedient servant, " W. campbell gillan." The Plaintiff applied to the Western District Banking Company to be recognised as having a charge upon the shares; but he was informed that he could not be acknowledged as having a right to the shares until a regular transfer was executed and recorded on the register of the bank; and the Plaintiff accordingly insisted upon having a deed of transfer from the Defendant: and an indenture, dated the 10th of March 1842, was accordingly made between the parties, whereby the Defendant assigned the 100 shares to the Plaintiff; and the Plaintiff thereupon signed an undertaking in the following form :- "W. C. Gillan, Esq.-Sir,-On repayment of the sum of £880, for which [3] amount I hold your promissory note, I hereby undertake to deliver back, and, in case of transfer, to retransfer to you, or to whom you may appoint, at your costs, the 100 shares in the Western District Banking Company delivered to me by you, and which I also hold as a collateral security for the payment of the aforesaid sum of money." " phineas phene." "Melsham, 15th July 1841." The deed of assignment was transmitted to the bank by the Plaintiff, who at the same time requested that his name should not be placed on the register, but was informed in reply that the rules of the bank did not admit of holding the transfer-without placing it on the register book, which was invariably done on the receipt of the deed. The transfer was accordingly registered. The promissory note for £880 was not paid when it became due, but a note for £1000, payable six months after date, was then given by the Defendant to the Plaintiff, and the Defendant at the same time wrote to the Plaintiff a letter, in which he said, "When the promissory note is paid, you undertake to transfer to me the 100 shares in the Western District Banking Company now standing in your name in the share register book of that company." The £1000 was paid by the Defendant to the Plaintiff on the 4th of August 1843, and the Plaintiff, on the 23d of August, applied to the manager of the bank and received a form of notice of transfer, which he delivered to the Defendant, who signed the same and forwarded it to the company, with a request to allow the 100 shares to be transferred to him from the Plaintiff. Several applications were made to the company by the Defendant for the retransfer of the shares, and on the 24th of [4] April 1844 the Defendant received a letter from the manager, stating that the directors had not yet allowed the transfer from the Plaintiff. On the 27th of September 1844 a creditor recovered judgment against the public officer of the bank for a debt exceeding £3000 ; and on the 27th of December following the Plaintiff was applied to by the solicitor of the creditor of the bank, who had obtained such judgment against the public officer, acquainting him that unless he should pay into the bank on the 4th of January 1845 £3, 10s. per share on the shares which he held execution would be levied upon him for the full amount of the judgment creditor's debt. The bill was filed on the 17th of January, and prayed an account of the monies and expenses paid or incurred by the Plaintiff since the 20th of August 1843, by reason of the 100 shares having been transferred into his name; and that the Defendant might be decreed to pay the same to the Plaintiff. The bill also prayed an inquiry respecting the unpaid calls on the shares, and that the Defendant might be decreed to execute to the Plaintiff a sufficient indemnity against the debts and liabilities of the bank, and take all necessary steps for obtaining the retransfer of the shares. The Defendant, by his answer, said that the Plaintiff had never communicated to him the circulars from time to time sent to the shareholders shewing the state of the bank affiairs; and added that he had strong ground for believing that the judgment recovered against the public officer was collusive, and that the debt for which it was SHAKE, 5. PHENE V. GILL AN 805 recovered was not justly due. The Defendant said he believed that, if a suit were instituted, discovery might be obtained which would sustain an injunction against the judgment creditor, restraining him from proceeding [5] to execution on the judgment. The Defendant said that he had always been willing to take a retransfer of the shares; and that be had offered to institute proceedings for the purpose of resisting the judgment, if the Plaintiff would allow his name to be used in such proceedings; and that he had offered to give his bond to indemnify the Plaintiff against the consequences of so using his name, but which the Plaintiff had declined to accept or allow. Mr. Wood and Mr. Grove, for the Plaintiff, argued that the Plaintiff must be regarded as a trustee for the Defendant of the shares in the bank; and that he was entitled to be indemnified by his cestui gue trust against all the liabilities which he might have incurred. The circumstance that the Plaintiff acquired the shares as mortgagee did not make him less a trustee when the mortgage was paid off: Marsh v. Wells (2 Sim. & St. 87), Earl fianelagh v. Hayes,(l) Balsh v. Hyam (2 P. Wms. 453). Mr. Romilly and Mr. Faber, for the Defendant, contended that a mortgagee was not in the position of a trustee; that the rights of the parties to a mortgage must be determined by the contract between them, and it was no part of that contract that the mortgagor should indemnify the mortgagee against the consequences of holding property which he held for his own security, and not for the benefit of the mortgagor. If any incidental advantage had arisen, as a bonus or payment upon the shares, the mortgagee would have received and applied it in discharge of his debt; and he [6] must be supposed to have contemplated all the liabilities to which the possession of the mortgaged property might subject him. There could be no right to indemnity in equity if the law gave no such right, for the contract must be the same in both Courts. What were the rights of the parties in equity 1 The mortgagee was entitled to payment or foreclosure. If payment should be made, the mortgagees might possibly require that it should include not only the debt, but also the expenses of retaining the security; but the mortgagor might be willing to be foreclosed, and on what principle should the equity of the mortgagee in case go beyond foreclosure? The question is not what the Court would impose upon the mortgagor if he came to redeem the mortgage ; but whether the Court should introduce, in cases of mortgage, a new equity not incidental either to redemption or foreclosure. They cited Burnett v. Lynch (5 B. & C. 589), Humble v. Lmgstm (2 Railway Ca. 533). the vice-chancellor [Sir James Wigram]. At the conclusion of the argument in this case, I stated my opinion to be that the Plaintiff could have no right of action...
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