12.6.1.2.1 Dearle v. Hall | 3 Russ 1 | December 24, 1828 | rauvinj

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12.6.1.2.1 Dearle v. Hall

Original Creator: Kessler, Gilmore & Kronman Current Version: rauvinj
1

3 Russ. 1
38 Eng Rep. 475

2

DEARLE
v.
HALL

3

[3 Russ. 48] [38 Eng. Rep. 492] Nov. 8, 9, 1827. The appeal in Dearle v. Hall was heard.

4

Before the Lewd Chancellor [Lyndhurst]. Mr. Sugden and Mr. Phillimore, for the appellants.

5

They urged the same topics, and referred to the same authorities, as were relied on by Mr. Shadwell in Loveridge v. Cooper. They further cited Tourville v. Naish (3 P. Wms. 307); the dictum in Brace v. The Duchess of Marlborough (2 P. Wms. 495), "That, in all cases where the legal estate is standing out, the several incumbrancers must be paid according to their priority in point of time"; and Lord [38 Eng. Rep. 493] Thurlow’s dictum in Davies v. Austen (1 Ves. Jun. 249), "A purchaser of a chose in action must always abide by the case of the person from whom he buys: that I take to be an invariable rule."

6

The negligence, said they, which was imputed to the Plaintiffs was merely this, that, having an incumbrance on a fund, they had omitted to take a step which might probably have been the means of bringing the existence of the incumbrance to the knowledge of intending purchasers. But where was the authority, which justified the court in [3 Russ. 49] imposing such a duty on an incumbrancer? The contrary doctrine was established by Osborne v. Lea (9 Mod. 96), where it was held, that a person, having an incumbrance on an estate, was not bound to give notice of it to persons whom he knew to be in treaty for the purchase of the property.

7

Looking merely at the comparative want of caution in the parties, the Plaintiffs were not more culpable than Hall. The enrolment of their annuities furnished to the whole world ample means of protection; and if Hall had searched at the enrolment-office, he would have found that he was purchasing a property which his vendor had previously parted with.

8

In the argument before the Master of the Rolls, a case of Wright v. Lord Dorchester (3) has cited as an au [3 Russ. 50] thority for preferring a second incumbrancer, who had given notice, to a prior incumbrancer who had not given notice. The order made in that suit was merely inter [3 Russ. 51] locutory; and, though the dividends were directed to be paid to the second incumbrancer, he was required to give security to refund them, if the final decree of Court should [3 Russ. 52] not be in his favour. It is, therefore, evident, that Lord Eldon did not mean to decide the question in that stage of the cause.

9

[3 Russ. 53] Mr. Horne and Mr. Barber, for Hall. They followed the same train of argument, which had been urged by the defendant in Loveridge v. Cooper; [3 Russ. 54] and further cited, Burrowes v. Lock (10 Ves. Jun. 475), Ex parte Knott (11 Ves. 609, 618), and Wright v. Lord Dorchester.

10

The order made in the last of these cases was, they argued, a direct authority on the point; for Lord Elden would not have dissolved the injunction, and directed payment to be made to the second incumbrancer, if he had not had a clear and decisive opinion on the subject. It had been stated by one of the counsel who were concerned in that case, that the Lord Chancellor was of opinion, that the power of attorney, which was executed by the trustees to the solicitor of the second purchaser, was equivalent to a declaration of trust in his favour. Lord Eldon required that Brown should give security to refund the money, not because he had any doubt as to the law upon the facts as they were presented to the Court by Brown's answer, but because, when the cause came to a hearing, those facts might be displaced, and the Court might have then to adjudicate upon a totally different state of circumstances. Brown might fail in proving that he had made the inquiry, received the answer, and given the notice, which his answer insisted on; for the purpose of the motion to dissolve the injunction, the Court was to act upon the statements of the answer on those points; at the hearing, those statements would go for nothing; the decree would proceed merely upon the facts proved; and Brown was required to give security to refund, because it might happen that the facts proved in the cause would not coincide with the facts stated in his answer.

11

If the trustees had concurred in the assignment to Hall, who could have doubted that he would have acquired a priority, which could not have been taken away from him? [3 Russ. 55] Though they have not concurred in the assignment, and though he had no right to require them to concur in it, does not their promise to pay the dividends to him, — does not an actual receipt of a part of those dividends, — place him in the same situation, with respect to other claimants, as if the trustees had been parties to the deed? The plaintiffs do not pretend that they can recall from Mr. Hall the sums which he has received; yet, if they have the better title, their right ought to extend to the dividends which were paid to him as well as to the dividends accrued subsequently, which have remained in the hands of the trustees, or of the Court. Negligence is not imputable to Hall because he did not search for annuities. What was there to put him upon such inquiry? Who ever imagined, that every purchaser of an equitable interest in stock is to make a search at the enrolment-office, in order to ascertain whether his vendor has previously granted [Eng Rep. 494] annuities. (Wilks v. Boddington, 2 Vernon, 599. Frere v. Moore, 8 Price, 480. See also 18 Ves. 112, 113; 2 Ves. Sen. 486; 1 Ball & Beattie, 171.)

12

December 24, 1828. The Lord Chancellor [Lyndhurst]. The cases of Dearle v. Hall, and Loveridge v. Cooper, were decided by Sir Thomas Plumer; and from his decree there is, in each of them, an appeal, which stands for judgment. As the two cases depend on the same principle, though the facts are, to a certain decree, different, the better course will be to dispose of both together; and as Dearle v. Hall was the first of the two which came before the Court below, though it was not argued on appeal till after Loveridge v. Cooper had been heard, I shall first direct my attention to the facts on which it depends.

13

[3 Russ. 56] Zachariah Brown was entitled, during his life, to about £93 a-year, being the interest arising from a share of the residue of his father's estate, which, in pursuance of the directions in his father's will, had been converted into money, and invested in the names of the executors and trustees. Among those executors and trustees was a solicitor of the name of Unthank, who took the principal share in the management of the trust. Zachariah Brown, being in distress for money, in consideration of a sum of £204, granted to Dearle, one of the Plaintiffs in the suit, an annuity of £37 a-year, secured by a deed of covenant and a warrant of attorney of the grantor and a surety; and, by way of collateral security, Brown assigned to Dearle all his interest in the yearly sum of £93: but neither Dearle nor Brouwn gave any notice of this assignment to the trustees under the father's will.

14

Shortly afterwards, a similar transaction took place between Brown and the other Plaintiff, Sherring, to whom an annuity of £27 a-year was granted. The securities were of a similar description; and, on this occasion, as on the former, no notice was given to the trustees.

15

These transactions took place in 1808 and 1809. The annuities were regularly paid till June 1811; and then, for the first time, default was made in payment.

16

Notwithstanding this circumstance, Brown, in 1812, publicly advertised for sale his interest in the property under his father's will. Hall, attracted by the advertisement, entered, through his solicitor, Mr. Patten, into a treaty of purchase; and it appears from the correspondence between Mr. Patten and Mr. Unthank, that the former exercised due caution in the transaction, and [3 Russ. 57] made every proper inquiry concerning the nature of Brown's title, the extent of any incumbrances affecting the property, and all other circumstances of which it was fit that a purchaser should be apprised. No intimation was given to Hall of the existence of any previous assignment; and his solicitor being satisfied, he advanced his money for the purchase of Brown's interest, and that interest was regularly assigned to him. Mr. Patten requested Unthank to join in the deed: but Mr. Unthank said, "I do not choose to join in the deed; and it is unnecessary for me to do so, because Z. Brown has an absolute right to this property, and may deal with it as he pleases." The first half-year's interest, subject to some deductions, which the trustees were entitled to make, was duly paid to Hall; and, shortly afterwards, Hall for the first time ascertained, that the property had been regularly assigned, in 1808 and 1809, to Dearle and to Sherring.

17

Sir Thomas Plumer was of opinion, that the Plaintiffs had no right to the assistance of a court of equity to enforce their claim to the property as against the Defendant Hall, and that, having neglected to give the trustees notice of their assignments, and having enabled Z. Brown to commit this fraud, they could not come into this Court to avail themselves of the priority of their assignments in point of time, in order to defeat the right of a person who had acted, as Hall had acted, and who, if the prior assignments were to prevail against him, would necessarily sustain a great loss. In that opinion I concur.

18

It was said, that there was no authority for the decision of the Master of the Rolls — no case in point to support it; and certainly it does not appear that the precise question has ever been determined, or that it has [3 Russ. 58] been even brought before the Court, except, perhaps, so far as it may have been discussed in an unreported case of Wright v. Lord Dorchester. But the case is not new in principle. Where personal property is assigned, delivery is necessary to complete the transaction, not as between the vendor and the vendee, but as to third persons, in order that they may not be deceived by apparent possession and ownership remaining in a person, who, in fact, is not the owner. This doctrine is not confined to chattels in [38 Eng. Rep. 495] possession, but extends to choses in action, bonds, &c.: in Ryall v. Rowles (1 Ves. Sen. 348; 1 Atk. 165) it is expressly applied to bonds, simple contract-debts, and other choses in action. It is true that Ryall v. Rowles was a case in bankruptcy; but the Lord Chancellor called to his assistance Lord Chief Justice Lee, Lord Chief Baron Parker, and Mr. Justice Barnett; so that the principle, on which the Court there acted, must be considered as having received most authoritative sanction. These eminent individuals, and particularly the Lord Chief Baron and Mr. Justice Burnett, did not, in the view which they took of the question before them, confine themselves to the case of bankruptcy, but stated grounds of judgment which are of general application. Lord Chief Baron Parker says, that, on the assignment of a bond debt, the bond should be delivered, and notice given to the debtor; and he adds, that, with respect to simple contract-debts, for which no securities are holden, such as book-debts for instance, notice of the assignment should be given to the debtor in order to take away from the debtor the right of making payment to the assignor, and to take away from the assignor the power and disposition over the thing assigned (1 Ves. Sen, 367; 2 Atk. 177). In cases like the present, the act of giving the trustee notice, is, in a certain degree, taking possession of the fund: it is going as far towards equit [3 Russ. 59] able possession as it is possible to go; for, after notice given, the trustee of the fund becomes a trustee for the assignee who has given him notice. It is upon these grounds that I am disposed to come to the same conclusion with the late Master of the Rolls.

19

I have alluded to a case of Wright v. Lord Dorchester, which was cited as an authority in support of the opinion of the Master of the Rolls. In that case, a person of the name of Charles Sturt, was entitled to the dividends of certain stock, which stood in the names of Lord Dorchester and another trustee. In 1793, Sturt applied to Messrs. Wright and Co., bankers at Norwich, for an advance of money, and, in consideration of the monies which they advanced to him, granted to them two annuities, and assigned his interest in the stock as a security for the payment. No notice was given by Messrs. Wright and Co. to the trustees. It would appear that Sturt afterwards applied to one of the defendants, Brown, to purchase his life-interest in the stock; Brown then made inquiry of the trustees, and they stated that they had no notice of any incumbrance on the fund: upon this B. completed the purchase, and received the dividends for upwards of six years. Messrs. Wright then filed a bill, and obtained an injunction, restraining the transfer of the fund or the payment of the dividends; but, on the answer of Brown, disclosing the facts with respect to his purchase, Lord Eldon dissolved that injunction. At the same time, however, that he dissolved the injunction, he dissolved it only on condition that Brown should give security to refund the money, if, at the hearing, the Court should give judgment in favour of any of the other parties. That case was attended also with this particular circumstance, that the party, who pledged the fund, stated by his answer, that, when he executed the security to Wright and Co., he considered that the pledge was meant [3 Russ. 60] to extend only to certain real estates. For these reasons, I do not rely on the case of Wright v. Lord Dorchester as an authority; I rest on the general principle to which I have referred; and, on that principle, I am of opinion that the Plaintiffs are not entitled to come into a court of equity for relief against the Defendant Hall. The decree must, therefore, be affirmed, and the deposit paid to Hall.

20

The case of Loveridge v. Cooper, though the circumstances are somewhat different, is the same in principle with Dearle v. Hall, and must follow the same decision.

21

(1) 1 Ves. Sen. 367. This passage of the judgment of the Lord Chief Baron is given by Atkyns (1 Atk. 177) in the following words: "If a bond is assigned, the bond must be delivered, and notice must be given to the debtor; but in assignments of book-debts, notice alone is sufficient, because there can be no delivery; and such acts as are equal to a delivery of goods which are capable of delivery. Domat. l. i. t. 2, s. 2. par. 9, says, 'Things incorporeal, such as debts, cannot properly be delivered.' This is to shew the nature of assignments of debts by notice to the debtor. This clause, therefore, extends to things in action; and all has not been done that might have been done by the assignee to vest the right of them in himself, [38 Eng. Rep. 496] and to take away from the bankrupt the power and disposition of them, for no notice has been given to the debtors."

22

(2) Mr. Sugden's Treatise on the Law of Vendors and Purchasers (edition 1822) contains the following observations on the subject: — "A purchaser of any equitable right, of which an immediate possession cannot be obtained, should, previous to completing his contract, inquire of the trustees, in whom the property is vested, whether it is liable to any incumbrance. If the trustee make a false representation, equity would compel him to make good the loss sustained by the purchaser in consequence of the fraudulent statement. Burrowes v. Lock, 10 Ves. 470. When the contract is completed, the purchaser should give notice of the sale to the trustee. The notice would certainly affect the conscience of the trustee, so as to make him liable in equity, should he convey the legal estate to any subsequent purchaser; and it would also, perhaps, give the purchaser a priority over any former purchaser, or incumbrancer, who had neglected the same precaution." Page 11.

23

"Upon the purchase of a chose in action, or of any equitable right, it is the invariable practice of the profession to require notice of the sale to be given to the trustee. This, of course, binds his conscience. And notwithstanding the general rule, that, with respect to equitable right, qui prior est tempore potior est jure,[1] it seems probable that equity would prefer a subsequent purchaser, who had given a proper notice to the trustee, to a prior purchaser, who had neglected to do so. At least, there is a case[2] which seems, in some measure, to authorise this conclusion." Page 700.

24

(3) The following were the material circumstances in Wright v. Lord Dorchester [S. C. 2 L. J. Ch. (O. S.) 78]. — Mr. Sturt was entitled to a life-interest in a sum of stock standing in the names of Lord Dorchester and Mr. Bouverie; and, in 1793, assigned it, with other property, to Wright, as a security for the payment of two annuities. In 1795, he proposed to sell his interest in the stock to Brown, who, having inquired of the trustees, and being informed by them, that they knew of no incumbrance on the fund, completed his purchase: and the trustees executed a power of attorney to Brown's solicitor, under which the dividends were received and paid to Brown till 1801. In that year Wright filed a bill, and obtained an injunction to restrain the transfer of the stock and the payment of the dividends.

25

The answer of Brown stated the title under which he claimed; and that of Sturt alleged, that Wright's security was meant to comprehend nothing beyond certain real estates.

26

Upon the answer, Lord Eldon, in 1809, dissolved the injunction against the payment of the dividends, and ordered the dividends to be paid to Brown, upon his giving security to refund the amount, in case a decree should be made against him.

27

The order made in that cause was as follows:—

28

Between John Wright, Ichabod Wright, Francis Beresford, and Francis Evans, Plaintiffs, and George Darner, Esquire, now Earl of Dorchester, and Edward Bouverie, Charles Sturt, Jonathan Brown, and the Governor and Company of the Bank of England, Defendants.

29

Whereas, by an order made in this cause, hearing date the 20th day of July 1801, it was, for the reasons therein contained, ordered, that the defendants, the Governor and Company of the Bank of England, should be restrained from per­mitting a transfer of the principal sum of £13,245, 0s. 7d. bank 3 per cent. consolidated annuities, in the pleadings in this cause mentioned, and also from paying the interest or dividends due, or thereafter to grow due, on the said principal sum, until the Defendants should fully answer the plaintiffs' bill, and this Court make other order to the contrary. Now, upon opening of the matter, &c., by Mr. Leach and Mr. Bell of counsel for the defendant Jonathan Brown, it was alleged, that the plaintiffs exhibited their bill in this Court against the defendants, stating, among other things, that, some time previous to the 27th day of December 1790, the sum of £13,245, 0s. 7d. 3 per cent. consolidated bank annuities was invested in the books of the Governor and Company of the Bank of England, in the names of the Honourable George Damer, afterwards Earl of Dorchester, and the Honourable Edward Bouverie, on certain trusts by some deed declared, and that the said Charles Sturt was entitled to receive the dividends and interest thereof for the term of his natural life; and that the said Charles Sturt had granted two annuities, amounting together to the sum of £2400, and had [Eng rep. 497] assigned to the plaintiff John Wright, his executors, administrators, and assigns, certain securities, including, among other things, the dividends of the £13,245, 0s. 7d. upon the several trusts mentioned in an indenture, bearing date the 14th day of March 1793; that, afterwards, the said annuity of £2400 was, by default of Charles Sturt, greatly in arrear, and, therefore, the plaintiffs applied for and obtained the order dated the 20th day of July 1801; — that the defendant Jonathan Brown hath put in his answer to the plaintiffs' bill, whereby he, among other things, saith, that the said Charles Sturt, having occasion for a sum of money in June 1795, applied to his, the defendant's, solicitor, to procure him the same, and proposed to sell his life-interest, which he was entitled to in the dividends of the said 3 per cent. bank annuities, amounting to the sum of £397, 7s.; that the said Charles Sturt then assured his, the defendant's solicitor, that the dividends were free from all incumbrances whatsoever; that his solicitor did apply to the Earl of Dorchester and the Honourable Edward Bouverie, the trustees named in the marriage settlement of the said Charles Sturt, with Lady Mary Ann Ashley Cooper, in whom the said 3 per cent. consolidated bank annuities are vested, and that the said trustees informed his said solicitor, that they had not heard of or knew of any person entitled thereto, or who had made any claim thereto, to their knowledge or belief, except the said Charles Sturt; that his said solicitor made the said trustees acquainted with the said treaty; that, by indenture bearing date the 18th day of June 1795, the said Charles Sturt, for the considerations therein mentioned, assigned the dividends of the said £13,245, 0s. 7d. 3 per cent. consolidated bank annuities to the said defendant for the term of the natural life of the said Charles Sturt; that the said George Earl of Dorchester, and the said Edward Bouverie, duly executed a power of attorney authorizing and empowering John Claridge, his, the defendant's, solicitor, to receive the interest and dividends of the said trust stock for the use of him the said defendant, as the same became due and by virtue thereof the said John Claridge duly received the interest and dividends of the said trust-stock until Midsummer 1801, a period of six years or upwards, without any interruption or molestation by any person whatsoever; — that the said defendant Charles Sturt hath put in his answer to the plaintiffs' bill, and, among other things, saith, that whatever may have been the particular expressions introduced into the said several indentures in the bill mentioned, it was the true understanding and agreement between him, Sturt, and the plaintiffs, that the plaintiffs should have the security of the real estates only granted to them, and, in order to prevent any doubt or misunderstanding what estates in particular belonging to him, the said defendant, were to be comprised in the grant of the annuity in the said plaintiffs' bill mentioned, a rental or schedule of such real estates of him, the said defendant, mentioned and intended as a security for the said annuity of £2400, was made out and approved by the said plaintiffs or their agents, or some of them, and the same rental or schedule was annexed to the said grant; — and therefore it was prayed, that the said injunction for restraining the Governor and Company of the Bank of England from permitting a transfer of the £13,245, 0s. 7d. 3 per cent. consolidated annuities, and also from paying the dividends due, or thereafter to accrue due on the same, may be dissolved: — Whereupon, and upon hearing Sir Samuel Romilly, of counsel for the plaintiffs, and Mr. Trower, of counsel for the defendant the Honourable Edward Bouverie, and the said order, dated the 20th day of July 1801, read, and what was alleged by the counsel for the said parties, — and the defendant Jonathan Brown, by his counsel, undertaking to give security to be approved of by Mr. Ord, one of the Masters of this Court, to whom the cause Portman v. Sturt stands referred to refund all dividends which he shall receive in respect of the bank annuities mentioned in the notice, until the hearing of this cause, after retaining the arrear of the property duty payable in respect thereof, in case the plaintiffs, or the defendants, the trustees, shall be declared to be entitled to such dividends,—upon the said Jonathan Brown giving such security, to be approved of by the said Master, his Lordship doth order, that the injunction granted in this cause, to restrain the defendants, the Governor and Company of the Bank of England, from paying such dividends, be dissolved; and it is ordered, that such dividends be received by the said John Claridge, on behalf of the said Jonathan Brown, by virtue of the letter of attorney given to him in the pleadings mentioned, until the hearing of this cause, or the further order of this Court: And it is ordered, that the plaintiffs do pay [38 Eng. Rep. 498] unto the defendant, the Honourable Edward Bouverie, the surviving trustee named in the indenture of settlement made on the marriage of the defendant Charles Sturt with Lady Mary Ann Ashley Cooper, bearing date the 11th day of April 1788, his costs of this suit up to this time, to be taxed by the said Master; but such payment is to be without prejudice to any questions by whom the same are ultimately to be paid. (It does not appear that the question came again before the Court in any subsequent stage of the cause.)

30

Reg. Lib. B. 1808, fo. 420.

31

[1] See Tourville v. Naish, 3 P. Wms. 307, and see 2 P. Wms. 495; 15 Ves. 354; 2 Taunt. 415.

32

[2] Stanhope v. Earl Verney, Butler's n. (1) to Co. Litt. 290 b, and see 1 Ves. Sen. 367; 9 Ves. 410.

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February 15, 2015

"Dearle v. Hall"

12.6.1.2.1 Dearle v. Hall

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