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A selection of leading cases in equity, with notes (Volume 2) online

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estabhshed, that a person having
a mortgage for a guaranteed
debt, is bound to hold it for the
benefit of the surety, so as to
enable him, on paying the debt
wliich he has guaranteed, to take
the security in its original condi-
tion unimpaired. In this case
the principal debtor having be-
come bankrupt, the creditor, in-
stead of going in under the bank-
ruptcy as he might have done,
and applying to have the security
realised and to be admitted to
prove for the balance, in effect



purchased the equity of redemp-
tion (no doubt on advantageous
terms), the price being the sm -
render of his right of proof.
The consequences of this were
two-fold : in the first place, the
surety could not get the security
with the same title under which
the creditor held it, which dated
from 1850. This might be a
matter of no small importance,
having regard to the possibility of
intervening judgments or other
charges. All that the creditor
can now give to the surety is a
security taking priority from the
present time. The right of the
surety was to have the same
security in exactly the same
plight and condition in which it
stood in the creditor's hands."

If the creditor appropriates any
security for the debt to another
purpose, the surety will, to the ex-
tent of the value of the secm-ity,
be discharged. Thus in Pearl v.
Deacon, 24 Beav. 186, the plain-
tiff was surety upon a promissory
note to the defendants for a sum
lent by them to their tenant, and
the defendants also took a mort-
gage of the tenant's furniture for
the same debt. They afterwards,
under a distress, took the same
furniture for arrears of rent. It
was held by Sir Jolm Romilly, M.
E., that as regarded the plaintiff
(the surety) the produce of the
furniture was first applicable to
the payment of the j)romissory
note, and tliat the landlords could
not, as against the surety, apply it
'6 V -1



1028



REES V. BERRINGTOX.



in paj'-ment of the rent. " If,"
said his Plonor, " the creditor
makes available any of his secu-
rities, the surety is entitled to
the benefit of it." This decision
was on aj)peal affirmed by the
Lords Justices, 1 De G. & Jo. 461.
Where, however, the debtor be-
comes bankrupt, a surrender of a
I)ohcy of assurance to the office
in consideration of a sum of
mone}' to the jDcrsonal represen-
tatives of the creditor who proved
for the rest of the debt, has been
held not to discharge a surety.
See Coaies v. Coates, 33 Beav.
249 ; there, the debtor, Jblm
Green, had dejiosited a policy on
his life as secmity for a debt. He
afterwards became banlcrupt. The
executrixes of the creditor proved
and received a dividend upon the
debt, and suiTendered the policy
in consideration of a sum of
money without the consent of a
surety for the debt. It was held
by Sir John Romilly, M. E., that
the sm-render of the policy could
not be treated as a discharge of
the surety. " John Green," said
his Honor, " was a bankrupt, and
it was not probable that he would
keep up the poHcy, from which he
could derive no benefit, and the
executrixes were not bound to do
so. To keep it up would have
been a mere speculation on their
part, which might or might not
have tm-ned out beneficial, and if
it had turned out unfavourably
might have been complained of
by the surety. They reahsed



what they could by surrendering
it to the office, and whether the
poKcy was sun'endered before or
after proof in the bankruptcy, I
think it did not release the surety.
It was the duty of the creditor to
sell and realise the secui'ity ; by
so doing he could alone make the
estate of the principal debtor
available for the payment of a
dividend on the debt for which
the surety was liable, and conse-
quently the benefit of which divi-
dend is obtained by the surety in
further discharge of his debt."

So, also where a creditor has
a security upon the equitable in-
terests of his debtor, and of a
surety in a trust fund, and trans-
fers the debt with the securities
for the same, the assignee will not
lose his right against the mterest
assigned by the sm^ety, in conse-
quence of his not giving to the
surety notice of the transfer.
Thus in Wheatley v. Bastow, 7
De G. Mac. & G. 261, a brother
and sister entitled in moieties to
a reversionary interest in a fund
in com't, mortgaged it to secure a
debt of the brother, the sister
joining, and being described in
the security as a surety for the
brother. The mortgagee obtained
a stop order, and afterwards on
his marriage assigned the mort-
gage debt to trustees, who how-
ever neither obtained a stop order
nor gave notice to the sister of
the settlement. On a petition of
the brother stating that the tenant
for life had assigned to him her



REES V. BERRINGTON.



1029



life interest in his share of the
fund, and that he had paid a por-
tion of the mortgage debt, and
praying for a transfer of his share
of the fund, a solicitor who had
acted for the sister and for the
mortgagee upon the occasion of
the mortgage, took upon himself
without authority to instruct
counsel to appear for the sister
and her husband, and also for the
mortgagee, who was abroad, and
to consent to or not oppose the
petition. Upon the hearing of
the petition the fund was ordered
to be, and was transferred out of
Court. It was held by the Lords
Justices, reversing the decision of
Sir John Stuart, V. C, that neither
the omission of the trustees to ob-
tain a stop order, nor any of the
above circumstances, operated to
discharge the liability of the
surety's share, but that it con-
tinued subject to the payment of
the mortgage debt. See, how-
ever, the remarks upon this case
in Strange v. Fooks, 4 Giff. 408.

A surety, however, will not be
discharged where a security be-
comes worthless, unless it became
so by the act of the creditor : Hard-
wick V. Wright, 35 Beav. 133.

With regard to a security given
by co-sureties, it seems that there
is an equity that it must not be
wasted {Margretts v. Gregory, 10
W. R. (Ex.) 630, per Bramicell,
B.), but a fair dealing by the cre-
ditor with the surety's security
under which the creditor sets off
the surety's share of the debt due



to him against the proceeds of the
security does not preclude a resort
to the other securities for thek re-
spective shares of the debt : Mar-
gretts v. Gregory, 10 W. E. (Ex.) 630.

IX. Different ineivs formerly
taken as to theliabllities of sureties of
law and in equity.] — The liabilities
of sureties were governed by the
same principles at law as in
equity. And, although different
doctrines formerly prevailed at
law, it was afterwards firmly es-
tablished, that the same j)rincij)les
wiiich had been held to discharge
a sm'ety in equity, would operate
to dischai'ge him also at law.
However, although the same relief
might be obtained in both, a Court
of equity would not have sent a
party who was suing there to a
Court of law for the discharge to
which he was equally entitled in
equity : Samuell v. Howarth, 3
Mer. 278 ; May hew v. Crickett, 2
Swanst. 185; Hawkskaw v. Par-
kins, 2 Swanst. 539, 546 ; Eyre v.
Everett, 2 Euss. 382 ; Mackintosh
V. Wyatt, 3 Hare, 567. See also
Moore v. Boicmaker, 6 Taunt.
379 ; S. C., 2 Marsh. 81 ; Mel^
vill V. Gl&ndinning, 7 Taunt. 126 ;
Philpot V. Briant, 4 Bing. 717.

Belief, however, might some-
times have, been had in equity,
where it could not formerly have
been obtained at law. Thus,
where it did not appear upon the
face of the instrument that a
person was a surety ; if, for in-
stance, in a bond, the principal



1030



KEES V. BERRINGTON.



debtor and surety were bound
jointly and severally, the surety, as
is laid down in the principal case,
could not, at laiv, aver by pleading
that he was bound only as surety
{Lewis V, Jones, 4 B. & C. 506),
and the remarks of Lord Abinger,
in Ashhee v. Pidduck, 1 Mee. &
W. 564 ; sed vide Laxton v. Peat,
2 Camp. 185; Hall v. Wilcox, 1
M. & Rob. 58) ; but in equity, al-
though they both appeared as
principals, parol evidence was
always admissible to show that one
was only a surety. The conse-
quence was that, ujion the creditor
giving further time to the principal
debtor, knowing him to be such,
the surety, upon proving that fact,
might have relief in equity, al-
though he would formerly still be
held bound at law, as he would
appear there only as a principal :
Craythorne v. Swinburne, 4 Ves.
160, 170; Clinton v. Hooper, 1
Ves. jun. 173 ; 3 Bro. C. C. 201 ;
Clarke v. Hcnty, 3 Y. & C. Exch.
Ca. 187 ; Ashby v. Pidduck, 1 Mee.
& W. 564 ; Oakley v. Pashaller, 4
C. & F. 207 ; Oriental and Finan-
cial Corporation v. Overend, Gur-
ney and Co., 7 L. R. Ch. App.
142, affirmed Dom. Proc. nom.
Liquidators of Overend, Gurney,
and Co. v. Liquidators of Oriental
Financial Corporation, 7 L. R.
Ho. Lo. 348 ; Wilson v. Lloyd, 16
L. R. Eq. 60.

But since equitable pleas were
used at common law, it might be
shown that a person appearing on
the face of an instrument as a



principal was only a surety (Davies
V. Stainbank, 6 De G. Mac. & G.
679 ; Pooley v. Harradine, 7 Ell.
& Bl. 431 ; Manley v. Boycott, 2
Ell. & BL 46 ; Wake v. Harrop,
1 H. & C. 202; Greenhough v.
M'Clelland, 2 Ell. & Ell. 424;
Re Mutual Loan Fund Association
V. Sudlow, 5 C. B. N. S. 449 ;
Taylor v. Burgess, 5 H. & N. 1 ;
Lawrence v. Walmsley, 12 C. B.
N. S. 799 ; Bailey v. Edwards,
4 B. & S. 761 ; Eivin v. Lancaster,
13 W. R. (Q.B.) 857, and it seems
that in order that a surety might
be discharged by a creditor giving
further time, it was sufficient that
the true relationship between the
parties should, although after the
original contract, be known to him
at or before the extension of time.
See The Oriental Financial Cor-
poration v. Overend, Gurney, and
Co., 7 L. R. Ch. App. 142; 20
W. R. (L. C.) 253, disapproving
of Ex parte Graham, 1 De G.
Mac. & G. (Bank.) 396. See also
Stro7ig V. Foster, 17 C. B. 201.

Again, as, in general, an obliga-
tion created by an instrument
could, at law, only be dissolved by
one of equal force, time given by
mere parol agreement, although
for valuable consideration, would
not at law discharge a surety by
an instrument under seal, as a
bond {Davey v. Prendergrass, 5 B.
& Aid. 187 ; Woosnan v. Price, 1
Cr. & Mee. 352 ; Ashby v. Pid-
duck, 1 Mee & W. 564) ; or by
matter of record, as a recognisance
{Bnlteel v. Jarrold, 8 Price, 467).



KEES V. BEKEINGTON.



1031



In equity, however, the rule of law
was disregarded, and, as what was
agreed to be done by a biuding
agreement is looked upon as done,
relief would be given : Bowmakcr
V. Moore, 3 Price, 214 ; 7 Price,
723 ; Blake v. White, 1 Y. & C.
Exch. Ca. 420.

A principal creditor might be
held at law to have released a
surety, where in equity the surety
would be held still liable ; as, for
instance, where the principal cre-
ditor had by deed, with the parol
consent only of the surety, re-
leased the principal debtor : Brooks
V. Stuart, 1 Beav. 512.

Where the debt for which a per-
son was surety became due, he
might file a bill m equity to com-
pel the principal to discharge him
from his liability. In the words of
an old case, where this subject was
much discussed, — " Although the
surety is not troubled or molested
for the debt, yet at any time after
the money becomes payable, the
Court will decree the principal to
discharge it, it being unreasonable
that a man should always have
such a cloud hanging over him ; "
per Lord Keeper in Ranelmigh v.
Hayes, 1 Vern. 188 : and see
Antrohus v. Davidson, 3 Mer. 579 ;
Lee V. Rook, Mos. 318.

In Woolridge v. Norris, 6 L. R.
Eq. 410, a surety on a bond to
secure a money debt, was secured
by another bond of indemnity en-
tered into by the principal debtor's
father, who had died, having by will
devised certain property specifi-
cally upon trust to pay the debt.



The creditor having applied to
the surety, the surety had re-
course to the executors, who said
they had no funds in hand, and
that they were unable under the
will to raise the money by sale
of any portion of the testator's
estate, except under a decree of
the Court. It was held by Sir
G. M. Giffard, V. C, that the
surety, though he had not paid
anything, was entitled to main-
tain a bill against the executors
for administration, payment of the
debt, and indemnity, and that it
was not necessary that the bill
should be filed on behalf of all
the creditors.

But where the creditor had not
a present right to sue, the surety
could not come into equity to be
discharged from his liability. See
Padwick v. Stanley, 9 Hare, 627,
628, where Sir George Turner
V. C, said that he considered
that the cases in which such a
jurisdiction is exercised by the
Court, are cases where the creditor
has a right to sue the debtor, and
refuses to exercise that right.

As by the Judicature Acts, the
rules of Equity prevail, any dis-
tinctions which may have ex-
isted in law and equity will now
disappear.

The Roman-Dutch law, and the
old French law upon the subject
of this note were discussed before
the Judicial Committee of the
Privy Council in tlie cases of
Macdonald v. Bell, 3 Moore, P.
C. C. 315 ; Belling Jiam v. Freer,
1 Moore, P. C. C. 333.



1032



THE EIGHT HON. GEOEGE,EARL OF HUNT-
INGDON V. FRANCES, COUNTESS-DOW-
AGEE OF HUNTINGDON.



s. C, 2 Vera. January 12, 1702.

437 ;'l Eq. Ga.

Ab. 62: Ca 4; [eePORTED 2 BRO. P. C. 1, TOML. EDIT.]

4 Viu. 69 : Ca.

9 ; 10 Vin. ,^ ,,^ , _, ^

345 : Ca. 17. MORTGAGE OF WlI^E S liiSTATE OF INHERITANCE FOR

THE Benefit of her Husband — ^Wife's Estate con-
sidered ONLY AS A Surety.] — A ivife joins with her
husband in a mortgage of her oivn inheritance, in order
to buy him a place, and the husband covenants to pay
the money. He accordingly pays the money, and takes
an assignment of the mortgage in trust for himself. The
mortgage being for a term of years, the husband devises it

for the benefit of his younger children. But it was
held, that the eldest son, as heir of the ivife, ivas entitled
to have the term assigned as he shoidd direct, discharged

from all demands of the younger children.

BY indenture, dated the 25th November, 1681, and by a
fine levied in pursuance thereof, Theophilus, Earl of Hunt-
ingdon, and Elizabeth, his then wife settled certain lord-
ships, manors, lands, and hereditaments, in the county
of York, which were the estates and inheritance of the
Countess, as one of the daughters and co-heirs-at-law of
Sir John Lewis, to the use of the said Countess Elizabeth
and her assigns, during her natural life, and after her
decease, to the use of the appellant her son, and the issue
of his body, with other remainders over, but subject to a
• power reserved to the Earl and Countess, during their
joint Hves, to revoke and limit new uses.

Some time afterwards, the Earl, being desirous of pur-
chasing the place of Captain of the Band of Gentlemen
Pensioners, he prevailed with the Countess to 'join with



EARL OF HUNTINGDON V. COUNTESS OF HUNTINGDON.

Mm in mortgaging the settled estate, for raising 4500Z. to
make such purchase, pivmising to repay the money out of
the profits of the place, or otherwise.

Accordingly, hy a deed dated the 1st of August, 1682,
the Earl and Countess revoked all the former uses, and
declared, that, in consideration of 4500Z. paid to the Earl
by one Cropper, the premises should remain and be to
the use of the said Cropper for a term of 1000 years, sub-
ject to redemption on payment of the 4:5001. and interest;
and after the expiration, or other sooner determination
of the said term, to the use of the said Countess Elizabeth
and her assigns, during her natm^al life, with remainder
to the appellant and the issue of his body, and such other
remainders over as were limited by the first settlement.
And by this deed the Earl covenanted that he would pay
off the mortgage-money.

On the 2nd of January, 1683, Croj)per, together with
the Earl and Countess, assigned over tliis mortgage to
one Mr. Newport and Sir William Cooper, subject to a
proviso or agreement, that, if the Earl and Countess, or
either of them, should pay the 4o00L and mterest, the
term of 1000 years should be assigned to the said Earl
and Countess, or to one of them, or as they or either oj
them should appoint.

The Earl havmg afterwards paid off this mortgage, pro-
cured the term to be assigned by deed, dated the 11th of
February, 1687, to Sir John Foach and the respondent
Sir Philip Meadows, in trust for the said Earl, liis exe-
cutors, administrators, or assigns ; but the Countess did
not join m, or was privy to this assignment.

On the 24th of December, 1688, the Countess died,
and the Earl continued in possession of the estate till his
death, applying part of the profits towards the mainten-
ance of the appellant, who was the reversioner, and the
residue towards satisfying the debt secured by the said
mortgage.

The Earl having six younger children by his second
wife, to be provided for out of his personal estate, of
which he considered this mortgage-money to be part.



1033



1034 EARL OF HUNTIxNGDON V. COUNTESS OF UUNTINGDON.

made his will on the 11th of April, 1G98, and thereby
devised the said mortgage, and all other his personal
estate, to the respondent Dr. Gery, his executor, in trust
for his said six younger children.

In 1701 the Earl died ; and in Michaelmas Term in
that year, the appellant exhibited his bill in the Court of
Chancery against the respondent, praying an account of
the rents and profits of the estate from the death of his
mother ; and that the defendant Sir Philip Meadows, as
the surviving trustee of the 1000 years' term, might sur-
render or assign the same, to attend the inheritance, free
from incumbrances.

The cause being at issue, was heard before the Lord
(«)_2 Vera. Keeper Wright, on the 12th of May, 1702 {a) ; when his
Lordship decreed an account to be taken of what rents
and profits had been received by the late Earl out of the
mortgaged premises since the death of the Countess
Elizabeth ; and that the same, after a reasonable allowance
to be thereout made for the plaintiffs maintenance and
education, and other just allowances, should be applied
towards the discharge of the said mortgage ; and, on pay-
ment of what should appear to be remaining due thereon,
to the defendant Dr. Gery, in trust for the defendants the
infants, the mortgage was to be assigned to the plaintiff,
or as he should appoint.

. owper. From this decree the plaintiff appealed ; insisting that
he was thereby, in effect, decreed to pay the mortgage
debt, which was wholly a debt of the late Earl, created to
serve his particular occasions, and never was in any shape
the debt of the late Countess, nor did any part of the
money come to her use ; besides, the Earl covenanted in
the mortgage deed to pay and satisfy the mortgage-money
and interest ; and this covenant being in fiict performed,
the term ought not any longer to have been kept on foot,
ueless to protect and defend the inheritance, but not to
charge it. That the appellant's mother being, at the time
of making this mortgage, tenant for life, with remainder
to the appellant in tail, and the premises being her own



EARL OF HUNTINGDON V. COUNTESS OF HUNTINGDON. 1035

inheritance, the same ought not to be charged further or
otherwise than she agreed or consented : and it coukl not
be imagined that she agreed to charge her land any other-
wise than to stand as a security for the money which her
husband had occasion for, and was thereby enabled to
borrow, and to be exonerated when he, the in'incii")al
debtor, should pay off the debt ; but she never meant to
make any absolute gift of so much money to her husband,
or that her estate should stand mortgaged to him, or in
an}' trust for him, for that or an}' other sum. That it
appeared by proof in the cause, that the Earl, in order to
gain the Countess's consent to the mortgage, had j^ro-
mised that he would pay off the money and discharge
the land ; but, if the Earl had made no such promise,
yet he ought not in conscience to be deemed a mortgagee
or incumbrancer upon the estate, for having discharged
his own debt, which he alone was liable to jjay, and to be
sued for, by virtue of his covenant ; and it was not agree-
able, either to reason or experience, that a principal
debtor, merely by paying the debt he owes, should become
a creditor, and charge his own surety with the payment
of the debt, by any means or contrivance whatever.

On the other side, it was contended that the late Earl T. Yernoti,
was compellable to discharge the land of this debt ; nor
did the Countess, when she agreed to mortgage the
premises for raising the 4500L, desire or insist on
any covenant or agreement for that purpose ; but
on the contrary, by the assignment of the mortgaf^e
in January, 1683, it was expressly agreed, that, on pay-
ment of the 4500Z., the term should be assigned to the
Earl and Countess, or as they or either of them should
direct. That the Earl was so far from intendin<T to
exonerate the land by his paying off the mortgage-money,
that he not only took care to have the mortgage assigned
and kept on foot; but also, considering himself as a
creditor for the money so advanced, he constantly, after
the death of the Countess, kept regular and exact ac-
counts of his receipts and payments relating to the
mortgaged premises. That it was certainly as lawful for



1036 EARL OF HUNTINGDON V. COUNTESS OF HUNTINGDON.

the Earl to lay clown the money, and take an assignment
of the mortgage, as it would have heen for any other per-
son to have done ; and therefore, it was but reasonable
that he should have the like benefit thereof, to reimburse
what he paid of such assignment, as a stranger might
have had; and since the Earl had thought fit to leave
his money due on the mortgage as a provision for his
six younger children, who had very slender fortunes,
and a narrow subsistence, it was hoped that there would
appear no ground or reason to reverse or alter his decree.
Decree re- But after hearing counsel on this appeal, it was ordered

Vori/ 1^266! ^^^ adjudged, that so much of the decree as was complained
of should be reversed, and that the premises in question
should be discharged from any demands which the re-
si^ondents, the Countess of Huntingdon, or her children,
or theii- trustees, or either of them, pretended to have, in
respect of the 4500L and interest ; and that the term
should be assigned as the appellant should direct or
appoint ; and that the profits of the estate in question,
which grew due and were received by the late Earl after
the death of the late Countess, or by his executors since
his death, should be accounted for to the appellant,
without being discounted out of the money pretended
due on the mortgage ; but the Master to whom the
account stood referred was to make the respondents all
such allowances for the appellant's maintenance and
education, and for all moneys laid out and expended in or
about the management and preservation of the said
estate, and all other just allowances as in the decree were
directed.



It is a well-estabhshed general it exonerated out of the real and

rule, that whenever husband and personal estate of the husband,

wife mortgage the estate of in- her estate being considered only

heritance of the wife for the as a surety for his debt. Even a

benefit of the husband, the wife creditor of the wife's, upon tlie

or her heir will be entitled, after refusal of her representatives to

the death of the husband, to have take proceedings, may file a bill



EARL OF HUNTINGDON V. COUNTESS OF HUNTINGDON.



1037



to obtain exoneration : Lancaste?-
V. Evors, 10 Beav. 154, 266. And
see Stamford, Spalding, and Boston
Railway Company v. Ball, 31 L. J.
N. S. Ch. 143.

The principal case is usually
referred to, as the earliest and
leading authority on the subject.
In Pocock V. Lee, 2 Vern. 604, A.
and his wife mortgaged the wife's
estate, and A. covenanted to pay
the money, but the equity of re-
demption was reserved to them
and their heirs. Upon the death
of the husband the question
was, whether the mortgage-money
should stand charged upon the
land, or the land be exonerated
out of the husband's personal
estate : et per Cur. " The hus-
band, having had the money, is
in equity the debtor, and the land
is to be considered but as an ad-
ditional security, and so decreed
it according to the judgment in



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