THORNE v. CANN, H.L. Vaux (3), Lord Cranworth, L.C., said, “A mortgagor cannot set up against his own incumbrancer any other incumbrance created by himself." In the latter case it was held that a mortgagor by a purchase of the estate from the first mortgagee selling under a power of sale could not defeat the title of the second mortgagee. There must be some clear indication of intention, not present in this case, in order to keep the mortgage alive.

[LORD MACNAGHTEN referred to Davidson's Conveyancing, vol. 2, pt. 1, p. 249, and to Banks v. Whittall (4).]

In Parry v. Wright (5) a third incumbrancer paying off the first mortgage, but failing to keep it on foot for his protection, was held not to be entitled to stand in place of the first mortgagee against the second. This decision of Sir John Leach, V.C., was affirmed by Lord Lyndhurst. So in Brown v. Stead (6), a second mortgagee lost his priority in like circumstances. There are here no such circumstances as existed in Adams v. Angell (7).

[They also cited Mangles v. Dixon (8).] Haldane, Q.C., and F. Hoare Colt, for the respondent, were not heard.

THE LORD CHANCELLOR (LORD HERSCHELL). This is an appeal from a judgment of the Court of Appeal, affirming a judgment of Mr. Justice Romer. The question was whether the respondents had made out a good title to sell. One objection, and one only, to that title was taken and argued before the Court of first instance; and in this House I think it is not open to your Lordships to consider any other point but that single one so taken.

The property had originally belonged to a Mr. Piller. He mortgaged it in the first instance for the sum of 300l. He then mortgaged it to a Mr. Forward for the sum of 1507. Subsequently to that

(3) 6 De Gex, M. & G. 638; 26 Law J. Rep. Chanc. 128.

(4) 1 De Gex & Sm. 536; 17 Law J. Rep. Chanc. 14; affirmed Ibid. 352.

(5) 1 Sim. & S. 369; affirmed 5 Russ. 144. (6) 5 Sim. 535; 2 Law J. Rep. Chanc. 45. (7) 46 Law J. Rep. Chanc. 352; Law Rep. 5 Ch. D. 634.

(8) 3 H.L. Cas. 702, 737.

mortgage to Forward an arrangement was come to that the first mortgage of 3001. should be transferred to Miss Arnold, and that she should also have a further charge of 7007., so that she became mortgagee for 1,000l. It may be that as regards 7007. there was a priority on the part of Forward. But I do not think that it will turn out that that is material so far as the question now to be determined is concerned. Afterwards there was a mortgage to Thorne, the appellant's testator. The mortgage transactions appear to have been carried out through the medium of Mr. Searle, a solicitor who acted for both sides, and he gave an undertaking to each of the mortgagees by which he granted a mortgage in effect, because he undertook either to take a transfer of the mortgage or, at his option, to make good any deficiency which might arise in the realisation thereof. None of the parties could insist on his taking a transfer, but if he did not take a transfer they could each of them insist that if upon the realisation of the security. there was a deficiency he should make good that deficiency. Piller, the mortgagor, afterwards became bankrupt, and under his bankruptcy Searle bought the equity of redemption from the trustee in bankruptcy, and thus became the owner of the equity of redemption. Miss Arnold desired to receive the mortgage money, and to be no longer out of it. Accordingly she entered into negotiation with Mr. Searle with that object. Thereupon, he not having the money, or not being prepared to advance the money himself, went to the Devon and Cornwall Bank, with whom he had an account, and obtained 1,000l. from them on a special advance, with a view of obtaining the money to pay Miss Arnold. At that time it would seem that he was in communication with a Mr. Cann with a view to his taking the mortgage; but at that time it was a mere matter of negotiation, and no absolute agreement had been come to on the subject. But this is certain, that he obtained 1,000l. from the bank, and that it was the intention of himself and of the bank that the bank should receive the mortgage security which he was going to

THORNE v. CANN, H.L. discharge. I think that is perfectly clear from the answers given by the bank manager (and there is nothing in Mr. Searle's evidence inconsistent with it) and from the documents put in. The bank manager says: "I knew nothing about Miss Arnold or Mr. Cann, because frequently he had got no client. I have had many transactions with him. If a client asked him to pay off a mortgage he would come to the bank, if he had not got any other client ready, and we would wait until he had one." Now what is the meaning of that, but that they were ready to find the money to pay off the mortgage? That is, they, advancing the money, were to have the benefit of the mortgage security. That obviously was the intention of both Mr. Searle and the bank. Under these circumstances he receives the money from the bank and he pays Miss Arnold; he takes an instrument from her which I will call attention to in a moment, and he deposits the deeds with the bank. Some months or so afterwards Mr. Cann advances 9007. and takes from Mr. Searle an assignment of the security.

Now the instrument executed by Miss Arnold witnesses that "in consideration of the sum of 1,000l. this day paid to the said Jane Owen Arnold by the said James Searle (the receipt whereof the said J. O. Arnold doth hereby acknowledge), she, the said J. O. Arnold, as mortgagee, doth hereby assign unto the said J. Searle, his executors and assigns, both the said sum of 1,000l. now owing to the said J. O. Arnold and the security aforesaid, and all the interest henceforth to accrue due for the sum, and the full benefit of the covenants entered into by the said J. Piller in the said indentures, and all other securities for the same premises and all the estate and interest of the said J. O. Arnold in the premises, and any part thereof." That was the nature of the instrument executed, and it purports, as will be seen, to assign the mortgage debt and all the securities held in respect thereof.

Now I do not think, as I have already said, that it can for a moment be doubted, looking to the surrounding circumstances

existing at the time when the money was paid to Miss Arnold and the instrument taken, that it was the intention of Mr. Searle to keep this security alive. It appears to me that such intention is indicated in the form of the instrument taken. I cannot myself conceive when the owner of the equity of redemption paid Miss Arnold, the mortgagee, what was the object of his taking to himself an assignment of the mortgage debt and all the benefits to arise in respect of it, if it was not to keep alive that security.

In

Now, that having been the intention which I infer from the instrument itself and from the surrounding circumstances at the time, is that intention defeated by some rule of law which prevents effect being given to it? Reliance has been placed by the learned counsel for the appellant upon the case of Toulmin v. Steere (1). Toulmin v. Steere (1) is a case which certainly has not met with universal acceptance. It has been often commented upon and criticised adversely. It appears that an appeal was contemplated, although circumstances rendered it unnecessary, and possibly the decision might be open to reconsideration in your Lordships' House. But it is not necessary to determine any such point on the present occasion, because if Toulmin v. Steere (1) be accepted as good law, it does not, in my opinion, govern the present case. Toulmin v. Steere (1) the owner of the equity of redemption (being so far in the same position as Mr. Searle in the present case) had purchased the property with the intention of paying off all the mortgages upon it; and when all the mortgages had been paid off out of the purchasemoney, as he thought, it was found that one mortgage had been omitted. But so far from the intention there being to keep any of the mortgages alive, the intention was to extinguish all the mortgages, and it was believed that this intention had been successfully accomplished. If there remained a mortgage, it was not because there had been any intention to keep it alive, nor was there any intention to keep it alive afterwards when it was paid off and extinguished, as the intention had been to extinguish all the mortgages.

THORNE v. Cann, H.L.

Now in the case of Adams v. Angell (7), as here, the equity of redemption had been purchased from the trustee under a bankruptcy. The question was whether the mortgage security had been kept alive; and the principle laid down by the late Master of the Rolls in giving his judgment is this: "That in all these cases the question is one of intention; and looking at the terms of the deed by the light of the surrounding circumstances, I am of opinion that an intention was clearly shewn not to let in Newson" (the subsequent mortgagee in that case) "except on the terms of his paying Adams his principal, interest, and costs." Adopting that principle, I say here, looking at the deed itself, which I think would have been sufficient, where there is nothing pointing to the contrary, I am of opinion that the intention was to keep the security alive. It seems to me one method recognised by conveyancers, expressing such an intention-namely, when an assignment is taken of the mortgage security. But if you are to look at the terms of the deed together with the surrounding circumstances at the time, so far from their pointing the other way, they all, to my mind, point in the same direction, and indeed beyond any possibility of dispute that that was the intention.

Reliance has been placed by the appellant upon the documents, and among them the undertakings to which I have referred given by Mr. Searle. I do not think they militate against the respondent's case. It was said that they explained why it was that the transfer was taken from Miss Arnold in that form. They do. They shew that it was intended to be a transfer of the mortgage-as excellent a way of expressing the intention of the parties as can well be conceived.

For these reasons I think the judgment of the Court of Appeal is perfectly correct and ought to be affirmed and the appeal dismissed with costs, and I move your Lordships accordingly.

LORD WATSON.-I concur. I am satisfield that it was the intention of James Searle, the owner of the equity of redemption, to keep on foot the mortgage

which he acquired from Miss Arnold and subsequently transferred to the respondent. I think that is a reasonable inference from the tenor of the documents by which these transactions were carried out, and the only inference consistent with the circumstances attending their execution. That inference, in effect, is sufficient to dispose of this appeal. It seems clear, upon authority, that in such circumstances intention must prevail, and that the case does not fall within the rule laid down in Toulmin v. Steere (1).

LORD MACNAGHTEN.-I do not think there is any foundation for this appeal in principle or authority.

The case of Toulmin v. Steere (1), which was pressed into the service of the appellant, has not, as it seems to me, any application to the present case. The facts in the two cases are not the same; nor is there, I think, any real resemblance between them.

In Toulmin v. Steere (1) it was decided that a purchaser who took a conveyance purporting to be free from incumbrances could not set up a mortgage which had been paid off out of the purchase-money against an incumbrance subsequent in date of which he had constructive notice. The authority of that case cannot nowadays be treated as going beyond the actual decision. Whether it would be regarded as a binding authority in a case on all-fours with it, except in a Court of first instance, is at least doubtful. It would not, I think, on the present occasion, be proper to go beyond what has been said in Stevens v. The Mid-Hants Railway Company (9) and Adams v. Angell (7). But I may remind your Lordships of an observation which was made by Lord Justice James in the former case which is not, I think, without application to the case now before your Lordships. "Of course, it is quite right," said his Lordship, "that an intermediate incumbrancer should not be prejudiced by any dealings between his debtor and another incumbrancer. At the same time, it is not for this Court to find some recondite

(9) 42 Law J. Rep. Chanc. 694; Law Rep. 8 Ch. 1064.

THORNE v. CANN, H.L.

technical reason for giving a man a benefit at the expense of another man who was under no liability whatever to pay him."

The material facts in this case are very simple. When Searle agreed to buy the equity of redemption from Piller's trustee in bankruptcy, he became owner of the whole, subject to certain charges. The debts which these charges were intended to secure were not his debts, nor was he personally liable to pay them. I do not forget the undertakings which Searle had given. But these undertakings did not make the debts his, or bind him to pay so that he could be constituted as a debtor. There was nothing inconsistent with Searle's duty to Thorne in his performing his undertaking to Miss Arnold.

Nothing, I think, is better settled than this

that when the owner of an estate pays charges on the estate which he is not personally liable to pay, the question whether these charges are to be considered as extinguished or as kept alive for his benefit is simply a question of intention. You may find intention in the deed, or you may find it in the circumstances attending the transaction, or you may presume an intention from considering whether it is or is not for his benefit that the charge should be kept on foot. Here I think the intention appears plainly on the face of the deed by which Miss Arnold purported to transfer her mortgage. There is no release of the debt. Payment is not acknowledged simply; but the debt is assigned-the mortgage is transferred. The power of sale and other powers are kept alive. To put it shortly, it is a transfer, and not a reconveyance. If it were necessary to look at the circumstances attending the transaction, it seems to me that the dealings with the bank and the negotiations with Cann, which began before Miss Arnold was paid, shew the intention clearly enough. These dealings and transactions would have been simply a fraud on the part of Searle if it had not been his intention to keep the charge alive. Moreover, if it were necessary to consider the point, it was plainly for the benefit of Searle to keep Miss Arnold's mortgage on foot.

On these broad grounds, without considering any special equity to which Mr.

Principal and Surety-ContributionMercantile Law Amendment Act, 1856 (19 & 20 Vict. c. 97), s. 5.

Where a principal creditor has proved for the debt against the estate of one surety, and has subsequently obtained payment of the debt in full from the two remaining sureties, the latter are entitled to the benefit of the proof for the whole amount of the debt, subject to the qualification that they cannot recover more than the just proportion payable by the third surety.

Decision of KEKEWICH, J., affirmed.

This was an application that the plaintiffs, as creditors, might be declared entitled to prove against the estate of James Caley Parker under a deed whereby he assigned his estate for the benefit of creditors for the sum of 1,7537. 158.

By a mortgage-deed made the 12th of March, 1892, the parties of the second part jointly and severally and any two, three, four, or five of them covenanted as sureties for the Norwich and Norfolk Investment Corporation, Limited (the principal debtors), to pay the mortgagees (Messrs. Cozens-Hardy and Jewson) 1,8537. 58. and interest, and certain costs as therein mentioned. The parties of the

IN RE PARKER, App.

second part consisted of five personsnamely, James Caley Parker, Robert Holmes, George Yallup, Luther Tall, and Richard Harry Court. There was a clause in the deed making the sureties as between themselves and the mortgagees principal debtors.

Of the five sureties, Robert Holmes became bankrupt, and nothing could be recovered from his estate. Luther Tall became bankrupt, and only 107. 48. was recovered from his estate by the mortgagees in respect of the amount due to them, for which credit was duly given. Substantially, therefore, there were three sureties left to bear the liability in respect of the mortgage debt, &c. On the 18th

of February, 1893, James Caley Parker executed a deed of assignment whereby he assigned his estate to Samuel Gerard Hill, as trustee, for the benefit of creditors.

The mortgagees sent in a claim to the trustee under the deed of assignment for the total amount of debt, interest, and costs due under the covenant, but there was no formal admission of the claim, and nothing paid by the trustee in respect thereof The mortgagors, the Norwich and Norfolk Investment Corporation, went into voluntary liquidation. The mortgagees called upon the remaining two sureties, Yallup and Court, to pay a substantial sum in respect of the amount due under the mortgage.

Court then paid to the mortgagees 2,1297. 18. 11d., being as to 1,7567. 11s. 11d. principal and interest due under the mortgage, and as to 3421. 108. for estimated costs, 2501. of the costs being in respect of a collateral security. One half of this sum Yallup paid to his co-surety Court.

By an indenture made the 13th of April, 1894, the mortgagees transferred the securities and debt to Mary Ann Morgan and John William Jewson, the plaintiffs, as trustees for Court and Yallup. Upon the payment off, the plaintiff's claimed against the defendant, as trustee of James Caley Parker, to be entitled to the benefit of the proof or claim of the mortgagees against Parker's estate for the full amount of principal, interest, and costs which had been properly payable under the mortgage-deed, so that the plaintiffs

might have a dividend on the full amount, provided such dividend did not (which was the fact) exceed one-third of the total amount of proof, being the proportion which, as between the sureties Parker, Yallup, and Court, Parker was liable to pay. It was contended by the defendant Hill, the trustee, that the proof would only lie for one-third of the total amount due under the mortgage, and a dividend was only payable on that one-third. The mortgagees did not claim a dividend on the 2507. costs above referred to, and it was found that they had claimed interest up to Christmas, 1893, instead of up to February, 1893, the date of the deed of assignment, so that the sum claimed was reduced to 1,753l. 158.

E. A. Hadley, for the co-sureties.-The surety who has paid more than his contribution is entitled to use the proofs of the original creditor-Ex parte Stokes (1).

T. B. Napier, for the trustee.--When one surety has paid the whole of the debt he is entitled to a proportion only from his co-surety-Ex parte Snowdon (2), Wolmerhausen v. Gullick (3), and In re Ennis; Coles v. Peyton (4). Under section 5 of the Mercantile Law Amendment Act, 1856 (5), no co-surety is entitled to re

(1) De Gex Rep. Bankr. 618.

(2) 50 Law J. Rep. Chanc. 540; Law Rep. 17 Ch. D. 44.

(3) 62 Law J. Rep. Chanc. 773; Law Rep. [1893] 2 Ch. 514.

(4) 62 Law J. Rep. Chanc. 991; Law Rep. [1893] 3 Ch. 238.

(5) Mercantile Law Amendment Act, 1856, s. 5: "Every person who, being surety for the debt or duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entitled to have assigned to him or to a trustee for him every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt or performance of the duty; and such person shall be entitled to stand in the place of the creditor and to use all his remedies, and if need be and upon a proper indemnity to use the name of the creditor in any action or other proceeding at law or in equity, in order to obtain from the principal debtor or any co-surety, co-contractor, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the person who shall have so paid such debt or performed such