Huggard v The Representative Church Body

• Jurisdiction: Ireland
• Judge: M. R.
• Judgment Date: 15 April 1915
• Court: Chancery Division (Ireland)
• Docket Number: (1914. No. 584.)
• Date: 15 April 1915

Huggard

and

The Representative Church Body.

M. R.

(1914. No. 584.)

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1916.

Principal and Surety — Collateral Security pro tanto for Debt of Mortgagor — Liability of Surety limited in amount — Right of Surety on Payment of Part of Debt.

A., the owner of lands mortgaged to the defendants for £13,000, demised part to B. for a term of years at the rent of £150. A. then agreed to sell to B., under the Purchase of Land (Ireland) Act, 1885, the part so demised, for the sum of £3000, to be secured by an instalment mortgage for that amount to the Irish Land Commission, and B. agreed to charge the part sold to him with £500 as collateral security pro tanto with the rest of the lands comprised in the mortgage to the defendants. In order to carry out this agreement the defendants joined in the conveyance, free from all incumbrances, of the part agreed to be sold to B., and B. mortgaged it to the Irish Land Commission to secure repayment of the £3000 by half-yearly instalments. B. then, by a mortgage which recited the above transactions and that the debt due by A. had been reduced to £11,200, conveyed the part sold to him to the defendants, subject to redemption on payment of £500 and interest thereon.

Years afterwards the plaintiffs, in whom B.'s interest in the lands had become vested, sold the lands, subject to the annuity payable to the Irish Land Commission but free from all incumbrances, for £750, and on completion of the sale paid to the defendants the £500 and interest due under the mortgage made by B.

Subsequently most of the remaining lands of A. were sold under the Purchase of Land (Ireland) Acts, and the defendants received out of the purchase-money considerable sums on account of their mortgage debts, leaving a balance still due to them.

The plaintiffs brought this action against the defendants, claiming the benefit of all securities held by the defendants in respect of the said mortgage debt, and the benefit of all moneys received by the defendants on foot of the said debt in the proportion which the sum of £500 bore to the total of the said debt, on the ground that the plaintiffs were sureties for part only of the mortgage debt, and that, having paid that part, they were entitled to stand pro tanto in the shoes of the defendants, the principal creditors.

Held, (1) That B. had an interest in the transaction, namely the acquiring of the lands free from the mortgage save as to £500, and was therefore not a surety, but a principal debtor. (2) That even if B. could be regarded as a surety, he was not surety for part of the debt only, but for the whole debt, with a liability limited to £500, and that therefore the plaintiffs were not entitled to any relief, as the whole debt was not repaid.

Trial of Action.

The following statement of facts is taken from the judgment of the Master of the Rolls:—

This action has been brought to establish the right of the plaintiffs, who may be treated as the representatives of one Richard Huggard, deceased, to participate in the benefits received by the defendants under two mortgages for £12,000 and £1,000 on the property of one Stephen Huggard, for whom it is alleged Richard Huggard was a surety to the extent of £500, part of the said mortgage debts, Richard Huggard's property was sold, and out of the proceeds of sale the £500 was paid to the defendants. A considerable part of Stephen Huggard's property has also been sold, and the defendants have been paid in round numbers the sum of about £10,000 in part discharge of the mortgages. The plaintiffs claim that they are entitled to be recouped by the defendants a proportionate part of the sum of £500 in the ratio which the amount recovered bears to the full amount due upon the mortgages. In other words, they claim to be paid a dividend on the sum of £500 on the ground that the sums realized by the defendants were received by them on account of the entire debt, including the £500 received out of Richard Huggard's property. If this is the right of the plaintiffs, it is based on that branch of the law of guarantee which gives the surety, on payment of the debt, the right to the benefit of securities obtained from the principal debtor by the creditor.

The facts of the case are these:—By indenture of mortgage, dated the 30th March, 1874, Stephen Huggard, in consideration of an advance of £12,000, mortgaged to the defendants certain lands in the county of Kerry, subject to redemption on payment of £12,000, with interest thereon at the rate of £5 10s. per cent. per annum, reducible to £4 10s. on punctual payment. The mortgage deed gave power to the mortgagor at any time before sale to appoint by way of lease any part of the lands for any term of years to take effect in possession, so as there should be reserved the best yearly rent that could reasonably be got without taking a fine. By a further mortgage, dated the 9th April, 1874, Stephen Huggard, in consideration of a further advance of £1,000, mortgaged to the defendants the same lands, subject to redemption on payment of the further sum of £1,000, with interest at the rate of £5 10s. per cent. per annum, reducible to £4 10s. per cent. on punctual payment. In this mortgage there is included the additional security of an annuity payable out of other lands. It also reserves for the mortgagor the same leasing power as was given by the prior security.

On the 11th June, 1886, Stephen Huggard, in exercise of the leasing power contained in the two mortgages, made a lease to his son, Richard Huggard, of a portion of the mortgaged lands, viz., part of Lissatanavally, containing 15a. 1r. 10p. statute measure, and part of Lismore, containing 71a. 1r. 38p. like measure, for a term of years, at the yearly rent of £150. This lease was made without the sanction of the defendants.

Shortly after this lease was made Stephen Huggard agreed with Richard Huggard to sell to him the lands demised by the lease for the sum of £3,000, and the Irish Land Commission agreed to advance that amount to enable the purchase to be completed under the Land Purchase Act, 1885, one-fifth of the purchase-money to be retained by the Laud Commission as a guarantee deposit as provided by the Act.

At this stage it becomes important to define the rights of the parties in connexion with the sale to Richard Huggard. It was the right of the mortgagor, notwithstanding the mortgages, to sell the lands to the tenants, but it was the right of the mortgagees to object to the prices as insufficient, and it was also their right to have the purchase-moneys, less by the guarantee deposits, applied in payment of the mortgage debts, or prior charges.

The purpose of the sale, however, was such as to require a partial waiver of their rights from the mortgagees. Stephen Huggard wanted part of the purchase-money for himself, and he asked the defendants to accept £1647 19s. 1d. on account, and to allow him to receive £600—the balance of the purchase-money to go in redeeming a tithe rentcharge, and providing the guarantee deposit. This the defendants agreed to. They were also asked by Stephen Huggard and Richard Huggard to sanction and approve of the lease. The reason for this was obvious. It was not a lease made in the ordinary course. It was made by a father to his own son, and apparently with the object of enabling the son to acquire the fee by purchase under the Act of 1885. The circumstances were such as would naturally excite suspicion and provoke investigation; and it was thought to be advisable, if not necessary, to get the defendants' approval of the lease. Be that as it may, the sale could not have been carried out in the way proposed without the concurrence of the defendants, who stipulated that, subject to the claim of the Land Commission on the purchased holding, they should in return for the concessions given by them have a charge upon it for £500 as collateral security for the moneys which should remain owing on the security of their mortgages.

This transaction was carried out by two conveyances. The first was an indenture, dated the 25th July, 1887, made between Stephen Huggard of the first part, the defendants of the second part, William Rowan, a puisne incumbrancer, of the third part, Richard Huggard of the fourth part, and the Irish Land Commission of the fifth part. It recited, inter alia, the two mortgages of £12,000 and £1000. It recited a subsequent mortgage then vested in William Rowan. It recited an agreement between Stephen Huggard and Richard Huggard for the sale by the former to the latter of the lands comprised in the lease in fee-simple, free from incumbrances, except a certain small annuity therein mentioned and against which there was an indemnity, and that Stephen Huggard had requested the defendants and William Rowan to join in the conveyance for the purpose of discharging the lands from their incumbrances. It then recited that Richard Huggard had applied to the Irish Land Commission for an advance of £3000 to enable him to complete the purchase, which the Commission agreed to give on the terms of retaining one-fifth part thereof as a guarantee deposit, and on having repayment of the sum of £3000 secured. It then recited that at the request of Richard Haggard and Stephen Huggard, and with the assent of the defendants and William Rowan, the Land Commission had applied the purchase-money as follows, viz.:—The sum of £152 0s. 11d. in redemption of a tithe rentcharge affecting the lands, and, at the request of Richard Huggard and William Rowan, the sum of £1647 19s. 1d. in payment to the defendants, and at the like request, and with the assent of the defendants and William Rowan, £600 in payment to the said Stephen Huggard, and the sum of £600 to be retained as a guarantee deposit. These recitals are followed by a conveyance by Stephen Huggard, the...