The Estate of Eleanor Mary Chute and Louisa Hawkesworth Kelly, Owners; The National Bank, Ltd, Petitioners

• Jurisdiction: Ireland
• Judge: Ross, J.
• Judgment Date: 27 February 1914
• Court: Chancery Division (Ireland)
• Date: 27 February 1914

In the Matter of the Estate of Eleanor Mary Chute and Louisa Hawkesworth Kelly,

Owners;

The National Bank, Limited,

Petitioners.

Ross, J.

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.

1914.

Mortgage — Priority — Mortgage to bank to secure present and future advances — Subsequent mortgage by mortgagor “as beneficial owner” — Appropriation of payments — Rule in Clayton's Case — Marshalling securities.

Held, that the rule in Clayton'sCase (1 Mer. 572) was not excluded by the conduct of the parties, and that F.'s mortgage had priority as against the lands to the bank's charge.

On Q.'s death the bank received the amount of the policy moneys, and claimed to be entitled to apply them towards the discharge of the amount of the overdraft due on the 30th June, 1904, with interest, leaving the sum of £1963 and interest still charged on the mortgaged lands.

Held, that F. had the right to compel the bank to discharge pro tanto the debt due to them on the 17th March, 1897, out of the policy moneys, in exoneration of the lands subject to F.'s mortgage.

Motion to settle priorities.

The estate for sale was formerly the absolute property of Albert W. Quill, who died in 1908. The late Albert W. Quill, being a customer of and indebted to the National Bank, mortgaged to the bank the lands sold in the present matter, to secure all present and future advances, with interest. On the same day, by another deed, he mortgaged to the bank, for the same purposes, a policy on his own life for £2000 effected with the North British Insurance Company. The bank from time to time made advances on foot of these securities by allowing Quill to overdraw his current account to a large extent. In addition to the above securities the bank took promissory notes from Quill, payable in each case so many months after date. The notes had originally been given in the years 1895 and 1896, and were renewed from time to time down to the 18th July, 1899, when £100 was paid off. From that time they were renewed from time to time till the 29th January, 1903, when they all became due, and since remained unpaid. The practice was, that when the notes became due they were debited in Quill's current account. When they were renewed, the amount was immediately credited to his account.

On the 16th March, 1897, Quill, “as beneficial owner,” mortgaged the lands comprised in the bank's security to John Ford, to secure £700 with interest. Ford gave notice of his mortgage to the bank on the 17th March, 1897. On that date Quill's account with the bank stood thus:—Promissory notes, £2500; cash credit, £536 1s. 9d.; total secured liability to the bank, £1963 18s. 3d. On receipt of the notice of Ford's mortgage, the bank did not rule off or break Quill's account, or strike a balance, or alter in any way their method of dealing with Quill's account and of renewing the promissory notes. Quill subsequently paid into the bank to the credit of his account over £4000 in cash, irrespective of credits for renewals of notes. Quill's account with the bank was closed on the 30th June, 1904, and then showed an overdraft due by him to the bank of £1,654 2s. 6d., in addition to the amount due by him to the bank on the promissory notes. On Quill's death in 1908 the bank received from the North British Insurance Company the sum of £2,394 10s. on foot of the policy of assurance. This sum the bank contended that they were entitled to appropriate as follows:—To the payment of premiums, £270 14s. 3d.; to overdraft and interest thereon, £2017; a small sum for costs; and the balance, £101 14s. 2d., to interest due on foot of the promissory notes, leaving, as the bank contended, a sum of £2400 still due to them with interest in respect of Quill's indebtedness to the bank on the 17th February, 1897.

The bank now claimed, as against and in priority to Ford, to be paid out of the lands sold in the matter this sum of £2400, with £1321 1s. 3d. interest thereon up to June, 1913.

Herbert Wilson, K.C., for the National Bank, Ltd.:—

Admittedly the bank cannot claim in priority to Ford moneys advanced after the 17th March, 1897: Hopkinson v. Rolt (1). Their claim is to apply towards such subsequent advances the proceeds of the North British policy, leaving the debt due on the 17th March, 1897, charged on the lands in priority to Ford.

T. S. M'Cann, K.C., and E. F. Leet, for the representatives of John Ford:—

The account between Quill and the bank is one continuous and unbroken current account, with balances communicated periodically to the customer. By the combined operation of the rule in Clayton'sCase (2), and the principle of Hopkinson v. Rolt (1), the entire liability of Quill due to the bank on the 17th March, 1897, was, as against Ford, wiped out by the subsequent dealings in the account. The system followed by the bank of taking renewals of the promissory notes from Quill cannot exclude the operation of the rule in Clayton'sCase (2), because after the 17th March...