[mortgage, foreclosure – trusts – equity]

Holt v. Bryant

Supreme Court of New South Wales

Dowling C.J., 3 September 1841

Source: Sydney Herald, 4 September 1841

SUPREME COURT - FRIDAY.
EQUITY SIDE.
BEFORE the CHIEF JUSTICE.

JAMES HOLT V. S. A. BRYANT.

In this suit his Honor delivered the following judgment:-

            This was a bill for foreclosure of a mortgage. The bill stated that the defendant being indebted to the plaintiff, as attorney far Charles Lettsom Elliot and Charles Lambert, of London, brewers, in the sum of £1,079 and interest, [mortgaged for a term of 500 years, to plaintiff,] certain premises in O’Connell-street, Sydney, by deed dated 5th May, 1838, with interest, at 10 per cent., payable quarterly, with a proviso for redemption upon payment of principal and interest on the 25th November, 1839, and payment not being made, the estate in plaintiff became absolute, concluding with the usual prayer. The defendant admitted all the facts stated in the bill, but says no arrear of interest was due at the time specified for payment, neither was there any now due, save a sum of £95, which interest, with principal, he asserts, the premises are of sufficient value amply to cover, and he prays a reasonable time for redemption, and he further alleges that the parties for whom the plaintiff is attorney are necessary parties to the bill, and prays to have the same benefits from this defence as if he had demurred to the bill for want of parties.

            The only question reserved for the consideration of the Court was whether Messrs. Elliot and Lambert, for whom the plaintiff acted as attorney or agent in taking the mortgage are necessary parties. The mortgage deed appears to have been taken by the plaintiff in his own name, though acting as attorney for Elliot and Lambert, and the defendant has covenanted with the plaintiff personally. On the part of the defendant, it was contended that as the plaintiff was only a trustee, it was necessary to make Elliot and Lambert the cestui que trusts parties to the bill, in order to protect the defendant from being sued or molested again, respecting the same matter, either at law or in Equity, for it was contended that he might be called upon again to pay the money to the plaintiff’s principals. For the plaintiff it was contended, that although in most cases respecting trust property, the cestui que trusts should be made parties, as when the existence or enjoyment of the property is affected by the prayer of the suit, yet this was an excepted case, for here the existence of the property was not affected, the only object of the Bill being to transfer the property into the hands of the plaintiff as trustee, who would be accountable over to his cestui que trusts, and the defendant could never be liable again to these latter. The cases mainly relied upon by the defendant’s counsel in argument were Lowe v. Morgan, 1. Bro. C. C. 368, and Palmer v. Lord Carlisle, 1. Lien. and Stu. 423, but it appears to me that those cases are mainly distinguishable from the present, and do not fall within the principle of the case, where the cestui que trusts should be made parties. In Lowe v. Morgan, a share of Covent Garden playhouse having been mortgaged, the mortgagee assigned the mortgage to a trustee in trust for three persons, who contributed equal portions of the money. One of the three filed a bill to foreclose the equity of redemption. The cause was opened as a common bill of foreclosure, and the ordinary decree pronounced, but the registrar finding some difficulty in drawing up the decree, applied to the Lord Chancellor, who said it was a new case in respect of their being joint tenants, and that it would be impossible for one to foreclose without making the other two parties. The case of Palmer v. Lord Carlisle relied upon as a case in point, went on the same principle, namely that where parties are jointly entitled to the whole of the mortgage money, they must all be before the Court, and cannot appear severally for their aliqnot shares. There the question was, whether a person entitled to a sixth part only of a sum of money due on a mortgage, could file a bill of foreclosure of a sixth part of the mortgaged estates The defendant had mortgaged certain estates to Thomas Hanway for £12,000; part of the money, £2,000 belonged to William Hanway, and this becoming vested in the plaintiff as his representive, and the whole of the £12,000 still remaining unpaid, she filed her bill praying that an account might be taken of what was due to her on the mortgage in respect of the £2000, her late brother’s share, being a sixth part of the £12,000, and that Lord Carlisle might be decreed to pay what should be found due to her, or be foreclosed from all equity of redemption in one-sixth part of the mortgaged premises. Lord Carlisle, by his answer, submitted that an account should be taken of the whole of the £12,000, and not of the £2000 only; as otherwise he might be put to unreasonable and unnecessary charges in taking many different accounts, in respect of the same mortgage. – And the Vice Chancellor said “There can be no foreclosure or redemption unless the parties entitled to the whole mortgage money are before the Court.” Now the obvious principle upon which both these decisions proceeded was, that if a decree had been pronounced in severity when the property had been incumbered by one mortgage for one entire sum the condition of the property would be affected - for the mortgager would be placed in the condition of having several mortgagees, in interest to deal with, instead of one, and his property might be affected in a manner which he never contemplated. It was necessary therefore for his protection, that all the parties who had an interest in the money should be before the Court. In the present case the existence of the property cannot be affected, the only object of the Bill being to transfer into the hands of the plaintiff, as trustee, for all the owners of the money. For this purpose they are not necessary parties. The plaintiff, as agent of both the cestui que trusts, lends their money to the defendant, who has full knowledge at the time of executing the mortgage that he is dealing with an agent, and with that agent he enters into a personal covenant to repay the money. It does not lie in his mouth to say, that he will not be accountable to the plaintiff with whom he has so dealt. Here is an express covenant with an agent, and he is the party who must appear before the Court. This is not like ordinary agreements not under seal, where one party contracts as agent for the benefit of another. In such cases it is not necessary to bring the agent before the Court; because, even at law, it is the undoubted right of the principal to intervene and supercede the right of his agent, by claiming to have the contract performed to himself, although made in the name of his agent. It appears to me that it was not necessary to bring the plaintiff’s principals before the Court to enable the Court to do complete justice, and so as to prevent by its decrees the defendant being sued or molested again respecting the same matter, either at law or in Equity. It is true that Lord Eldon, in Adams v. St. Ledger, 1 Bull and Beattie, 182, says that “in most cases respecting trust property” the cestui que trusts should be made parties, but that is only where the existance or enjoyment of the property is affected by the prayer of the suit.

            There are, in fact, two classes of cases; in one of which the cestui que trust need not be a party, in the other, he must. The latter class of cases is where the interest of the cestui que trust is immediately affected by the proceedings, and the other is where his interest will not be thereby affected; for he will not lose his lien upon the property, whether the trustees do or do not reduce it into possession. It is the duty of the present plaintiff, as trustee, to reduce the property into possession, that he may have the complete execution of the trust within his own power, a duty which he must perform, and in which his principals or cestui que trusts, although they may compel him to undertake it, ought not to bear a part; after [the property is] reduced into possession they will have their lien, and can look only to their own agent or trustee, but they are not necessary parties to that proceeding. The prayer of the Bill is confined to the object of reducing this mortgage money into possession. The case of Franco v. Franco 3 Ves. 76 will illustrate the distinction to which I have adverted, when cestui que trusts need or need not be parties to a suit. Two trustees, A and B, held stock in trust – A, with the permission of B, transferred it into his own name, entering into an engagement to replace it or give security. B filed his Bill against A to compel him to do so, and it was held that the cestui que trusts were not necessary parties, and the distinction to which I have alluded was remarked by the Court. I regard the object of this Bill to be merely to obtain payment of a sum of money on account of the cestui que trust, where the debtor has contracted immediately with the trustee. I have carefully looked into the authorities and am of opinion that Messrs. Elliot and Lambert are not necessary parties to this suit, and the usual decree must be pronounced.