COMMON LAW 229
Facts
C, the Manager of a company, executed a legal mortgage to his company, delivered title-deeds. They were kept in a safe of the company, the key to which was in C’s possession: C— some time after took out the title-deeds and created another mortgage on the same property in favour of Mrs. Whipp. Mrs. Whipp has no notice of the first mortgage to the Company. Held : Company entitled to priority.
- The proposition laid down in the case is this—
Where the owner of a legal estate has assisted in or connived at the fraud which has laid to the creation of a subsequent equitable estate and the owner of equitable estate had no notice of the prior legal right, the Court will postpone the legal estate to the equitable estate although it is subsequent in its origin.
- What is the evidence of assistance in or connivance at fraud :
(i) Omission to use ordinary care in inquiry after title-deeds.
(ii) Failing to take delivery in title-deeds are treated as evidence of assistance in or connivance at fraud where such conduct cannot otherwise be explained.
- The same authority lays down another case in which also a legal estate will be postponed to a subsequent equitable estate.
Where the mortgagee, the owner of the legal estate has constituted the mortgagor, his agent with authority to raise money on the property mortgaged and the estate created has by the fraud or misconduct of the agent been represented as being the first estate.
- For the operation of this rule, mere carelessness or want of prudence on the part of the legal owner will not be a sufficient ground. There must be fraud and connivance at or assistance therein. Nothing but fraud I will postpone.
( 1913 ) 2 Ch. 18.
III. Where the competition is between two equitable rights.