Banking Securities.

Gisborne Standard and Cook County Gazette, Volume IV, Issue 589, 2 April 1891, Page 2

Banking Securities.

IMPORTANT DECISION. In the Ashburton Dlatrict Court last week Judge Ward gave a decision which, It it. he upheld on appeal, will affect many securities on wool and stock given to bankers aud merchants. The action was brought by the OfiioUl Assignee in the estate of William de Burton Wbaoa, to have declared void under clause 26 of the Chattels Securities Awt, a stock mortgage and wool Hen given by Wilson to the Bank of Australasia. The evfdenpe atpwed that Mr Witson, some time before he filed, desired'to open an account with the bank, and that the manager, Mr Jameson, agreed to grant him an advance of £looo| on having such advance secured by a stock mortgage over 7600 sheep, and by a guarantee to be given by one Ross. Roas and Wilson attended at the bank, and Mr Jameson produced a stock mortgage for £lOOO and further advances, and a guarantee for £lOOO which were signed for Wilson and Ross respectively. Mr Jameson staled that on these being signed he went into ths office and got a cheque book, and got WHsoa to draw out a cheque tor

£lOOO Th<in h-J went an ! procured £lOOO in ooU’m and a credit nHp. which at his requPHt Wilson filled up f<»r th*above amount Th- slip and no'e-< w»-reatnnce handed to the teller. Mr Jameson took nut a printed form of wo d lien, til ed it up as security for £lOOO and further advances, and requeated Wil«on to mgn it. Wilson raised some objection, but nig'-ed aa requested wi'hout leaving the room. Th i whole of the Ripnatures were obtained wi li fi 'n minuses. Each of th“Be document* (mortgage and <i*>n) constituted a form-il *cju iiy for £lOOO and fiir>her advances, and each contained no reference to the other beyond thia—that the stock mortgage con'ai ied a covenant by Wileon to give to ihe bank a lien over the wool of tbe mortgaged sheep whenever required. Lastly each was admittedly given for the same advance. It waa contended, on beha f of tho bank, that the advance on the mortgage was complete when the credit slip was signed l»y Wi son and accepted by the teller fiorn Jameson with the notes for £lOOO ; and that the lien formed an entirely new departure. Judge Ward, however, decided against the hank, saying, *• If the mortgagee was determined to have the lien, in addition to the mortgage, before Wilson could possibly take ad vantage of the technical advance, before honoring one of his cheques, and produced that lien for execution before he could sign a cheque or leave the room, and had it executed within five minutes after the mortgage, it seems to rue impossible to decide t iat the two deeds did not in reality form part of the same transaction. For the official assignee it was contended that the guarantee and stock mortgage were mutual defeasances; but in reply it was pointed out by Mr Wilding that if the debt of the mortgagor to the bauk were extinguished by a payment on th“ guarantee, the guarantor could then obtain from the bank an assignment of the mortgage. It seems to mo that this reply is conclusive as to the guarantee on the point of defeasance. And I doubt if the condition of a-signmein in tbe above case, implied in tbe arrangement between the three parties, oan be ssti to be snob a 'condition ’ ae would, un<i»-r o au«e26, require to bs set out in tbe m->rtgage or wool lien. But thh leaves untouaued ths question of the effect of the two laxt mentioned doouments on each other. It w«s urged for the bank that in each case where a document has beau held a d4easanof>, such docurnant hat contained a variance from the terms of the original contract coniaiued in the ajcuiity held void; that, therefore, there oan be no defeasance wi bout such variance, and that no Hucn varia'ice exists bare. If a registered document coutnl <s certain term*, and thorg terms are varied oy private agreement, there is a of fraud cast over the trausaaiion, as b«*i*ig osculated to deceive out-ide creditors inspecting the registry. But if, as in the praeent gasp, two deeds or mortgages are taken f>r the same advance, such creditors may be equally deceived. Here the mortgage aud lien each purport to show a «epurate advance of £lOOO. This might cause such creditors to ref raiu from enforcing their rights, on account of the large apparent amount of (he bank's prior claim. It is true that the mortg <ge contains a covenant by the mortgigor to deliver the woui of the mort» gaged sheep to <he bank. But tbe Hen purport* to strerxihen tne b*nk’s k gr|p of this wool by conferring sundry pa*ver« over it not given by the m*»r?g-tge; p >wera which might prove exceeding y useful In tbe event of lhe liener'a bunkrup oy. With reference to the uppireuc double advance, the. two documente must be read together* in order to ascertain lhe full contract between the ponies." After quoting authorities bearing upon the subject his Honor concluded, “It i-eernu to me that if, as in the present case, two instrum mta tie given securl ig tbe same advance at thn same time, and as part of the same traua-iction, each being appArently for a sop irate advance, aud containing no reference tn the other, bu so that payment and discharge of either one operates as payment and discharge of the other, they oms icuta mutual defeasances, and are by cliuae 2G void." The so ioitor for the bank gave noiice of appeal.—H. B. Herald.