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Notes of Recent Leading Cases.
Page 1. ESPIN v. PEMBERTON (4 Drew., 333; 28 L. J. Chanc., 308, 311)
Equitable and Legal Mortgages—Solicitor and Client—Notice-
415 COMMON LAW. 2. JACKSON v. FORSTER (28 L. J. Q. B., 166, and in Error 18th June,
1859) Policy of Insurance on Life- What is a bona fide Assignment
427 3. LONDON AND NORTH WESTERN RAILWAY COMPANY v. GLYN (28 L. J.
Q.B., 188) Fire Policy–Railway Co.'s Insuring Goods Ware-
428 4. LOFFT v. DENNIS (28 I. J. Q.B., 168) Fire Insurance-Honse burnt
down-Rent payable for Use and Occupation-Lord St. Leonards'
1. ESPIN V. PEMBERTON, 28 L. J. Chanc., (V. C. KINDERSLEY)
308 & (L.C.) 311; 4 Drew., 333. Equitable and Legal Mortgages-Solicitor and Client-Notice-Negligence
Priority. In 1855, the defendant Pemberton, a solicitor, borrowed of Espin, the plaintiff, a sum of £300, and, by way of security, deposited with Espin the lease of a house in Southampton-street, Bloomsbury, and the assignments of the same, and delivered to him a memorandum, whereby Pemberton agreed to execute an assignment of the premises to Espin, on being required so to do by him. In the month of April, 1857, Browne, a defendant, the stepson and articled clerk of Pemberton, lent Pemberton a sum of £1500, and on the 8th September, 1857, Pemberton assigned the house in Southampton-street to Browne (who was then ignorant of the security to Espin) as a security for £500, part of the sum of £1500. At the time the assignment was executed, Browne, for whom no separate solicitor acted, requested Pemberton to hand over to him the title-deeds; and subsequently he repeatedly asked for the deeds, but was informed by Pemberton that they were mislaid, and that he should have them when they could be found.
The questions raised on this state of facts were :-first, whether Pemberton must be considered as having acted as
Browne's solicitor; and, inasmuch as Pemberton knew of the previous equitable mortgage to Espin, whether there was constructive notice of the same to Browne; and secondly, whether there was such negligence on the part of Browne, in not asking for the title-deeds, as to postpone his legal estate to Espin's equitable security.
With respect to the first question, Kindersley, V.C., said :“ In the case of Hewitt v. Loosemore (9 Hare, 449), it appears that Lord Justice Turner, then Vice-Chancellor, came to the conclusion, in a similar case to the present, where a mortgagor was himself a solicitor, and no solicitor was acting for the mortgagee, that there the mortgagor quà solicitor was to be considered as solicitor of the mortgagee. I confess I think I am bound to state, that if it were not for the opinion expressed in that case, I doubt whether I should arrive at a similar conclusion; but the long experience and ability of that learned judge are such, that although I should consider it probable that his opinion is right and mine wrong, yet I should hesitate to apply the principle in every case. It might be, for instance, that the intended mortgagee was a retired solicitor, and thought fit to act for himself. How could I say in such a case, that, because the mortgagor happened to be a solicitor, he was to be considered as solicitor for the mortgagee? Or, suppose the
« mortgagor were a barrister who was not in practice, he might say he could take care of himself, and could act for himself. It would be very hard in such a case to say, that he was therefore to be taken to have acted professionally for the mortgagee. I should also feel great difficulty in a case like the present, where the gentleman is being educated as a solicitor, and is, in fact, an articled clerk. He has got, at least, some knowledge of what should be done. I do not see the reasonableness of saying, that because Mr. Pemberton was a solicitor, consequently he is to be treated as solicitor for his article clerk. Therefore, if it were not for the expression of opinion found in the case of Hewitt v. Loosemore, I should not have come to the same conclusion ; but as it is I dare say the Lord Justice is right and I am wrong. But suppose Pemberton were to be treated as solicitor for Browne in the transaction, it would be a monstrous perversion of the doctrine of constructive notice to say that, because Pemberton knew of a prior mortgage to the plaintiff, that is constructive notice to the subsequent mortgagee of the prior mortgage. It appears, however, that, in the same case I have mentioned, the same judge refused to add to the constructive solicitorship the additional ingredient of constructive notice, and I entirely concur in the justice of that conclusion."
On this first question Lord Chancellor Chelmsford said :
“The notice which a principal is supposed to receive through a solicitor is generally treated as constructive notice; but I cannot help thinking it would be better if it were classed under the head of actual notice. The notice which affects the principal through a solicitor, does not depend upon whether it is communicated to him or not. If a person employs a solicitor who either knows, or has intimated to him in the course of his employment, a fact that is hostile to his interest, he is bound by it, whether the fact is communicated to or is concealed from him. Constructive notice is properly the knowledge which the court imputes to a person, the contrary presumption being so strong it cannot be allowed to be rebutted ; and the knowledge must exist either from his knowing something which ought to have put
him on further inquiry, or from his wilfully abstaining from inquiry to avoid notice. I should, therefore, prefer calling the knowledge which a person has either by himself or his agent, actual knowledge; or, if it is necessary to make a distinction between that which a person knows himself, and that which is known to his agent, the latter might, I think, be called imputed knowledge. Was Pemberton, then, who came to the transaction with a perfect knowledge of the plaintiff's incumbrance, the solicitor of the defendant? I find it very difficult to accede to the proposition, however high the authority from which it proceeds, that when a mortgagor is himself a solicitor, and preparing the mortgage-deed, the mortgagee employing no other solicitor, the mortgagor must be considered to be the agent or solicitor of the mortgagee in the transaction. I think there must be some consent on the part of the mortgagee to constitute this relation, If he is imprudent enough to intrust his interest to the mortgagor, who is himself a solicitor, he may do so and take the consequences ; but he may not desire to have any solicitor, he considering himself equal to the protection of his own interest, and then his mere omission to communicate the circumstance to the mortgagor, who is preparing the deed, cannot constitute him the solicitor. If the mortgagor, under these circumstances, becomes the solicitor of the mortgagee, it is impossible to stop short in applying all the consequences of the relation, and then the knowledge which the mortgagor possesses becomes the knowledge of his client, the mortgagee. It is difficult to escape from this conclusion unless you apply the principle of Kennedy v. Green (3 Myl. & K., 699), and exclude this particular knowledge; because the mortgagor was committing a fraud in the transaction which he could not be presumed to communicate, or rather perhaps, because the very commission of the fraud broke off the relation of principal and agent, and therefore prevented the possibility of imputing his knowledge to his client. I think
Pemberton was not the solicitor of Browne in the assignment, and there is not only no proof of consent that he should act in that capacity, but something approaching to a proof of the contrary.
It is necessary, for the clear understanding of this case, that the cases of Kennedy v. Green, and Hewitt v. Loosemore, should be somewhat fully referred to.
In the first of those cases, Bostock, a solicitor, obtained by fraud the execution of a deed by a Mrs. Kennedy, purporting to be an assignment to himself of a mortgage of a leasehold property, and subsequently purchased the equity of redemption. Sometime afterwards he purported to assign this property, by way of mortgage, to his father-in law, Kirby. In the mortgage transaction between Bostock and Kirby, the latter employed no solicitor other than Bostock. Sir John Leach, M.R., heid, that Bostock must be considered as the solicitor of Kirby, and that it was impossible for him, under these circumstances, to deny notice [i. e., legal and constructive notice] of the fraud committed upon Mrs. Kennedy. The cause was reheard before Lord Brougham, C., who said, “ Bostock was acting as Mr. Kirby's solicitor in the transaction, and although, generally speaking, the knowledge obtained by a man's attorney or agent fixes himself, if obtained while so employed and on the same business,
yet it cannot here be said that Mr. Kirby is fixed with all which Bostock knew ; for the fraud tised by Bostock upon Mr. Kirby himself, was of course concealed from him; and so we may say would certainly be that other fraud which he had practised on Mrs. Kennedy. Indeed, that was only another part of the same fraud, another act of the same plot; and therefore I think we cannot, on this account alone, fix his client, Mr. Kirby, any more than his other employer, Mrs. Kennedy, with the knowledge of his criminal proceedings. We must lay out of our view all the knowledge,
. the actual and full knowledge, he had of his own fraud, and are not to hold Mr. Kirby as cognisant-I mean, of course, cognisant in law and constructively-of that, merely because his solicitor, himself the contriver, the actor, and the gainer in the transaction, knew it all well.”
In Hewitt v. Loosemore, Robert Loosemore, a solicitor, deposited a lease with Hewitt for securing a sum of money, and signed and delivered to Hewitt a memorandum that it was deposited for that purpose. Afterwards, Robert Loosemore assigned the lease to John Loosemore, who had no actual notice of the former security by way of mortgage. John Loosemore employed no solicitor in this transaction, and Robert Loosemore prepared the assignment at his own expense. Upon the ques
tion, whether Robert Loosemore must be taken to have acted as the solicitor of John in the transaction of the mortgage, and whether, therefore, John had notice through Robert of the lease having been deposited with Hewitt, Turner, V.C., made the following observations :-“I think that where a mortgagor is himself a solicitor, and prepares the mortgage deed, the mortgagee employing no other solicitor, the mortgagor must be considered to be the agent or solicitor of the mortgagee in the transaction of the mortgage. The mortgagee in such cases trusts the mortgagor to discharge those duties which his solicitor would discharge, if he thought proper to employ one; and it can make no difference that the mortgagor is not paid by the mortgagee—the very nature of the transaction being, that all the expenses are borne by the mortgagor. I am of opinion, therefore, that Robert Loosemore must be considered to have been the agent and solicitor of the defendant in the transaction of his mortgage; but I do not think that the defendant is therefore to be considered to have had notice of the plaintiff's deposit; such notice would be constructive merely, and constructive notice is knowledge which the court imputes to a party, upon a presumption so strong that it cannot be allowed to be rebutted, that the knowledge must have been communicated; and I cannot act upon such a presumption in the face of the evidence which the plaintiff himself has adduced. In determining this point in favour of the defendant, I desire it to be understood that I do not proceed upon the case of Kennedy v. Green. The well-founded and wholesome limitation upon the doctrine of constructive notice established by that case, does not appear to me to apply to the present. There was here no fraud in the original deposit with the plaintiff, and no fraud in the mortgage to the defendant, if the fact of the deposit with the plaintiff was communicated; and it would, I think, be a misapplication of the case of Kennedy v. Green, to hold that the fact of the deposit must be taken not to have been communicated, because it was a fraud to conceal it. So to apply the case would be, in trying the question, whether there were knowledge or not, to assume that there was fraud.”
In considering the question of constructive solicitorship, both Vice-Chancellor Kindersley and Lord Chelmsford seem to have overlooked the fact that the mortgage deed is, we may say, invariably prepared by the mortgagee's solicitor. Now, if the intended mortgagee were, as supposed by the Vice-Chancellor, a retired solicitor, or a barrister who could take care of himself," he ought, if he act for himself, to prepare the deed; but if he should think proper to permit the mortgagor's solicitor to prepare the same, we cannot see why “it would be very hard to say,"