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and giving information when inquiries are made by intending mortgagees or purchasers. The rule appears to be-(1), that it is the duty of the insurers to answer all inquiries made bonâ fide for this purpose; (2), that it is not obligatory upon them to volunteer information, unless, from the terms of notice or inquiry, they are distinctly informed of a state of facts in which a pecuniary loss would be sustained by reason of their withholding it.

The author is not aware of any decisions expressly in point in which insurance offices were interested, but the results appear to flow from the doctrine laid down in the very recent case of Mangles v. Dixon, in the House of Lords. (s) In this case, at the time of the execution of a charter-party, an agreement was signed, under which the owners became in effect joint adventurers with the charterers. The owner, without mentioning the agreement, assigned the charter-party (which was a chose in action assignable in equity only) to his bankers as a security: the bankers gave notice of the assignment to the charterers. A loss occurring upon the adventure, the question was, whether the assignees were entitled to the full freight, or whether the charterers were entitled to set off the share of the loss sustained: the House decided in favour of the charterers. Lord St. Leonard's, C., in delivering judgment, observed: "If there is one rule more perfectly established in a court of equity than another, it is, that whoever takes an assignment of a chose in action takes *it subject to all the equities of the person who made the assign[*210] ment. The rule applies when there is no notice: the assignee takes with all the liabilities of the assignor. He gives notice of the assignment. But when the notice was given, was it incumbent on the charterers to write back to the bankers and tell them of the additional document? In the first place, who is to inquire and to take the trouble in these cases? Who ought to do that? Why, the person who ought to do this is, undoubtedly, he who is fixed with the liability. If he desired to remove that liability, he ought to have made due inquiry, and, therefore, prima facie at least, the loss ought to fall upon him who, having the duty to inquire, has not though fit to do so. He has no right to speculate whether he shall obtain an answer which may disclose circmstances which he is not desirous to know; and if there is to be a loss, the loss ought to fall upon him who, being subject to the liability, and having to remove that liability, if he can remove it, ought to inquire and does not inquire. I must take care to guard myself on this important point, as not for a moment meaning to say, that if that notice of the bankers had shown that they had been deceived, that they were advancing money upon a ground which they misunderstood; and if the charterers had stood by, well knowing that circumstance, and had been silent, the result would have been the same: I acknowledge that the case would have been different. It would then have been incumbent upon the charterers to disclose the real circumstances of the case. It is certainly a new point. I admit that the books do not establish the rule; but I think the principle perfectly clear that, when there is no fraud,

(s) 3 House of Lords Cases, 702.

nothing to lead to the conclusion in the mind of the party who receives the notice, that the party who gives it has been deceived, and is likely to sustain a loss, I say it is clear that the former is not bound to volunteer information. I conceive that equity will not require the party who receives the notice impertinently almost to interfere between the two parties who have dealt behind his back, and also have never made any

[*211] communication to him, or even seen him on the subject. Is he

to assume that a fraud will be committed ?"

12. As may have been gathered from this and the preceding chapter, it is not optional for the company either to disregard or to register notices of assignment served upon them. After due notice it becomes a quasi trustee for the assignee, or at least a depository with notice of a trust, and is liable in equity for any misapplication of the fund to which it is a party. This is a liability attaching upon the company, not in consequence of any peculiarity of insurance law, but arising from the ordinary doctrine of the Court. It may be illustrated by an extreme case lately decided at the Rolls, in which a woman prior to her marriage, being entitled to a sum of money in the hands of A. B., the same was assigned by the settlement then made to trustees, upon trust, when thereunto requested by the intended wife, by any writing under her hand, to call in and invest the fund, which was to be held by them upon the trusts of the settlement. Notice of the settlement was served upon A. B., and he was furnished with a copy of it, and thereupon gave to the trustees a promissory note for the amount. He subsequently, after many remonstrances on his part against such an application of the trust funds, and after receiving written notices from the trustees requiring him to make the payment, but without any request in writing by the wife to him or the trustees, paid the money in part to the husband and in part to the trustees, believing, as was the fact, that they intended to advance it to the husband, by whose bankruptcy the larger part of it was lost it was held, that A. B., as well as the trustees, was responsible as being a party to the breach of trust in the application of the fund.() And not only will the insurers be compelled by a Court of Equity to take notice of the assignment, but even at law, where the action is brought by the assignee *in the name of the assignor after proof of notice of the assign[*212] ment, the Court will refuse to allow a plea of release or payment to stand.(u) Hence, it will be observed, that it is at the peril of the company to disregard notices of assignment served upon it. There can be no doubt but that if it were to pay the sum insured to the executors of the deceased, having notice of a prior assignment or lien, it might be compelled to pay the money over again to the party having the better equity, and that although the policy might have found its way back to the assured, and been delivered up to the company with a receipt by the parties, in whom at law the right to sue and give a discharge was vested.

13. An attempt has been made to escape from the liabilities thus

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arising, by inserting a clause in the deed of settlement or in the policy, expressly to rebut them. And in one case in a private Act, amending the deed of settlement of a life office, the clause was added to the provisions of the deed: the section of the Act was as follows:-"And be it enacted, that in regard of any policy or annuity which after the passing of this Act shall be issued or granted by the company, the deed of settlement of the company herein before recited shall be read and construed, and have force and effect, as if the following proviso had been inserted therein; that is to say, 'provided always, that in all cases where any policy or annuity which shall be issued or granted by the company, shall either originally or at any time be or become subject to any trust or trusts whatsoever, the receipt of the trustees or trustee for time being shall, notwithstanding any equitable claim or demand whatsoever of the person or persons beneficially entitled to the said policy or annuity, be a good and sufficient discharge for the money which may become payable in respect of the said policy or annuity, and shall discharge the company and the members thereof from all obligation of seeing to its application, *or from being answerable for its misapplication or nonapplication.""(v) [*213] The effect of this section, it will be observed, is not to enact the clause in favour of the company, but simply to insert, quantum valeat, in the deed of settlement.

It is extremely important for companies adopting such clauses that their true construction should be ascertained. If it is that they simply express the rule in equity when no notice is given, and all notices received are duly registered, no evil can ensue, and cases may arise in which they may be found convenient in practice. If they have a more extensive operation, it should be ascertained whether the trustees referred to include, as a class, trustees by construction of equity, such as the assignor of a policy upon a sale, or express trustees only, and to what extent the rights of the cestui que trust are bound by them. Taking the general case of trusts, as well constructive as express, it is clear that the assured is not entitled to stipulate that his receipt shall be a good discharge notwithstanding he may have assigned the policy, such a provision being contrary both to justice and sound policy, and the rules forbidding a restraint upon the alienation of property belonging to persons sui juris. Is then the office, in order to avoid future trouble and responsibility, entitled to make it a condition previous to the issue of the policy, that such a provision shall be inserted in it, the effect of which is to make the assignor an express trustee for the purchaser, with an irrevocable power of giving receipts for the sum assured? The rule that the purchaser can only claim, subject to the equities to which the policy would be subject in the hands of the assignor, is obviously inoperative in this case; for if this is an equity, it does not arise until after the assignment. Is it, however, a condition of the policy or term of the contract inseparable from it, so that the benefit of the contract can only be enjoyed subject to it? The reply to this appears to be *that although the insurers [*214] and assured may stipulate inter se, the contract itself does not

(v) 12 & 13 Vict. c. 70, s. 35. (Local and Personal.) JULY, 1853.-10

assume that the policy is assignable. That the benefit of it is transferable arises from a rule of equity dehors the stipulations of the policy, and uncontrollable by them; and the liability arising from notice is so equally. This construction of the clause would doubtless be a surprise upon a purchaser, who should find that in the teeth, so to speak, of a notice from him, the sum assured had been paid to the vendor or his representatives. Its operation is very different from a receipt clause in a mortgage which depends upon the right of the mortgagee exercising it; and if it is compared to that of the receipt clause in a settlement or will overriding all the trusts contained in it, it is to be observed that when such trusts are created and the entire beneficial interest centres in one party, he can terminate the trust at his pleasure, so that its execution would become a breach of trust on the part of the trustee. Again, the company, it is true, is not a trustee but a depositary only, while the assignor becomes a constructive trustee for the purchaser. Now, it is clear that whenever a party paying money or conveying a legal estate so acts as to sanction any act by the trustee to the prejudice of the cestuis que trust, he thereby becomes a party to the breach of trust and is answerable for it,(w) according to the equitable rule that when an act is a breach of duty by the trustee, it is very fit that those who deal with him should be affected by an act tending to defeat the trust of which they, have notice.(x) And, so far from its being the duty of the assignor to receive the amount assured, it is actually a breach of trust or fraud on his part to do so. Can then the office, having notice from the cestui que trust not to pay,—for such is the effect of at least every express notice of assignment, make such a payment with safety, and can it be entitled before the creation of the relationship of trustee and cestui que [*215] trust, but in anticipation of it, to stipulate that it shall be entitled to do so? In the case of express trusts arising out of contracts to which the insurers are not parties, the same argument is in a great measure applicable. The power to give a receipt as against cestui que trusts flows from the contract under which they are entitled; but where they are purchasers, the clause is no term of their contract, although it may perhaps be otherwise where they are mere volunteers claiming under the assured. The rule that every express trustee should have power to give receipts, may be very convenient in many cases, but the principle has been most distinctly rejected by the legislature in the repeal of the 7th & 8th Vict. c. 76, s. 10. It is given to the Bank of England, but on public grounds, by act of Parliament; and it may be thought that any attempts by a private company, when no such grounds exist to pass a special enactment in its own favour, must signally fail. The latter question may not be without difficulty, and the clause carries with it considerable weight, as having originated under the sanction of an eminent conveyancing authority, and having been very extensively used. The foregoing suggestions are therefore offered to the reader for his consideration, not as a statement of the law. The subject, moreover, would not have been dwelt upon at any length had the author not been informed

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that an impression existed that such a provision relieved the insurers from all responsibility, so that some companies, relying upon it, have habitually neglected any registration of the notices served upon them.

*CHAPTER IV.

[*216]

CONCERNING ADVANCES BY INSURANCE OFFICES, BY WAY OF MORTGAGE UPON THEIR OWN POLICIES, WITH OR WITHOUT ADDITIONAL SECURITY.

1. SINCE it is the province of insurance companies to accumulate the savings of their members, we may next consider them in the character of capitalists, and that of a very important class. Uniting the resources of many thousand contributors into one fund, they are capable of carrying out transactions far beyond the powers of private lenders of money. Colonial loans, when guaranteed by the legislature of this country, have been repeatedly taken by them; sometimes an entire loan by a single society. Their importance to the landed interest, as affording the means of raising large sums of money upon mortgage upon the best possible terms, and with the certainty of honourable treatment, has been more than once acknowledged in debate in the House of Commons. It is, in fact, a case of frequent occurrence, that a great landed estate, burthened with a variety of incumbrances, many of them bearing interest, at a rate exceeding the current annual value of money, is retrieved, and its possessor rescued from ruin, by the assistance given by an insurance office in paying off the accumulated charges, and capitalising them in one principal mortgage, at a moderate rate of interest. In one such case mentioned in the books, (a) one of the numerous incumbrances was a mortgage made to trustees, for securing a sum of 344,000l., advanced by a number of private individuals in different proportions. In another, *which came under the notice of the author, the sum of 250,0007.

was lent upon the life estate alone, the total advances exceeding [*217]

half a million of money. The company, moreover, while able to give the borrower the full benefit of a low rate of interest when occurring for a long series of years, being in itself unaffected by the hazards of commerce, is under no necessity of calling in its advances when a crisis happens in the money market; but is content with a reasonable increase in the rate of interest to be paid. In some offices the interest upon their mortgages fluctuates with the price of consols. In such cases it is not, it is believed, usual to encumber the mortgage deed with any stipulations to this effect, but the highest legal rate, viz. 5 per cent., is reserved, and the borrower trusts to the rule of the office, which is generally embodied

(a) Damer Lord v. Portarlington, 15 Sim. 380, 2 Phill. 30.

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