CLAIM UNDER MORTGAGE

Greymouth Evening Star, 11 December 1940, Page 4

CLAIM UNDER MORTGAGE

RESERVED JUDGMENT GIVEN The reserved judgment of Mr. Justice Northcroft, in a case heard in the Supreme Court at Greymouth on November 14, was read by the Registrar (Mr. F. Bird), at Greymouth, yesterday afternoon. The case was that in which Patrick McCormack, formerly of Greymouth, hotelkeeper, and now of Ruru, farmer, claimed from Thomas Hubert Lee, Reefton, accountant, and Duncan Angus McVicar, Reefton, mining investor, £1,268/5/6, principal and interest alleged to be due under a mortgage in the estate of Michael Murray, deceased; in the alternative, a declaration that defendants are-executors in the estate of Michael Murray, and that defendants be ordered to render an account of the administration of the estate and apply the assets in payment of the alleged debt to plaintiff. Mr. J. W. Hannan appeared for plaintiff and Mr. J. K. Patterson for the defendants. In his judgment, His .Honor said that the action was undertaken by arrangement to obtain a decision as to whether certain funds belonged to the estate of Michael Murray or to the estate of Sarah Murray, his wife. In 1922, Michael Murray borrowed £5OO from the plaintiff as a trustee and executed a mortgage over Crown lands as security. He died in 1924 and his sole legatee, Sarah Murray, obtained letters of administration cum testamento annexo. In 1930 the Crown lease was cancelled because of default in payment of rent, and the late Mr. Isaac Patterson, solicitor for the widow, invited the plaintiff and the beneficiary of the trust fund which had been lent, to pay the arrears of rent, to avoid forfeiture. This they were not disposed to do, as no interest had ever been paid under the mortgage, and the estate of Michael Murray was seriously impoverished, if not insolvent. In 1937, Sarah Murray registered transmission to herself as administratrix of other property of her husband subject to mortgages. She died in 1938 and probate of her wih was granted to the defendants as executors named therein. They in turn registered transmission to themselves of the same properties of which Sarah Murray had become registered proprietor as administratrix of the estate of Michael Murray. Before her death, Sarah Murray had given an option to a gold dredging concern to buy these properties for £3OOO, the option being exercised in November, 1938,’•three months after her death. Presumably because of knowledge of this transaction, the plaintiff’s solicitors in December, 1938, wrote to the defendants, claiming the repayment of the original loan ‘of £5OO, with accumulations of interest. After some delay in obtaining probate of the will of Sarah Murray, the defendants appeared to have called for claims against the estate upon which, in June, 1939, the paintiff sent a formal account for principal and interest, headed, “Sarah Murray, deceased, Reefton, in account with Miss M. E. Phelan.” Miss Phelan was the person beneficially entitled to the trust fund, part of which was originally lent to Michael Murray. After dealing with the various mortgage negotiations and reductions, as outlined in the evidence, His Honour said that the action was to determine the following questions:—(l) Whether the surplus of purchase money held by the defendants should be treated as an asset of the estate of Michael Murray, available for the payment of the loan of £5OO and interest or (2) as an asset of the estate of Sarah Murray, deceased, and available for payment of her debts. (3) If the second question be answered in the affirmative, whether the loan is to be included amongst the unsecured debts of Sarah Murray and to be paid equally with them.

I ASSET OF ESTATE. After dealing with the evidence in detail, His Honor said he was satisfied that the defendants personally were ignorant of the condition of the estate, of Michael Murray, but at the same time he did not think they or their solicitors should have been unaware of it. He said that Mr. Isaac Patterson had died before defendants had assumed office as executors, but his practice was continued by Mr. J. K. Patterson and there thus was a continuous handling of the successive affairs of Michael Murray and Sarah Murray, by the same legal practice. A reference to the files would have disclosed the existence of the debt to the plaintiff or at least indicated the person from whom information about it could have been obtained. No doubt the defendants Gid not make any enquiries of their own accord. His Honor did not suggest that the firm of Isaac Patterson and Son should have undertaken a search of the files in their possession before the plaintiff made his claim in December, 1938. Before they completed the sale of the properties to the dredging company, indeed before they obtained probate, of the will of Sarah Murray, defendants had notice of the claim of the plaintiff. The defendants obtained probate and then proceeded with the sale, and His Honor did not think they could then be heard to say they were unaware of the position. In these circumstances he was of the opinion that they had become executors de son tort, and held the proceeds of the sale as assets of the estate of Michael Murray.

Following a review of the points I raised by the defence, including a compromise with the mortgagees of the remaining property, His Honor said that the mortgagees had made concessions for the express purpose of benefitting the unsecured creditors of Sarah Murray and he had no doubt this was also the aim, of the defendants. He also found that the admintratrix of Michael Murray was not liable for the debt nor liable to indemnify the plaintiff within the definition of the Mortgagors’ and Lessees’ Rehibilitation Act, 1936. Her obligation for the debt was vicarious, only, and extended only as far as the assets of the estate, consequently she was not a guarantor of the debt. “At the trial it was agreed that a decision in accordance with the questions set out above would be sufficient to settle the controversy between the parties,” stated His Honor. “For the reasons given, I am of opinion that the surplus of purchase money should be treated as an asset of the estate of. Michael Murray, available for the re- ] payment of the loan of £5OO and in- t terest thereon. If it becomes neces- I sary I will hear counsel further upon I the form of judgment to be entered and upon any further question which may arise.”