INTRICATE DEALINGS.

Otago Daily Times, Issue 19762, 13 April 1926, Page 7

INTRICATE DEALINGS.

A BANK AND A MORTGAGE. LONG LEGAL ARGUMENT. (Per United Pruss Association.) WELLINGTON, April 12. Judges from both divisions of the Appeal Court are sitting to day to hear a Taranaki case, the Bank of New Zealand v. Baker, involving intricate dealings on a mortgage. The bench consists of Mr Justice Sim, Mr Justice Stringer, Mr Justice Herdman, Mr Justice Heed, and Mr Justice Adams. A full coul ' r t ' consisting of Mr Justice MacGrefor, Mr Justice Ostler, and Mr Justice Alperu originally heard the case, and the judgment of Mr Justice MacGregor and Mr Justice Ostler, Mr Justice Alpers dissenting on the first and expressing no opinion on the second point, was—(l) That the mortgage by defendant extended to secure all moneys owing by one S. Smith to the bank, and was not limited to moneys owing by Smith and secured by the mortgage given by him m October, 1916; that even if this construction were erroneous the defendant had contracted himself out of his right as a surety and that release by the buuk ot the mortgage given by Smith in October 1916, and the taking of a new mortgage in lieu thereof did not entitle the defendant to have the mortgage given by him released. , , (2) That as Smith was bankrupt at the date of demand on the defendant, there were no moneys due or payable by Smith to the bank at that date, and defendant was therefore entitled to the release of his mortgage. __ _ T . Sir John Findlay and Mr H. F. Jo' l } l ' son appeared for the appellant and Mr C. P. Brown and Mr R. Kennedy tor the respondent. The facts of the case, which is considered of importance in banking circles, are that, by a mortgage dated October, 1916, one Sam Smith, in consideration ot banking accommodation then or thereafter given to him by plaintiff bank covenanted to pay, to the bank, on demand, all moneys that might at the time of demand be due owing or payable by him to the bank, and to secure payment thereof, he mortgaged certain lands to the bank. In December, 1916, defendant executed to the bank a mortgage over certain lands. The mortgage recited that Smith was and might become further indebted to the bank, and that in consideration of any' loans, advances, or other banking .accommodation which had been, or might thereafter be made, to Smith by the bank, the defendant had agreed to secure repayment to the bank on demand of all sums of money that might at the time of making such demand be due. owing, or payable by Smith to the bank on any account whatsoverer, but so that he was not to be personally liable for such payment and mortgage containing,inter alia, the following covenants by the defendant with the hank; that the relation constituted by virtue of the mortgage should, as between defendant and the bank, be deemed for all purposes that of a principal obligunt and not that of a surety, and that the bank might grant time or other indulgence to, or compound with Smith, without discharging or affecting the security; that the mortgage should be continuing security so long as the relation of banker and customer should subsist, between the bank and Smith, and notwithstanding any settlement of account or any other matter or thing whatsoever such security should remain in force and extend to cover any sum which might thereafter become owing from Smith to the bank until the final release of the mortgage should have been executed by the bank; that no personal liability should attach to the defendant; that moneys thereby secured were the same moneys secured also by the mortgage given by Smith to the bank, and that that mortgage and the mortgage given by the defendant should be read and construed together, and for the better securing to the bank the repayment of all moneys which it was thereinbefore recited should be secured, and also all moneys which it was thereinbefore provided should be included in tne security. Defendant mortgaged to the bank all his estate and interest in the lands therein described. When the mortgage above referred to was given to the bank by Smith the land comprised therein was subject to two prior mortgages, and in September, 1919. Smith paid off both those mortgages upon which at that date there was owing the principal sum ot £3493, and mortgaged the land to secure £4OOO, and the bank released its mortgage of December 6, 1916, and took a fresh mortgage subject to the mortgage for £4OOO. This was done without reference . to the defendant and without his being informed of it by the bank. The release of the bank’s iportgage was in the form of a receipt endorsed on the mortgage, and the moneys thereby secured were expressed to be received in full satisfaction of the “within obligation” so far as the same affected the laud mortgaged, but without releasing the mortgagor from payment of any moneys owing under the mortgage in 1923, and before any demand was made on the defendant Smith became bankrupt. Legal argument is still proceeding.