CHAPTER XVI. decisions in each case was that "if the owner of a chose in action clothes a third party with the apparent ownership and right of disposition of it, he is estopped from asserting his title as against a person to whom such third party has disposed of it, and who received it in good faith and for value" (r). This equitable principle, though applicable to the transaction of mortgage, is not applicable to "pledge" in the strict sense of the word, to which the maxim" caveat emptor" still applies in ordinary cases (s). It is submitted, therefore, that the expression "pledge" in the cases above referred to is used in a broad and popular sense rather than in a strictly technical sense, which is the more likely, as in none of those cases did any question as to the proper remedy of the depositee arise apart from the question of title, so that the distinction between mortgage and pledge does not appear to have been necessary to the decisions. Deposit of negotiable instruments. Simple deposit of certificates of shares without transfer. On the other hand, it is settled that a marketable or negotiable instrument may be the subject of pledge, and, accordingly, it was held that a deposit of Canada railway bonds did not confer on the holder a right to foreclosure (t). And the same principle would seem to apply to a deposit of instruments which are not, strictly speaking, marketable or negotiable, as debentures or share warrants to bearer. Where there is a simple deposit of certificates of shares passing by transfer unaccompanied by any transfer, it would seem that the deposit will operate like a deposit of title deeds of land, and be deemed to give a right to a legal transfer of the shares carrying with it the remedies incident to a mortgage. So where a deposit of shares was made with bankers as a security for an advance, but no written memorandum was made, the borrower having become bankrupt, it was held that the proper remedy of the bankers was to apply to the Court to have the shares realized, as in the case of a deposit with a written memorandum, and they were accordingly allowed the costs of such application (u). Again, where directors of a company deposited their shares with a bank to secure an advance to the company, and one of (r) Colonial Bank v. Cady and Williams, 15 App. Cas. 267, at p. 285. (s) See as to this rule, as applied to pledges of goods, post, pp. 1462 et seq. (t) Carter v. Wake, 4 Ch. D. 605. As to what are marketable securities, see Stern v. Reg., (1896) 1 Q. B. 211, and cases there cited. (u) Exp. Moss, 3 De G. & S. 599. the directors became bankrupt, the transaction was treated as one of equitable mortgage, and accordingly decided in favour of the bank as against the bankrupt's assignees, on the ground that the company had constructive notice of the deposit (x). In one case, where share certificates were deposited with a bank as security, accompanied with a blank transfer, which was inoperative as a transfer, and where, the borrower having become bankrupt, it was held that the shares were not in his order and disposition as reputed owner, the transaction was, throughout the judgments of the learned lords who decided the case, referred to as a pledge; but the use of the words "equitable title of the pledgee" and other expressions, seem to indicate that the terms " pledge" and "pledgee" were not used in a strictly technical sense, and that, if any necessity had arisen for taking into account the distinction between a pledge and a mortgage, the transaction would have been treated as one of equitable mortgage by deposit (y). (x) Exp. Stewart, Re Shelley, 4 De G. J. & S. 543. (y) Colonial Bank v. Whinney, 11 App. Cas. 426. CHAPTER XVI. Mortgages of policies coupled with life interests in realty or personalty. Company not chargeable with interest on policy moneys. CHAPTER XVII. OF MORTGAGES OF POLICIES OF LIFE ASSURANCE. i.—Introductory Remarks.-Mortgages of policies of life assurance are generally given as collateral securities, and, as such, are of great value when coupled with a life interest in real or personal property, so as to provide a fund for payment of interest and premiums. But, unless accompanied by a security upon property yielding an immediate income adequate to such payments, a mortgage of a policy is obviously a precarious and ineligible security, inasmuch as it requires periodical payments for its maintenance which must be made by the mortgagee if the mortgagor fails to do so; also, it yields no income, and in the first instance it is of little value for purposes of sale, though its value increases in proportion as it has been long effected, especially if, by the terms of the policy, the insured becomes in course of time entitled to accretions of bonus, or reduction of premiums. A further disadvantage attending mortgages of policies is that, upon the death of the assured, the assurance company may be justified in refusing to pay over the policy moneys to the mortgagee till satisfied on points which may arise; in which case the company is not chargeable with interest on the policy moneys, unless they have been guilty of default or undue delay. Where a policy of life assurance was deposited by way of equitable mortgage, and, on the death of the assured, the mortgagee did not take out administration, but an order was made dispensing with the legal personal representative of the assured, and directing payment of the policy moneys, which were insufficient to satisfy the amount due under the mortgage, to the mortgagor, it was held that interest on the policy moneys did not begin to run until the order for payment was made (a). (a) Webster v. British Empire Mutual Life Assurance Co., 15 Ch. D. 169, C. A. Where a mortgage is effected by a tenant for life, or on an CHAPTER XVII. estate depending upon lives, it is usual to insure the lives of the Court cannot cestuis compel vie as a further security; but in the absence of any insurance. such stipulation the Court cannot compel the mortgagor to insure the lives (b). que lives on which Where a mortgagee of leaseholds for lives insures one of the Insurance of lives, the insurance moneys will not be applied in part redemp- leases depend. tion, but may be held as compensation for the loss to his security by the dropping of the life (c). policies alone. Policies are, however, often mortgaged by themselves. A Mortgages of policy is a security which can be given by those who have no other to give, by men in business, who can afford to pay interest and premiums for the use of capital, or by persons who, like beneficed clergymen and officers on half-pay, are in receipt of an assured income during their lives, which they cannot legally pledge to an incumbrancer (d). When policies are mortgaged alone, the concurrence of sureties in the transaction is often required for the purpose of guaranteeing the payment of the interest and premiums, and, sometimes, of the principal. Securities of this kind are affected by the death of the assured by the hands of justice (e), or by suicide when sane (ƒ). Where the policy is to be void if the assured "died by his own hands," all acts of voluntary self-destruction are included, and the clause is not limited to acts of felonious suicide (g). Policy invalisuicide of the dated by assured. in favour of A policy may contain a stipulation that it shall be valid to Sipulations the extent of the interest of any bond fide assignee, notwith- bona fide standing that the assured should commit suicide (h). And where assignee. a policy containing a stipulation to this effect was mortgaged with other property for a sum exceeding the amount of the policy, and the assured committed suicide (during a fit of temporary insanity), it was held that the payment of the sum assured to the mortgagee did not give the insurance company 96. (b) Grantley v. Garthwaite, 6 Madd. (c) Milliken v. Kidd, 4 Dr. & War. 274. (d) Dav. Conv. vol. ii. pt. 2, p. 122. (e) Amicable Soc. v. Bolland, 4 Bli. N. S. 194. (f) Moore v. Woolsey, 4 E. & B. 251. But it would seem that suicide by an insane person would, in the absence of express stipulation to the contrary, invalidate a policy on his life. See Horne v. Anglo- Australian, &c. Co., 7 Jur. N. S. 673; Borrodaile v. (g) Borrodaile v. Hunter, 5 Man. & (h) Moore v. Woolsey, 4 E. & B. 254; Cook v. Black, 1 Ha. 390; Dufaur v. Professional Life Ass. Co.. sup.; Jones v. Consolidated Investment Co., 26 Beav. 256. CHAPTER XVII. any equity against either the property comprised in the mortgage or the estate of the assured, neither the doctrine of marshalling nor that of principal and surety being applicable to such a case (i). Who is an assignee. Protection of interests of third party. Effect of misrepresentation. As to interest requisite to A deposit and agreement to assign, or a mere letter charging the policy with a floating balance, is a sufficient assignment within this clause; and notice need not be given to the office (). Where the terms of the condition were, that a third party should, notwithstanding that the assured might commit suicide, be indemnified out of the sum assured to the extent of his interest, an inquiry was directed whether he had any securities for his debt other than the policy in order to ascertain such interest (1). A stipulation to take effect in case of the suicide of the assured, "if any third party have acquired a bona fide interest by assignment or by legal or equitable lien for a valuable consideration, or as security for money," does not apply in favour of the trustee in bankruptcy of the assured (m). Where an insurance company advanced money on the security of a policy effected in their office, and containing such a stipulation, the company was held to be a "third party" within the meaning of the stipulation; the condition being intended for the benefit of the assured in order to render the policy an available security (n). The validity of a security on a policy of assurance may be affected by misrepresentations of the assured as to health or age at the time when the policy is effected, even although the fact may be immaterial (o). It is of great importance, therefore, that the mortgagee of a policy of assurance should ascertain that no misrepresentation or suppression of facts was used in effecting the policy, and also, if the policy is not in the name of the cestui que vie, that the assured had an insurable interest at the date of the policy. ii.-What Insurable Interest is necessary to support a Policy.— (i) Solicitors and General Life Assurance Society v. Lamb, 2 De G. J. & S. 251; City Bank v. Sovereign Ass., W. N. (1884) 61. (k) Cook v. Black, 1 Ha. 390; Dufaur v. Professional Life Ass. Co., 25 Beav. 599; Jones v. Consolidated Investment Co., 26 Beav. 256. (1) Cook v. Black, 1 Ha. 390. (m) Jackson v. Forster, 1 E. & E. 463. (n) White v. The British Empire Mutual Life Assurance Co., L. R. 7 Eq. 396. (0) Anderson v. Fitzgerald, 4 H. L. C. 484; Casenove v. British Equitable Insurance Co., 29 L. J. C. P. 160; Thomson v. Weems, 9 App. Cas. 671. |