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Vishvanath P. Vaidya Vs. the London and Lancashire Life Assurance Company - Court Judgment

LegalCrystal Citation
Decided On
Case Number Suit No. 976 of 1909
Reported in(1910)12BOMLR717
AppellantVishvanath P. Vaidya
RespondentThe London and Lancashire Life Assurance Company
DispositionAppeal dismissed
Excerpt: assignment of policy to another debtor who had no notice, of the deposit-legal estate vested in the second debtor-priority of him over the first creditor who had only equitable charge.;by way of security for advances made by him from time to time, the plaintiff obtained from one d, a deposit of a policy on d's life; but the plaintiff gave no notice of it to the insurance company. defendant no. 2, another creditor of d, who was not aware of the above transaction, took on the 13th august 1909 from d an assignment of the policy as security for debts which d owed to him. the policy was not delivered to defendant no. 2 because d pretended that he could not find it. an application was then made to the insurance company for a duplicate copy of the policy; but the..........these two policies to the second defendant in this suit mulraj khatao who claimed that he had a legal estate in the policies in priority to the claim of the plaintiff.2. i am concerned in this case with only one of these policies, the rs. 30,000 policy in the london and lancashire insurance company. they were made the first defendant in this suit and were discharged on paying the money into court. the circumstances under which mulraj obtained a claim on this policy were as follows :-mulraj was a creditor of dwarkadas to the extent of well over a lac of rupees in june 1909. he heard about that time that dwarkadas was giving security to others of his creditors and therefore getting anxious about his own debt, he called upon dwarkadas to give security. he sent instructions from poona to.....

Macleod, J.

1. The plaintiff in this case had monetary dealings with the late Dwarkadas Dharamsey. In 1904, there was a balance of about Rs. 9000 due to the plaintiff on current account. The plaintiff also accommodated Dwarkadas by signing notes in favour of the Bank of Bombay to the extent of Rs. 50,000, and in order to secure him obtained a deposit of shares from Dwarkadas. In November, 1904, Dwarkadas sub. stituted two policies on his life, one in the London and Lancashire Assurance Company and the other in the New York Assurance Company, in substitution for the share certificates. The liability of the plaintiff on the notes signed by him continued owing to the notes being renewed from time to time until November, 1907, when the notes were paid off; but the policies remained with the plaintiff from November, 1907, until April 1909, when again he became responsible on bills drawn by Dwarkadas Dharamsey to the extent of Rs. 25,000. The liability increased to Rs. 75,000 in July 1909; bills for the amount were falling due in September, and the Specie Bank which help them gave notice to Dwarkadas and the plaintiff that the) would not be renewed. The plaintiff had not given any notice to the Insurance Companies that he held these policies as security for the liabilities incurred by him on behalf of Dwarkadas Dharamsey. On the 28th August Dwarkadas committed suicide. In September, the Bank, an Dwarkadas's estate proved insolvent, gave notice to the plaintiff, and the plaintiff had to deposit security with the Bank to cover his own liability on the ' bills. After the death of Dwarkadas the plaintiff discovered that Dwarkadas had assigned these two policies to the second defendant in this suit Mulraj Khatao who claimed that he had a legal estate in the policies in priority to the claim of the plaintiff.

2. I am concerned in this case with only one of these policies, the Rs. 30,000 policy in the London and Lancashire Insurance Company. They were made the first defendant in this suit and were discharged on paying the money into Court. The circumstances under which Mulraj obtained a claim on this policy were as follows :-

Mulraj was a creditor of Dwarkadas to the extent of well over a lac of rupees in June 1909. He heard about that time that Dwarkadas was giving security to others of his creditors and therefore getting anxious about his own debt, he called upon Dwarkadas to give security. He sent instructions from Poona to his clerk to see Mr. Madhavji, his Solicitor, who was to go to Dwarkadas and demand payment or security. Madhavji saw Dwarkadas on the 19th of June, when Dwarkadas promised that he would see Mulraj about the debt. Dwarkadas went to Poona and saw Mulraj and the next thing Mr. Madhavji heard from his client was that Dwarkadas had promised to give as security policies to the extent of Rs. 1,10,000. Mr. Madhavji saw Dwarkadas on the 22nd of June, and Dwarkadas produced four policies for Rs. 60,000 and said that he would look for the two remaining policies for Rs. 50,000. Mr. Madhavji prepared deeds of assignments of those four policies which had been produced, and on the 23rd of June Dwarkadas executed an assignment of those four policies in favour of Mulraj. He also stated that he would search for the policies, and asked his son in the presence of Mr. Madhavji also to search. After the 23rd of June Mr. Madhavji saw Dwarkadas once or twice and Dwarkadas still asserted that he had been searching for the missing policies and could not find them. The matter then came to the hands of Mr. Kamdar, partner of Mr. Madhavji, who saw Mulraj and Dwarkadas on the 22nd of July. Dwarkadas produced on slips of paper particulars of the missing policies and said he would assign them to Mulraj, The question whether duplicate policies could be obtained from the Companies was discussed and at the instructions of Mr. Dwarkadas, Messrs Madhowji and Kamdar wrote to the Companies asking them for duplicate copies of the policies. Replies from the Companies were received by the 31st of July stating that they required indemnity bonds in a particular form to be signed before they could issue' duplicate policies. The New York Assurance Company also wanted an affidavit. On the 6th of August Mr. Kamdar got instructions to prepare the necessary documents. He prepared the two assignments and two indemnity bonds and an affidavit and he took all those documents to Dwarkadas for signature on the 13th of August. Dwarkadas signed the assignments in favour of Mulraj but as the indemnity bonds and the affidavit had to be signed before a Magistrate or a Justice of the Peace, he told Mr. Kamdar that he would keep the documents in his office and sign them before a Magistrate or a Justice of the Peace thereafter. As a matter of fact Mr. Dwarkadas kept putting off both Mr. Kamdar and Mr. Mulraj. He made excuses that he was busy and gave promises that he would sign the documents but eventually committed suicide on the 28th of August without having executed either the indemnity bonds or the affidavit. The result was that on the 13th of August Mulraj obtained a legal estate in the policies. On the 27th of August he gave a notice to the Companies of the assignment in his favour. The dispute, therefore, in this case is between the defendant who has a legal estate in the policy and the plaintiff who has an equitable charge on the policy without having given notice to the Company that the policies had been deposited with him as security. The well-known principle, therefore applies to this case that an owner of a legal estate has priority over an equitable mortgagee, unless it can be shown that he has had notice of the prior equitable charge or that there were circumstances which put him on notice to enquire whether there was any such prior charge. No doubt a person who gets in a legal estate without getting documents of title in ordinary cases is bound to enquire of the mortgagor or assignor what has become of the documents. But the cases show that if proper enquiry is made and a reasonable answer is given, then the person obtaining a legal estate is not required to do anything further.

3. In this case enquiries were made where the actual policies were. Dwarkadas said they were lost. Was there anything in the statement made by Dwarkadas which might have made Mulraj suspicious of any dishonesty on the part of Dwarkadas. It is not as if he had stated that the policies were in a particular place, then Mulraj would have been bound to ascertain whether they were in such a place. It is not suggested that at that time there was any reason to suppose beyond the fact that Dwarkadas was in want of money and that he was acting dishonestly. And therefore the plaintiff on whom the onus lies has not suggested or proved any facts which, if proved, would have shown that Mulraj should have made further enquiries as to the existence or the locality of the missing documents. It was suggested that as Dwarkadas had already assigned two policies in the New York Life Assurance Company and London and Lancashire Company, that Mulraj ought not to have believed his story that the remaining policies in the London and Lancashire and New York Companies had been lost. But it is difficult to see what further enquiries Mulraj could have made without disputing the good faith of Dwarkadas. As I have said, there was nothing at that time which could lead him to suspect that Dwarkadas was dishonest. It is true that he did not enquire directly of the Companies whether they had received a notice of the assignment but the plaintiff cannot take advantage of that because he had given no notice to the Company himself. If he had given notice to the Company before the 13th of August, there can be no doubt that the companies would have informed Messrs. Madhavji and Kamdar of such notice when they had asked the companies to inform them whether they would issue duplicate policies. But the question as to who would have a prior title, supposing the plaintiff had given notice to the companies, does not arise. There is no reason why he should not had have given a notice to the companies that he was in possession of the policies, except that he did not wish to embarrass Dwarkadas. But owing to his not having given notice to the companies, he enabled Dwarkadas to deal with the policies as if they were still his own. Therefore, on the contest between the owner of the legal estate and the prior equitable mortgagee, as nothing has been proved which should have put the owner of the legal estate on enquiry, and as it has not been proved that he had notice actual or constructive of the prior equitable charge, it follows that the owner of the legal estate must succeed.

4. As regards the indemnity bond, which was at one time thought by Mulraj to be necessary, it might be said, supposing it had been proved that Dwarkadas had been unwilling to sign the indemnity bond, that Mulraj's suspicions might have been ' aroused and that I thought, at first, was the plaintiff's case. But the execution of the assignment and the indemnity bond are two entirely separate things, The execution of the assignment gave Mulraj a legal estate without the documents : the execution of the indemnity bonds was only required to enable him to obtain duplicate policies from the companies, and that in no way affected the legal estate already vested in him by the assignment. Therefore, there was nothing in the fact that Dwarkadas did not sign the indemnity bonds, which could assist the plaintiffs.

5. The plaintiff's suit must be dismissed, and there must be a declaration in favour of the second defendant on his counter-claim against the plaintiff that he is the bond fide assignee for valuable consideration of the policy, and as such is entitled to the policy payable thereunder, and that the moneys in Court should be paid to him. The second defendant must have his costs throughout. The costs of the first defendant to be paid by the plaintiff, and, if already deducted out of the moneys in Court, the same should be paid by the plaintiff to the defendant No. 2.

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