Home >> Dictionary Of Banking >> Paying Banker to Transfer Of Shares >> Priorities


equitable, deeds, banker, jones, charge and legal

PRIORITIES. In charges upon landed property, a mortgage conveying the legal estate comes first, and, after that, all the other equitable charges which there may be rank in order of the dates of the respective charges. If, for example, a trustee fraudu lently deposits the deeds of trust property with a banker, the banker's equitable charge will rank after the equitable charge which already existed, before he took the deeds, in favour of the persons benefiting under the trust. But if, on the other hand, a banker is negligent and allows, without a sufficient reason, the deeds of the property included in his equitable charge to remain in the hands of the customer, and the customer obtains a loan upon them from another party, say, Jones, the banker's charge, although first in point of time. will, by reason of his negligence, be postponed to that of Jones.

So long as the title deeds remain in the banker's possession it is unlikely that a charge would be created in priority to his. As a rule, the charges with which a banker is most concerned are those which may exist at the time the security is taken ; but if the banker holds the usual memorandum of deposit agreeing to execute a legal mortgage when called upon, the possession of the deeds and such a document would probably give him the best right to call for the legal estate.

If, before the deeds were deposited with the banker, as security, the property was mortgaged, say, to Jones, or if Jones had an equitable mortgage and subsequently, with or without notice of the banker's charge, obtained a legal mortgage, Jones would then hold the legal estate and would rank before the banker's equitable charge. But if Jones was guilty of negligence in not retaining posses sion of the deeds, or of not obtaining a satis factory explanation of their absence, which enabled the mortgagor to deposit them with the banker, the banker's equitable •targe might in such a case, in equity, be held to precede the legal mortgage held by Jones, provided, of course, that the banker had no knowledge, at the time he took the deeds, that there was a charge in existence in favour of Jones.

.\ prior legal estate would probably not, however, be postponed to a subsequent equitable estate, because of mere careless ness, as distinguished from gross negligence, on the part of the prior mortgagee.

The legal estate can be held only by one person at a time.

If a banker has made an advance upon an equitable charge, without notice of a prior equitable charge, the banker's charge will rank after the prior charge (unless the prior equitable mortgagee has been negligent in not retaining possession of the deeds) ; but if the banker subsequently obtains a mortgage conveying the legal estate to himself, he will thereby secure priority to any previous equitable mortgagee. For example, if Brown contracted with Jones for the sale to him of some land, and, while the deeds were still (without negligence) in Brown's hands, Brown deposited the deeds with a banker without notice of the sale, there would then be two equitable interests in the land, and the interest of Jones, having been created before th3 interest of the banker, would rank first ; but if the banker obtained a legal mortgage, he would thereby gain the priority. If, however, the banker was aware of the fact when he took the deeds that Jones had an equitable interest in the property, he could not, in that case, by securing the legal estate, step in in front of Jones.

In Yorkshire, charges upon property rank according to the date of registration. (See particulars under YORKSHIRE REGISTRY OF DEEDS.) A mortgage upon a ship takes priority from the date of production for registry, not from the date of the instrument. (See under SHIP—MORTGAGE, etc.) (See DEBTS—ASSIGNMENT OF, MORTGAGE, NOTICE OF MORTGAGE.)