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A selection of leading cases in equity, with notes (Volume 1) online

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Bep. 260.

The second exception from the
rule, mentioned by the Master of
the Bolls, is, where there is a
fraud in the case on the part of a
pm'chaser or mortgagee, which
fraud will be inferred in many
instances. Thus, where an exe-
cutor disposes of or pledges his
testator's assets in payment of or
as a security for a debt of his
own, the person to whom they are
disposed of or pledged will take
them subject to the claims of the
creditors, specific and general lega-
tees, of the testator : thus, in Hill
V. Simpson, 7 Ves. 152, Simpson,'
an executor, immediately after
the death of his testatrix, Mrs.
Smith, transferred certain funds
standing in the name of John
Smith, her deceased husband, to
whom she was executrix, and
other funds standing in her
name and in .the name of her
co-executor, to Moffatt & Co.,
his bankers, as a secmity for
such sums as he then owed,
or might afterwards owe them.
Mofi'at & Co. denied that they
knew, or suspected, that the funds
were not at the time of the trans-



fer the absolute propert}- of Simp-
son, as executor or devisee of
Mrs. Smith ; or that they were
part of the personal estate of
John Smith ; on the contrar}^
they believed they were Simpson's
own propertj^; and he represented
to them that he was absolute^
entitled thereto subject onl}'' to
an annuity of 20Z. to Elizabeth
Smith's sister during her life,
and to a few very small legacies :
that he had full right to dispose
thereof, and would have disposed
thereof but for the low price of
the funds, which he expected
would rise. They also stated
that they did not know any of the
legacies of John Smith to the
plaintiffs, or any other person, were
unpaid. However, Sir IF. Grcnit,
M. R., held that the general
legatees could follow the funds
transferred to the bankers. " In
this instance," observed his Ho-
nor, "the assignment was made
in less than a month after the
death of INIrs. Smith. There is
not, therefore, the least ground
for the presumption of right ac-
quired to the assets of Mr. or
Mrs. Smith by jjayments made in
that short interval on account of
either estate. It is not pretended
it was to satisfy any claim on
oitlier estate ; for the express
purpofse appears to have been to
secure a debt of his own, wliich
he already owed to the bankers,
and otlier advances they were to
make by taking up Idlls of his
then actually outstanding. 'I'bcy

had distinct notice, therefore,
that the money was not to be
applied to any demand upon
either estate ; but the assets were
to be wholly applied to the pri-
vate purpose of the executor.
Allowing every case to remain
undisturbed, does it follow from
any that an executor in the first
month after the testator's death
can apply the assets in payment
of his own debt ; and that a cre-
ditor is perfectly safe m so receiv-
ing and applying them, x^rovided
he abstains from looking at the
will, which would show the exist-
ence of unsatisfied demands ? I
am for the moment keeping out of
sight the representation made by
Simpson, and supposing the ques-
tion to be, whether an executor
may thus deal and be dealt with ;
and it is clear, no rule of justice
permits, or of convenience re-
quires, that he should have, this
unbounded power. Though it
may be dangerous at all to re-
strain the power of purchasing
from him, what inconvenience can
there be in holding, that the
assets, known to be such, should
not be aj)plied in any case to the
executor's debt, unless the credi-
tor could be first satisfied of his
right ? It ma}' be essential that
the executor should have the
power to sell the assets ; but it is
not essential that he should have
the pcjwer to pay his own creditor,
and it is not just that one man's
proi)orty should be applied to the
l)iiyiiK'nt of another man's debt . . .



It was gross negligence not to look
at the will, under which alone a
title could be given to them. It was
not necessary to use any exertion
to obtain information, but merely
not to shut their eyes against the
information which, without extra-
ordinar}- neglect, they could not
avoid receiving. No transaction
with executors can be rendered
unsafe, by holding that assets
transferred under such circum-
stances may be followed." See
also Haynes v. Forshaiv, 11 Hare,
93 ; Wilson v. Moore, 1 My. & K.
337 ; Wilson v. Leslie, 5 W. E. (V.
C. K.) 815 ; Ilolfe v. Gregory, 11
W. K. (V. C. K.) 1016 ; Farliall
V. Farhall, 7 L. R. Eq. 286.

A diiferent doctrine appears to
have formerly prevailed in Mead v.
Orrery, 3 Atk. 235, and Xugent v.
Gifford, 1 Atk. 463. The autho-
rity of these cases, however, is
Aveakened, if thej' are not com-
pletely overruled, by Hill v. Sinq)-
son ; and see Bonney v. lUdr/ard,
1 Cox, 145, where Sir Lloyd Ken-
yon, M. E., in commenting on
Mead V. Lord Orrery, says, that
if it had come before him, he
should have decided it in dii-ect
opposition to that authority. It
may be remarked, however, that
in Nugent v. Gifford the executor
was the sole residuary legatee ;
and in Mead v. Lord Orrery he
was one of the residuary legatees,
and his co-executors joined with
him in the assignment. If, there-
fore, these cases are rightly de-
cided, they seem to establish that

where an executor is also resi-
duary legatee, fraud or collusion
will not necessarily be inferred as
against the person to whom he
sells or mortgages a chattel of the
testator's in payment of or as a
security for his own debt. See
M'Lcod V. Drummond, 17 Ves.
163, 164 ; Bedford v. Woodham, 4
Yes. 40, note ; Williams v. Massy,
15 Ir. Ch. Eep.47.

It is clear, that, in the absence
of fraud or collusion, the assign-
ment by an executor, as a securit}'
for his own debt, of a chattel spe-
cifically bequeathed to him, will
be good : Taylor v. Haichins, 8
Ves. 209.

A purchaser, however, with
notice of the testator's debts
being unpaid, will not be allowed
to retain a chattel obtained from
an executor as a security for
his own debt, although the exe-
cutor is also specific or residuary
legatee ; thus in Crane v. Drake,
2 Vern. 616, where the purchaser,
with notice of the plaintiif 's debt,
bought a lease from the executor
and devisee, upon an arrangement
that part of the purchase-money
was to go in payment of a debt
due to him from the executor,
it was held that the sale was not
binding upon the plaintiif, the
Lord Chancellor saying, " The
defendant was a party, and con-
senting to and contriving a devas-
tavit." In commenting on this
case, in Andrcir v. Wrigley, 4 Bro.
C. C. 139, Lord Alvanley, M. E.,
observes, " Can tliere be a stronger



case of a devastavit, than an exe-
cutor aliening the propert}' of his
testator to pay his own tlehts, and
the ahenee then knew that the
plaintiff's debt was due?" See
also Nugent v. Gijford, 1 Atk.
4G4; M'Leod v. Dnimmond, 17
Yes. 163.

So, where the executor has sold
for an under-value, or to one who
has notice that the testator had
left no debts, or that all debts had
been paid, a sale or mortgage of
the personal estate b}' the executor
will not be valid. Eicer v. Corbet,
2 P. Wins. 148 ; Scott v. Tyler, 2
Dick. 725; Drohan \. Drohan, 1
Ball k B. 185 ; Rice v. Gordon,
11 Beav. 265 ; and see Stroughill
V. Anstey, 1 De G. Mac. & G. 635 ;
M'Midlen v. O'lleilly, 15 Ir. Ch.
Hep. 251 ; Hcdl v. Andreics, 27
L. T. E. (N. S) 195 ; 20 W. E.
(V. C. W.) 799.

The exceptions from the general
rule, that a purchaser from an
executor is not bound to see to
the application of the purchase-
money, have been well summed up
by Lord Tlmrlow in Scott v. Tyler,
2 Dick. 725. " If," observes his
Lordship, " one concerts -svith an
executor, by obtaining the testa-
tor's effects at a nominal price or
at a fraudulent under-value, or by
applying the real value to the pur-
chase of other subjects for his own
behoof, or in extinguishing the
private debt of the executor, or in
any other manner, contrary to the
duty of the office of executor, such
concert will involve the seemiut'

purchaser, or his pawnee, and
make him liable for the full

Length of time and acquies-
cence, as in the principal case,
will prevent creditors and legatees
from asserting their claims against
purchasers, although the sale by
the executor Avas attended with
suspicious circumstances of fraud,
and a fortiori against mesne pur-
chasers : Bonney v. Ilidgard, 4
Bro. C. C. 138, cited in M'Leod
V. Dnimmond, 17 Yes. 165 : S. C,
1 Cox, 145.

And the fact of the legacies
being contingent will be no suffi-
cient excuse for the legatees lying
by when they have such an inte-
rest as will entitle them to know
what debts the testator owed, and
what part of his estate had been
applied in payment of them : An-
dren- v. Wrigley, 4 Bro. C. C.
135 ; llolfc v. Gregory, 11 W. E.
(Y. C. K.) 1016^4 De G.Jo. &
Sm. 576.

In Mead v. Lord Orrery, 8 Atk.
235, Lord Hardwicke seems to
think that residuary legatees are
never permitted in any case to
question the disposition which the
executors have made of the assets
— that creditors or siiecific lega-
tees could only do so. However,
in Hill V. Simpson, 7 Yes. 152,
Sir William Grant decided that a
mere pecuniary legatee could fol-
low the assets into the hands of
a third person. In M'Leod v.
Dnimmond, 17 Yes. 169, Lord
Eldon concurred in the principle



laid down b}' Sir William Grant.
" I caimot conceive," said his
Lordshij), " why a creditor and a
specific legatee should be able to
follow the assets, and not a pecu-
niary or residuary legatee."

Upon the same principle as
that applicable to the cases of
sales by executors, a banker
will not be liable for paying the
cheque of his customer, being an
executor, who misapplies the
money, unless a misapplication
thereof was intended by the exe-
cutor amounting to a breach of
trust of which the banker was
cognisant. See Gray v. Johnston,
3 L. E. Ho. Lo. 1. There E. Gray
& Co. acted as bankers to T.
Johnston, who carried on business
with his son-in-law under the
style of Johnston & INIayston,
but whose accounts Avith them
were kept in his own name alone,
and were unsettled at his death.
He left a will, bequeathing all his
property to the use of his wife
for life, and after her death to be
divided among their children fj.s
she might think fit. Part of the
property consisted of life-policies,
which were put into the hands of
the bankers, together with the
probate of T. Johnston's will,
and the}' received the amount
of the policies, made up their
accounts, and, after deducting
their own unsettled claims, de-
clared a certain sum to remain
due from themselves to the exe-
cutrix. She continued her hus-

band's business with his late
partner, under the style of " John-
ston ifc Mayston," and a new
account was ojiened with the
bankers in the name of the new
firm, and she as executrix drew
a cheque for the amount stated
to be due to her, and paid it to
the bankers to be credited to the
firm of " Johnston & Mayston,"
and it was so credited and paid
out, with other money on account
of cheques drawn by the new
^nn. It was held by the House
oi Ijords, reversing the decision
of the Lord Chancellor of Ireland
{Brady), that these circum-
stances were not in themselves
sufficient to show that a breach
of trust had been committed, and
that the bankers knew the inten-
tion to commit it, so as to render
them liable (in a suit by the
children of the testator) to re-
place the monej'. " The relation,"
said Lord Wcsthury, " between
banker and customer is somewhat
peculiar, and it is most important
that the rules which regulate it
should be well known and care-
fully observed. A banker is
bound to honour an order of his
customer with respect to the
money belonging to that customer
which is in .the hands of the
banker; and it is impossible
for the banker to set up a jus
tertii against the order of his
customer, or to refuse to honour
his draft, on any other ground
than some sufficient one resultmg
from an act of the customer



himself. Sup})osmo', therefore,
that the banker becomes inci-
dentally aware that the customer,
being in a fiduciary or a represen-
tative capacit}', meditates a breach
of trust, and draws a cheque for
that purpose, the banker, not
being interested in the transac-
tion, has no light to refuse the
payment of the cheque ; for if he
did so he would be making him-
self a party to an inquiiy as
between his customer and third
persons. He would be setting
up a supposed jus tertii, as a
reason why he should not perform
his own distinct obligation to his
customer. But then it has been
very well settled, that if an exe-
cutor or a trustee who is indebted
to a banker, or to another person
havmg the legal custody of the
assets of a trust estate, applies
a portion of them in the payment
of his own debt to the individual
having that custody, the indi-
vidual receiving the debt has at
once not only abundant proof of
this breach of trust, but parti-
cipates in it for his own personal

benefit The question

then resolves itself into one of
fact. Can the payment of that
money to the credit of the ac-
count of the new firm be properly
treated as a payment for the
benefit of the bankers, designed
and intended to be the means of
payment to the bankers of the
debt that might be due to them
on the new account ? It would
be impossible to say that any such

thing was either designed or in-
tended; and it would be equally
impossible to say that any such
thing was at once accomplished
by means of the pajinent of the
money to the credit of the new
account. If it had been so ac-
complished, if a balance had
been immediatel}' struck, and the
sum of money so paid in had
been ai^propriated at once to the
paj'inent of the balance due on
that account to the bankers, or if
any other transaction had been
made by which you might follow
the mone}', and say that it was
applied according to the agree-
ment of the parties, dii'ectly and
expressly in discharge of a debt
due from the new firm to the
bankers, then we should, want no
more to compel restitution from
the bankers, and the case would
fall within the ambit of well-
settled and firmly fixed aulho-
rities. But it is impossible, I
think, to credit the statement that
this was a payment intended to be
for the benefit of bankers, or that
it was made by any collusion or
fraudulent agreement between the
bankers and the executrix in
order that the bankers might
derive a personal benefit there-
from.'* See also FarhaU v. Far-
hall, 7 L. Pt. Eq. 28G ; Barnes v.
Addy, 9 L. R. Ch. App. 244.

Wlicther a Charge of Debts au-
thorises a Sale of Real F state by
Executors.] — The question has of
late been much discussed, whether



a general cliarge of debts upon
real estate authorises a sale b}' the
executors. It is laid down broadly
by SirL. SJtadw ell, Y.-C, inForhes
V. Peacock (12 Sim. 541 ; overruled
upon another point, 1 Ph. 717),
that " if a testator charges his
real estate with payment of his
debts, that, prima, facie, gives his
executor power to sell the estate,
and to give a good discharge for
the purchase-money."

If the learned Yice-Chancellor
meant, that such a charge gave a
legal power to the executors to
sell, the subsequent authorities
render it necessary that his pro-
position should to some extent be

The first case which it is im-
portant to notice is that of SJiaw
v. Borrer, 1 Keen, 559 — there the
will contained a general direction
to pay debts, so expressed as to
constitute a charge on all the tes-
tator's real estates ; followed by a
devise of a particular portion of
the real estate to trustees for a
special purpose, and a residuary
devise of real estates for other sj)e-
cial purposes. No suit had been
instituted in equity to ascertain
the deficiency of the personal estate
to pay the debts; and the question
was, whether the trustees and exe-
cutors together could make a title
to the purchaser of that part of the
real estate which was devised to
trustees for special purposes. It
was argued, that such a sale could
only be effected under the decree
of a Court of equity for the admi-

nistration of the testator's estate ;
but Lord Lanrjdale, M. R., held
that a good title could be made.
" It seems to be clear," said his
Lordship, "that a charge of this
nature has been, and ought to be,
treated as a trust, which gives the
creditors a priority over the spe-
cial purposes of the devise ; and
no doubt is raised but that, on the
application of the creditors, the
Court would, in a suit to which the
executors were parties, compel the
trustees, for special pm-poses, to
raise the money requisite for the
payment of the debts. If so, is
there any good reason to doubt
but that the trustees and execu-
tors may themselves do that which
the Court Avould compel them to
do on the application of the cre-
ditors '?"

Sliaw V. Borrer was approved
of by Lord Cottenltam m the
case of Ball v. Harris (4 My. &
Cr. 264), where he held that an
executor, who was also trustee of
the real estate for other persons,
there being a general charge of
debts, had power to sell or mort-
gage the estate. "I have," said his
Lordship, " carefully considered
the judgment of the Master of the
Eolls in S]iaw v. Borrer upon this
point, and I. entirely concur with
him upon it. The pomt, indeed,
has been long established. It
arose directly in Elliot v. Merry-
man, and as there laid down, has
been recognised in the several
cases referred to by the Master of
the Rolls ; to which may be added



the opinions of Lord Tkiniow and
Lord Eldon in Bailey v. Eldns (7
Ves. 319, 323), and Doltoii v.
Ilciven (6 Madd. 9) ; for although
the point in some of those cases
was, whether the purchaser was
hound to see to the application of
the purchase-money, the decision
that he was not, assumes that the
sale was authorised hy the charge
in the will of the dehts upon the
estate ; that is, that the charge of
the dehts upon the estate was
equivalent to a trust to sell for the
payment of them."

Now, in the first of these cases,
it will he observed that the trus-
tees joined with the executors in
the sale ; and, in the second, that
the executor was also trustee, so
that, as no difficulty arose with
respect to the conveyance of the
legal estate, a good title could
he made ; in the first case, b}^
the trustees and executors ; and
in the second case, by the exe-
cutor actmg in a double capacity

Li the case of Gosling v. Carter,
1 Coll. G44, the testator, after
giving a general direction for pay-
ment of his debts, gave and be-
queathed all his real and personal
estate to his wife for life, with a
direction to sell the same, and
divide the proceeds after her de-
cease ; and he made his wife and
another person executrix and exe-
cutor. The executrix and executor
sold the real estate by auction ;
and upon a bill filed by tliom
against the purchaser, it was hold

by Sii- J. L. Knight-Bruce, V.-C,
that they had an implied power to
sell the estate for pajmient of debts,
but that the defendant ought not
to be compelled to complete the
purchase without a conveyance
from the heir-at-law. " There is,"
said his Honor, " an implied power
of sale, because the life interest of
the wife is subject to the general
charge for payment of debts ; there-
fore, in a sense, and in a manner,
there does exist a power of selling
during the lifetime of the wife,
there being debts, which fact is
proved. And I am of opinion,
that there is uj)on this will an in-
tention exhibited, that a sale, if
made, should be made by the exe-
cutors, or one of them, and not
otherwise. The next question is,
whether this intention is expressed
so as to create a legal power ? in
which case, the concurrence of the
heir-at-law would not be necessary.
I am of opinion this question is
one of too great nicety and diffi-
culty to decide against the pur-
chaser. If he wishes the concur-
rence of the heir, he must pa}', or
not pay, for the discovery of the
heir, according to his contract.
Upon that I give no opmion.
But I thinlc that in this suit he is
not to be compelled to take the
title from the executor and execu-
trix without the concurrence of the
heir. I decide, therefore, without
prejudice to the question, whether
the heir is, or is not, a necessary
party to the conveyance, tliat the
executor and executrix, ns dcl)ts



are admitted to have existed at
the time of the sale, had power to
sell." And see Curtis v. Fulhrook,
8 Hare, 25, 278.

Tlie question was next con-
sidered at hiAV in the case of Doe
d. Jones V. Hughes, G Exch. 223 ;
there a testator, after charging all
his real and personal estate with
his dehts, funeral and testamen-
tary expenses, and a legacy therein
mentioned, subject thereto, gave
and devised the rents and profits
of aU his messuages, farms, and
lands, except Ids Bala Houses, to
his wife for life, with remainder
over to another person in fee.
And he also bequeathed to his
wife the whole of his personal
estates, and appointed her sole
executrix. It was held by the
Com't of Exchequer that the
executrix had no implied power
to sell or mortgage the Bala
Houses (which descended to the
heir) for the pa3aiient either of the
debts or of the funeral or tes-
tamentary expenses or legacy.
"Upon the argument of this case,"
said Parke, B., "the several autho-
ritiesuponthe subject were brought
before us ; and it was contended
on behalf of the defendant, that
the effect of a charge of the real
estates with debts was to give to
the executrix an implied power of
sale. But upon a due considera-
tion of all the cases, it is perfectl}''
clear that not one of them bears out
that proposition. One class of cases
shows, that by a devise to trustees
of the real estate charged with the

testator's debts, the trustees have
thereby imposed upon them the
duty of raising money to pay those
debts ; for, as the estate is given
to tliem, they can, through the
means of the estate, raise money
for the payment of those debts.
Another class of cases decides,
that if from the whole purview of
the will it appears to have been
the intention of the testator that
his real estate should be sold,
and the proceeds of that real
estate are to be distributed for the
purpose for which it is given,
which the executors alone by law
could perform, then there is an
implied power given them by the _
will to sell the estate ; and that
the executor who is to distribute
the money is to sell the estate. Se-
veral cases were cited which con-
firm this proposition, and amongst
them is that of Forbes v. Peacock.
But upon looking through the
cases, not a single authorit}'' is to
be found which says, thata simple
charge of the estate with the
payment of the debts does more
than make a charge upon the
estate in the hands of the devisee,
if the estate is devised, or upon
the estate in the hands of the heir-
at-law, if the estate devolves upon
him by the law of mheritance. . . .
The estate is only subjected in the
hands of the heir-at-law to a charge
for funeral and testamentary ex-
penses, and the chai'ges attending
the proof of the will, wliich the
executrix must enforce through
the medium of a Court of Equity;



and we therefore tliink the execu-
trix had no power to sell or
mortga£;e the estate. It is not
within the principle of any of the
cases in which it has been held
there is an implied power of sale
or mortgage." See also Kenrick
V. Lord Beauderh, 3 B. & P. 175 ;
Doe V. Claridge, 6 C. B. 641.

The next case to be noticed,
(apparently conflicting with Doe
d. Jones v. IlugJies) is tlie case
of Robinson v. Lowater (17 Beav.
532): there a testator devised some
messuages in Ptutland Place to his
daughter Elizabeth (since de-
ceased) for life, with remainder to
all her children living at her de-
cease, and two closes in Sand-
field to his son Ptichard for life,
with remainder to the use of his
children who should be living
at his decease, as tenants in
common, Avitli a limitation over
in the event of that remainder
not taking effect. And he de-
vised his estate at Arnold to
his son Richard in fee charged
with the payment of the sum of
200Z. due on mortgage of his mes-
suages devised to his daughter

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