Spode v. Smith.

HIGH COURT OF CHANCERY

Original Printed Version (PDF)

Original Citation: (1827) 3 Russ 511

English Reports Citation: 38 E.R. 667

August 7, 1827.

[511] Spode v. Smith. August 7, 1827.

If an executor, acting bona fide, and under a conviction that the assets are amply sufficient for the payment of the testator's debts, permits specific legatees to retain or possess themselves of the articles bequeathed to them, he will be answerable for the value of those articles, with interest at 4 per cent., if there should ulti¡mately be a deficiency of assets, although the deficiency should be occasioned by subsequent events, which he had no reason to anticipate ; and the Court will direct an account to be taken of the value of the property so possessed by the legatees, and interest to be computed, unless it is certain that the assets will ultimately be sufficient to pay all the creditors.

Thomas Johnes of Hafod, by his will, dated the 16th of February 1815, bequeathed to his wife Jane Johnes a leasehold messuage and premises called Langston, with all the household goods and furniture, plate, linen, pictures, china ware, books, and all other goods, chattels, and effects which should be in or about it at the time of his death, and also all other his household goods and furniture, plate, linen, china, books, prints, pictures, household utensils, wines, spirits, liquors, and other household stores, and all his live and dead stock : and he appointed his wife and Hugh Smith his executrix and executor.

The testator died early in the following year ; and, on the 29th of July 1816, the will was proved by Hugh Smith alone. The widow, not having acted in the execution of the trusts, renounced probate in May 1817.

The bill was filed by creditors of the testator for the administration of the assets. After a decree on further directions, the conduct of the suit had been taken from the Plaintiffs, on the ground that the same solicitor acted for them and for the Defendants, and had been given to other creditors ; and, on the petition of these other creditors, the Vice-Chancellor, on the 20th of March 182(i, made un order, directing that it should be referred to the Master to take an account of the personal estate of Thomas Johnes specifically bequeathed ; and the Master [512] was to inquire and state what was become thereof, and whether any and what part of such personal estate was possessed or retained by the specific legatees with the assent of Hugh Smith, and under what circumstances ; and after the Master should have made his report, such further order was to be made as should be just.

By his report, the Master found from the examination of Hugh Smith, that, immediately upon the death of the testator, his widow Jane Johnes, who was then residing in the house at Langston, took possession, as specific legatee, of the house¡hold goods and other effects in and about it; that she afterwards sold the leasehold and those effects for an annuity during her life, and for the sum of -1000 : that

668 SPODE V. SMITH 3 BUSS. 513.

soon afterwards, possession of the personal estate and effects, which were at Hafod House, or on an adjoining farm which the testator had occupied, was taken on behalf of Jane Johnes by her sister Eliza Johnes, who went for that express purpose to Hafod, and sent some of the articles thence to the house at Langston : that, pre¡parations being made for the sale of the rest of the articles specifically bequeathed, Mr. Claughton, who had purchased of Mr. Johnes the reversion in fee, expectant on his decease, of the mansion house at Hafod, and of Mr. Johnes's other estates in Cardiganshire, proposed to purchase every thing belonging to Jane Johnes in or about Hafod House and the farm : that, after some discussion, Hugh Smith, as the agent for that purpose of Jane Johnes, sold to Claughton certain classes of the articles specifically bequeathed for 2500, which he received and remitted to Jane Johnes : that Claughton agreed to take the residue of the articles at Hafod, being worth from 1500 to 2000, at a valuation, and they were set apart in places of security, till the valuation should be made : but that Claughton, having delayed to name a valuer, timith, on the application of the widow, [513] had advanced her money on the credit of those articles to an amount greater than the price for which they would have been sold : that another legatee, to whom the testator had given a security on a turnpike road for a sum of 200, had been permitted to take posses¡sion of it, and had ever since received the interest; and that the personal estate and effects specifically bequeathed had been retained or possessed by the specific legatees, with the knowledge, privity, assent, and concurrence of Smith, the exec¡utor.

The creditors now presented a petition, praying that the report might be con¡firmed ; that the Defendant might be charged with the value of the personal estate and effects specifically bequeathed, which, with his assent and concurrence, hud been possessed or retained by the specific legatees, and with interest thereon ; and that it might be referred to the Master to ascertain the amount of such value and interest.

At the date of the general report made in the cause, which was in July 1821, there was due to unsatisfied specialty creditors 1927 ; and to unsatisfied simple contract creditors 16,050. The simple contract debts, which carried interest at 5 per cent., were under 4000. All these debts still remained unpaid.

In 1814, Mr. Johnes had contracted to sell to Claughton all bis estates in the counties of Cardigan and Montgomery, for the sum of 90,000,: as to part of the estates, the immediate fee was to be conveyed to the purchaser ; and as to others of them, the reversion expectant on the death of Mr. Johnes : and 35,000 of the purchase-money was to be paid in 1815, and the remaining 55,000, by instal¡ments falling due within the three years next after Mr. Johnes's death. Had this contract [514] been performed, the purchase-money, agreed to be paid by Claughton, would have afforded ample funds for the discharge of all the testator's debts, without resorting to the property specifically bequeathed ; and, for some time after the testator's death, there was no reason to apprehend that the completion of the pur¡chase would be resisted or delayed. Mr. Claughton had entered into possession of the property ; had expressed himself satisfied with the title, after the delivery of the abstract; and had exercised various acts of ownership, and even advertised the estate for sale. Subsequently, however, it appeared that some of the lands were not included in the abstracts which had been delivered ; objections were taken to the title to those lands ; and Claughton refused to perform the contract. A bill for specific performance was then filed, in which the Plaintiffs insisted that Claughton had accepted the title ; but, on the hearing ^f the cause in 1824, a limited order of reference as to title was made by the Vice-Chancellor. That suit was still pend¡ing : and, in the meantime, a commission of bankrupt had issued against Claughton.

The questions on the petition were,-Whether, in case the assets should ulti¡mately prove insufficient for the payment of the testator's debts, the executor, Smith, would be personally answerable for the value of the specific legacies which he had permitted the specific legatees to possess themselves of, or to retain 1 and whether, while it was uncertain whether there would be a deficiency of general assets, any proceedings should now be taken with a view to his alleged contingent liability 1

July 5. The Master of the Rolls [Sir John LeachJ confirmed the report, and dismissed the rest of the petition.

3RUSS. 515.. . SPODE v. SMITH 669

From this order the petitioners appealed.

[515] Mr. Reald and Mr. Spence, for the appeal. The personal assets actually available at the time of the testator's death, including the articles specifically be¡queathed, constituted a fund, which, both at law and in equity, was applicable to the payment of his debts, and was not more than sufficient for that purpose. The executor, in giving up part of the assets to the legatees, before the creditors were satisfied, was guilty of-a devastavit, and must be answerable to those who have been injured by his acts. The creditors had a right to immediate payment out of the first assets which were at the disposition of the executor : it was not his business- to speculate on the supposition that other funds would probably come into his hands, out of which the debts might ultimately be paid ; and it is altogether immaterial, whether, at the time when the legatees received their specific legacies, he had or had not just reason to suppose, that Claughton's purchase-money would soon be received, and that the creditors would sustain no injury by what he then did. The specific legatees could never have been permitted to say, especially to creditors whose debts did not carry interest, " You shall wait for a dozen years before your debt is paid, in order that the articles, bequeathed to us, may remain ours in specie : " and the executor could not give the legatees, at the expense of creditors, an advantage which they could not have claimed for themselves. The delay to which the creditors have been already exposed, is a great injury which they have sustained through the act of the executor ; and they have a right to charge him immediately with the amount of the assets which he has improperly parted with, in order that their debts may be forthwith satisfied, so far as the fund will extend. At any rate, he must be answerable, if there should ultimately be a deficiency of assets. Now. it is by no means clear, that there will not b such a deficiency ; the probability is the other way ; and if [516] the contract with Claugh-ton should not be completed, the deficiency will be considerable. It is in vain to say, that, as Mr. Smith acted with perfect bona fides, the creditors must go against the legatees: the possession of the legatees, with the executor's consent, is the posses¡sion of the executor. It is against the executor that the creditors have to assert their rights; and he may seek compensation from the legatees.

Mr. Sugden and Mr. Simpkinson, contra. It is the duty of an executor, as far as possible, to give effect to his testator's specific bequests ; and if Mr. Smith had applied, in payment of Mr. Johnes's debts, the articles specifically bequeathed by that gentleman, he would have been guilty of a breach of duty. Clarke v. Lord Ormond (Jacob, 108). In 1816, there was a moral certainty that funds would be immediately available, far exceeding the amount of the testator's debts. It did not occur to the executor, or to any of the creditors, that there could be a deficiency of assets ; the very transaction of selling to Mr. Claughton, on behalf of the widow, a great part of the articles specifically bequeathed, was a step proceeding upon and confirmatory of the contract of 1814, the fulfilment of which would necessarily increase the personal assets by 55,000 at the least. Under such circumstances, Smith, in allowing specific legatees to retain or possess themselves of the articles bequeathed to them, acted fairly and honestly, and without negligence or improvid¡ence. No complaint was made against him in 1816. If such a complaint had been then made, it would have appeared most unreasonable and extravagant ; and if he was not blameable at that time, he cannot be blameable now. Even if the assets should be ultimately deficient, the [517] deficiency will have been occasioned by unforeseen and improbable events : and the creditors ought not, under such circum¡stances, to have any relief against the executor, who has acted with perfect honesty, and a fair degree of prudence. They ought to be left to seek their remedy against the specific legatee.

In fact, however, there will not be a deficiency of assets ; there will be funds sufficient for the payment of all the creditors ; and that result will be a convincing proof, that the executor has acted properly. At all events, it is premature to take any proceedings against the executor, until it is certain that the claims of the creditors cannot be provided for otherwise.

The Lord Chancellor [Lyndhurst]. I have no doubt that the conduct of Mr. Smith in this case was perfectly bona fide, and that, at the time when he allowed Mrs. Johnes to take possession of the property bequeathed to her, he was quite satisfied that there were assets sufficient to pay all the debts : and if I could see, with

670 PERRY v. WRLLRR 3 EUSS! 518.

absolute certainty, that there will be a fund equal to the payment of the debts, I should agree entirely with the Master of the Rolls. But I do not see my way, with absolute certainty, to the conclusion, that, independently of the property specifically bequeathed, there will be a fund equal to the payment of the debts : and, if there be a deficiency of assets, I think, on the facts as they at present stand, there is enough to charge Mr. Smith. An account, therefore, must be directed of the value of the specific legacies which have been received by the specific legatees with the consent of the executor, and interest must be computed at 4 per cent. ; unless Mr. Smith will give security.

[518] Mr. Sugden, on behalf of Mr. Smith, declined to give security.

The order was as follows : " His lordship doth order that the order, bearing date the 5th day of July 1827, be reversed, so far as it dismisses that part of the petition which prays that it may be referred to the Master to ascertain the amount and value of the personal estate specifically bequeathed, and interest: and it is ordered, that the Master do take an account of the value of the specific legacies received by the legatees thereof with the consent of the said Defendant Hugh Smith, and compute interest at the rate of 4 per cent, per annum on such value, from the time when the specific legatees possessed or received the same legacies."