The Official Managers of the Newcastle, &c., Banking Company v. Hymers.

ROLLS COURT

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Original Citation: (1856) 22 Beav 367

English Reports Citation: 52 E.R. 1149

May 23, 1856.

[367] The Official Managers of the Newcastle, &c., Banking Company v. Hymers. Hay 23, 1856.

Payments to legatees is no answer to the claims of creditors, though no debt had arisen at the time of such payment. Thus, where the testator held shares in a banking company, and nine years after his death the bank was wound up and a call made, it was held, that payments to legatees in the meantime could not be allowed to the executors as against the official manager in respect of the call.

Payments to legatees, made under a decree in a legatees' suit, cannot be allowed as against creditors, if made without having the accounts taken, and therefore as upoii an admission of assets.

The testator died in 1844, possessed of 100 shares in the above company. By his will he gave a number of legacies, and the residue to Mary Cowan ; and he appointed Hymers and Carr executors. The executors retained the shares and received six dividends on them. In 1847 they took some steps to sell them, but were dissuaded by the family from proceeding in the sale on account of the loss of income which it would occasion. The bank got into difficulties, and in January 1853 an order wa.s made to wind it up. In June 1853 a call was made and the executors, in respect of the testator's shares, was ordered to pay 1836 out of his assets. The amount not having been paid, the Plaintiffs filed a creditors' suit for the administration of the real and personal estate of the testator, and a decree was made for taking the accounts.

Thirty-six items of payments made by the executors anterior to 1853, on account of legacies, annuities, interest and of residue, were disallowed by the Chief Clerk, as

1150 MANAGERS OF NEWCASTLE BANKING CO. V. HYMERS 22 BEAV.368.

was also a sum of 520, paid in April 1853 to Mary Cowan, to compromise a suit instituted by her in respect of the residue.

Carr also stated that in 1847 Robert Cowan, a legatee of 1000, instituted a suit against the executors, and at the hearing in 1849 a decree was made to transfer to him a mortgage for 450, part of the assets, and to pay him 584, which was done. The executors sought [368J to be allowed 1000, the amount of .Robert Cowan's legacy, thus paid under the decree of the Court; but it did not appear that any accounts had been directed, and it was therefore considered by the Court that the order must have been made as on an admission of assets.

Mr. R. Palmer and Mr. Haig, for the Plaintiffs.

Mr. Roupell and Mr. Cracknall, for the Defendant Carr, and Mr. J. H. Palmer, for the Defendant Hymers. The question is, whether executors are entitled to be allowed in their accounts, as against the Plaintiff, the official manager, payments band Jitle made by them to legatees, at a time when there was no debt due from the testator's estate, and before the present claim had any existence. We submit that, on the result of the authorities, they are so entitled.

The question, whether executors are entitled to be allowed payments made to legatees, as against persons claiming a debt against their testator's estate, which was contingent when those payments were made, but became afterwards payable, is treated as unsettled by Mr. Justice Williams (2 Wms. Exors. 1150 (4th edit.) ). The only decision on the question is against the liability of executors, and the other cases, when examined, will be found not to be authorities on the point.

In Nectar v. Gennet (1 Croke, 466), payment of a legacy was resisted by executors, on the ground that their testator had given a bond for a sum sufficient to exhaust the assets, and that they were, or might become, under a liability in respect of that bond. The contest in that case really was, whether the bond had or not been [369] forfeited (the Court holding that it had not), for it was admitted by the counsel for the executors and by the Court, that if the bond had not been forfeited, its existence was no answer to the claim of the legatees, Lord Coke saying, "The difference is, when the obligation is for the payment of a lesser sum at a day to come, it shall be a good plea against the legatee before the day, for it is a duty niaintenant which is in the condition. But otherwise it is where a statute or obligation is for the perform¡ance of covenants or to do a collateral thing; there, until it be forfeited, it is not any plea against a legatee, for peradventure it never shall be forfeited, and may lie in perpefuum ; and by such means no will should be performed." This principle was recognized and acted on by Lord Kenyori, in The Chelsea Waterworks Company v. Cmvper (1 Esp. 277). The question was raised, but not decided, in the recent case of Smith v. Day (2 Mee & W. 684), where one point was, whether executors, in an action against them by a specialty creditor of their testator, could give evidence of payments made to legatees, under a plea of plme eulministravit. The Court held that they had in hand assets sufficient to answer the demand, and, therefore, that their plea was not proved in fact; but if the law had been as contended for by the Plaintiff, there could have been no occasion to consider that question. So, in tiinwums v. Holland (3 Mer. 547), the question was considered by Sir W. Grant as doubtful.

The cases relied upon by the other side are Hawkina v. Day (1 Amb. 160; 2 Amb. (App.) 803), and Norman v. fialdnj (6 Sim. 621). The first case, when examined, will be found to be no authority for [370] the general principle, and that for two reasons: the one, that the supposed payments of legacies was made too soon, Lord Hardwicke saying (2 Amb. 806), " It would be strange to say that legacies, paid immediately, where the executor has a year allowed him for that purpose, should be good against creditors;" the other, that it appears from the schedule to the Master's report in that ease (see 3 Meriv. 558, in a note to Simmons v. Bolland), that the legacies disallowed were legacies to the executor and his wife, retained by him, and therefore still in his hands. Norman v. Baldry was a case of an actual obligation to pay a definite sum, and therefore falls within the distinction taken in Nedor v. Sharp?,, the defence of the executors being, not that the debts or liabilities were contingent, but that they had not any notice of the bond under which it arose, which, as is shewn by Knatchbutt v. Fearnbead (3 Myl. & Cr. 122), affords no defence. So, Davis

OBEAV. STL HIND V. SELBY 1151

v. Blackwdl (9 Bing. 5), was decided on the ground that the Defendants, the executors, had paid legacies prematurely.

A similar question, in principle, has been sometimes raised with respect to pay¡ments of simple contract debts by executors, claims by specialty having afterwards become payable; and it is settled that as against such specialty creditors, these payments ought to be allowed; Henderson v. Gilchrist (22 Law J. (Ch.) 970), and they have been allowed in this case, though, in the regular administration of assets, the specialty creditor has priority.

2. But all the former cases were cases of liabilities of the testator either actual or contingent, at the time of the payment of the legacies by the executors. Here, but [371] for the Winding-up Acts, the liability of this testator's estate would have ceased long since. The remedies of creditors against the shareholders of joint stock banks are governed by the Banking Act, 7 Geo. 4, c. 46, and after three years from the death of a shareholder, his estate ceases to be liable in respect of his shares, both at law and in equity; Barker v. Buttress (7 Heav. 134). If the Defendants, in the present case, are to be held liable, it is by means of an ex post facto law, his estate being made liable wholly by the Winding-up Acts. [THE master of the rolls. Your argument goes to shew that the Defendants ought not to have been put upon the list of contributories, but which you cannot now contest.] 3. As to Robert Cowan's legacy, that was paid under the decree of the Court, and the Defendants ought to be protected for obeying the order of the Court. That they did not put the testator's estate to the expense of taking the usual accounts ought to make no difference, for, otherwise, no executors could safely pay a legacy without inflicting that expense upon the estate. Thmnas v. Montgomery (3 Russ. 502); Musson v. May (3 Ves. & B. 194); Manning v. Ptwlps (10 Exch. 59), were also cited. Mr. Bates, for the devisee of the real estate.

the master OF the rolls [Sir John Romilly]. This ease has been argued very elaborately, but ever since the cases of Hawkins v. Day (1 Amb. 160), Knatdibull v. Fearnhead (3 Myl. &. Cr. 122), Simmons v. Bolland (3 Mer. 547), it has always [372] been held, that where there are debts, executors, are not released from theiv liability by paying legatees. It is contended that the assets are not liable, but in order to maintain that, it ought to be established that the estate was not contributory. I must assume that the assets are liable, that the debt is established ; and, in that case, the executors are not discharged, though they seek to discharge themselves by payment of legacies. It is a very hard case, but if the executors had got in and realized the outstanding estate by a sale of the shares, they would have incurred no liability.

I cannot treat the decree in Cowan's suit as anything. If the payments to the legatees had been made after taking an account of the debts and assets, in the ordinary mode under an administration decree, it would have been a complete indemnity to the executors; but this is not so; no such account was taken, and the payment to the legatees was made as on an admission of assets, and being so, it rather favours the case of the Plaintiffs.

As to the specific legacy, I must treat it as so much money in the hands of the executors, for I assume that they assented to it.

Note.-Carr expressed his intention to appeal, but some compromise was come to between him and the Plaintiffs.