Judgment of the Court
THE JUSTICE.-The Chancellor by whom this action was originally tried, the Queen's Bench Division consisting of three judges, and the learned Chief Justice of the Court of Appeal, all came to the conclusion that in the matter of the assignment of the mortgages in question Wragg was acting as trustee, and not in the capacity of executor, under the will of James Cumming. Three learned judges of the Court of Appeal arrived at a contrary conclusion.
In the several judgments which were delivered in the courts below the reasons for and against the view which ultimately prevailed are fully set forth.
I have come to the conclusion that the judgment in the court of first instance was entirely right, and that for the reasons given by the Chancellor to whose conclusions, as both regards the facts and the law, I give my unqualified assent.
Had Wragg not been an executor under the will Cumming at all no one can doubt that there would have been a breach of trust in the assignment of these mortgages of which the respondents must be deemed to have had notice. That there would have been in that case in fact-a breach of trust is evident, as Wragg had no power to deal with or transfer the securities in which the trust funds belonging to the estate might happen to be invested.
Granting that there was authority to invest the trust Justice. funds in the mortgages to Foley & Brignall yet Wragg would have been guilty of a breach of trust in taking those securities in his own name alone.
He would have been guilty of a further broach of trust when he assigned these mortgages to the building society, and of yet another dereliction of his duty as a trustee when he made the transfer to the respondents.
Then, on the face of all the instruments,-the niortgages themselves, the assignments to the building society, the re-assignments by the latter to Wragg, and the assignments by Wragg to the respondents,-' he described as a trustee.
This was beyond all doubt question sufficient to give notice to the respondents that he was a trustee professing to act under some trust contained in the will of James Cumming. They, therefore, had constructive notice of the trusts contained in that instrument.
If they had made the inquiries which they ought to have made they would surely and easily have discovered the fraud and breach of trust which Wragg was perpetrating.
It is said, however, that Wragg having been an executor as well as a trustee, and the law being that as an executor he had power without the concurrence of his co-executor to make a valid mortgage of any of the assets provided the mortgagees had no notice either from the nature of the transaction or from extrinsic circumstances that he was acting in fraud of the estate, he must be assumed to have been acting as executor in these transactions, and that therefore the respondents having had no actual notice of any breach of trust are purchasers for value without notice and entitled to hold the mortgages as such.
The case of Ewart v. Gordon (1) is relied on as an authority for this.
I was counsel for the defendant in that case, and my recollection of it, confirmed by a recent perusal of the judgment, leads me to the same conclusion as the Chancellor, viz.: that the actual decision there has no bearing on the present question.
As regards Wragg himself and all persons taking securities from him it would, I think, without altogether ignoring Sioeeny v. Bank of Monlreal, be impossible to say that he was not acting as on the face these instruments he declared himself to be acting, viz., as a trustee and not as an executor.
The respondents' own officer in his evidence swears that the respondents' company dealt with Wragg as a trustee, and in their statement of defence they do not even set up the ground the majority of the Court Appeal have rested their judgment upon, namely, that he was acting as an executor.
I think it impossible now to hold that Wragg was acting as executor after having announced himself to be dealing with the respondents as a trustee, and after their own officer's admission that they dealt with him in that character.
Further, I am not prepared to say that after all the debts of an estate are paid, and after the lapse of ten years from the testator's death, there ought not to be in any case at least a presumption that, one of several executor-trustees who is dealing with assets is so dealing with them qud trustee and not as executor. think in such a case it should lie on the person seeking to uphold the transaction to show thathe dealt with the other party as an executor. What I have now said may perhaps to some extent contravene propositions laid down in Ewart v. Gordon or in some of the cases relating to the same estate decided at the same time.
should be unwilling-to do this did I not feel that that case was a very strong decision bearing hardly on the beneficiaries of the estate.
I do not go so far as to say that the presumption I speak of ought to be con- Justice. clusive, but I think it ought at least to shift the burden of proof. Then, if it is sufficient for that purpose it is clear that the respondents here cannot say that they did not deal with Wragg as a trustee, for they accepted transfers of these securities from him acting ostensibly in that character, and moreover their officer says they dealt with him as a trustee.
I also agree with Mr. Justice Street that if it was necessary to show that these mortgages had been appropriated to the trust (referring to the case of Willimott v..Jenkins) there was proof of such an appropriation here, inasmuch as that fact appeared from the form of the mortgage deeds themselves.
What could show more plainly that personal assets held originally by an executor, who was also a trustee, had been turned over to the trust than the fact that he had invested them in securities taken in favour of the trust ?
If there had been within the scope of the trust power in Wragg acting alone to deal with these securities in the way he has done, -and the only breach of trust had consisted in his misapplication of the moneys received.
from the respondents, then it would have been a case within the statute which relieves persons rightfully and innocently dealing with trustees from seeing to the application of purchase money and loans.
But, as I have said, the dealing with the securities themselves, not merely the use made of the proceeds, involved a breach of trust of vwhich the respondents must be taken to have had constructive notice.
The original judgment pronounced by theChancellor must be affirmed with costs to the appellants in all the courts.
SoiAppeal allowed with costs.