RICHARDSON and all the other members; therefore every person interested in the documents is before the Court.

v.

HASTINGS.

July 31.

[ *356 ]

As to the other point, the plaintiff is willing to undertake not to use the documents for the purposes apprehended by the defendants.

The MASTER OF THE ROLLS having, during the argument, referred to Few v. Guppy (1), said he would consider the points.

THE MASTER OF THE ROLLS:

In this case, I think that the defendants are bound to produce, or to permit, the inspection of the documents *in their possession. I think that they cannot refuse the production on the ground that other persons not parties to the cause have an interest in them, it having been determined that those other persons are not, under the circumstances of this case, necessary parties to the cause.

It was objected that the plaintiff is an attorney in actions brought against the defendants by different creditors of the Club whose affairs are the subject of this suit, and that he may use the documents sought to be produced, as evidence of the demands which those creditors have against the Club.

I think that the plaintiff ought not to use the documents for any such collateral object; and as he has offered, if I should think it right, to undertake not to use the documents, or any copy of them, for that purpose, I shall make the order for the production or inspection of these documents, on his undertaking to that effect.

1844. June 5, 7.

Rolls Court.
Lord
LANGDALE,

M.R.
[379]

AMES v. PARKINSON (2).

(7 Beav. 379-386.)

An executor and trustee directed to invest a legacy on mortgage, may properly appropriate one of the testator's mortgages in payment of the legacy, but he must ascertain its sufficiency.

A trustee, having the option of investing on mortgage or Government security, improperly took an insufficient mortgage security. Being held answerable, the Court decided, that having exercised his discretion, though improperly, he was answerable for the money lost, and not for the stock it might have produced.

By his will, the testator directed his executors, "within twelve months after his decease, out of his personal estate, to lay out and

(1) See 13 Beav. 471.

(2) In re Chapman [1896] 2 Ch. 763, 65 L. J. Ch. 892, 75 L. T. 196.

invest in their or his names or name the sum of 1,500l. on mort- AMES gage of freehold or copyhold estates of inheritance or on Govern- PARKINSON. ment securities," and which they were to hold upon certain trusts under which the plaintiffs were interested.

The testator died on the 27th of December, 1825, possessed of three mortgages on freehold estates for 800l., 500l., and 200l., besides other property. His assets were admitted to have been more than sufficient to pay his debts, funeral expenses, and legacies, and it appeared that the defendant, his executor, was interested in the residue.

On the 27th of December, 1826, the executor appropriated the three mortgages of 500l., 2001., and 800l. for the purpose of answering the legacy of 1,500l., which the executor had the option of investing on mortgage or Government securities.

The mortgage for 500l. was paid off, and the produce properly invested.

The mortgage for 800l. was paid off in May, 1836, and was placed in the hands of Messrs. Gurney, bankers, to a deposit account, in the name of the surviving executor. *The account was distinct from his own account, but the money was, in no way, marked as trust money.

The 2001. was alleged and appeared to be invested upon an insufficient security, and the mortgagor was insolvent.

This bill was filed in 1842, by parties interested in the 1,500l. legacy, against the surviving executor, seeking to make him liable for the loss occasioned by the alleged non-investment of the legacy within twelve months after the testator's death.

The price of the funds had risen, so that it would be more beneficial to the plaintiffs to make the defendant account for the stock which might have been purchased, than for the money.

Mr. Kindersley and Mr. Busk for the plaintiffs :

The executors never complied with the direction of the will. They might have invested the money on mortgage, yet it was to be "in their names; "but they had no authority to appropriate the testator's mortgage in discharge of the legacy, thus leaving the securities in the name of the testator, instead of that of the trustees.

As to the 2001. mortgage, the executor did not exercise a proper discretion. The mortgage property is proved to be worth no more than 150l., and the mortgagor is insolvent. The defendant is interested in the residuary estate, and would have the benefit of

[ *380 ]

appropriating bad securities to the payment of the legatee; he is therefore liable: Stickney v. Sewell (1).

The defendant committed a breach of trust by lending the 8001. on a deposit account with his bankers, and as to all the funds, the cestui que trust has the option of recovering either the money or the stock, which would have been produced by a proper investment in the funds at the proper time: Watts v. Girdlestone (2).

Mr. Turner and Mr. Adams, contrà :

The executor had a discretion, and has been guilty of no default in appropriating the testator's own mortgages in discharge of the legacy of 1,500l., for he has substantially fulfilled the directions of the testator. It would have been absurd for him to have realised the mortgages, and then to have reinvested the produce in the same securities to answer the legacy.

As to the two mortgages for 500l. and 800l., they have been realised, and no complaint can therefore be made as to those securities.

As to the 2001. mortgage, there is no allegation that, at the time of the appropriation, the defendant was aware that it was a deficient security, and it may have become depreciated since. If a trustee acts bonâ fide to the best of his judgment and without corrupt motives, the Court will not charge him, though the security he has taken may ultimately turn out deficient. There is no case, "in which an executor has been called upon to bear the loss that has arisen, because, in the bonâ fide exercise of a reasonable discretion, the conclusion he came to has turned out unfortunately:" Buxton v. Buxton (3). At all events, the defendant is entitled to an enquiry on the subject. *

Lastly, the defendant has been found a lunatic, and is shown by the evidence to have had fits of partial insanity before the time from which he is found by the inquisition to have been a lunatic. He is not, therefore, responsible for his acts or defaults.

Mr. Kindersley, in reply.

Hall v. Hallett (4), and Hockley v. Bantock (5) were also cited.

THE MASTER OF THE ROLLS:

One ground of defence in this case is, that the defendant has been

(1) 43 R. R. 129 (1 My. & Cr. 8).
(2) 63 R. R. 49 (6 Beav. 188); see
note, post, p. 104,

(3) 43 R. R. 138 (1 My. & Cr. 96). (4) 1 R. R. 3 (1 Cox, 134).

(5) 25 R. R. 16 (1 Russ, 141),

found a lunatic by inquisition, which carries back the lunacy to December, 1840, a period subsequent to the time when the several transactions, in respect of which relief is sought, took place. These acts and omissions having taken place at a time not overreached by the inquisition, the defendant must be assumed, in the absence of distinct proof to the contrary, to have been of sound mind, and, having regard to the answer and evidence, I am of opinion, that there is no satisfactory proof of this gentleman having been of unsound mind at the several particular times at which the transactions complained of took place. He must, therefore, be considered subject to the same liabilities, as a person of competent understanding would be.

The principal allegation, on the part of the plaintiffs, is, that the executors, being directed to invest this money either on real security in their own names, or on Government securities, have not done so: not having invested a competent portion of the testator's personal estate in their own names, it is asked, that they may pay into Court so much stock as would have been purchased with the 1,500l., at the end of twelve months from the testator's death.

On the other hand, it has been argued, that there being proper mortgage securities belonging to the testator, the executors were under no obligation to sell or realise those securities, and afterwards invest the produce again in the same sort of securities. I think there is great weight in the argument; but it does not apply here. I do not think it was necessary for them to call in good securities, and then procure others of the same nature to answer the legacy, and I do not understand that there was any thing to preclude the executors from appropriating proper securities belonging to the testator to the payment of these legacies; but the appropriation, being an act of their own, was done on their own *responsibility, and it was therefore incumbent on them to see that the securities so appropriated were of sufficient value. It was an exercise of discretion on the part of the executors when they, by appropriation, invested the 1,500l. on real security.

It has happened that, with respect to two of the three mortgages, they have been actually paid; in the exercise, therefore, of their discretion as to these two sums, they were right, and no harm ensued, because these two sums were both actually realised.

With respect to the other, I think there is, on this evidence, great doubt whether the discretion was properly exercised, because no

enquiry appears to have been made by them at the time, and I am PARKINSON. not satisfied that at that time it was a good security.

AMES

[ 385]

June 7.

What is the extent of their liability? The executors exercised a discretion which they were authorised to do; and, taking it at the worst, it turns out that the 2001. is not wholly secured. The loss must be answered by the trustee who has improperly exercised his discretion. The plaintiffs ask, that they may have the benefit of the money, as if it had been laid out in the funds at the end of the year. I think they are not entitled to this, because the trustees had a right to exercise a discretion, whether the 1,500l. should be invested on real securities or in the funds. They exercised that right of selection; and are only to be charged with the sum which may be lost.

As to the 500l. there has been no loss, and it was properly invested therefore nothing more need be said respecting it.

With respect to the 8001., the case seems to be very different. When the mortgage was paid off in May, 1836, the money was in the hands of the surviving trustee, who had a discretion to lay it out on mortgage, or on Government securities. He did neither, and never exercised his discretion, but left it on deposit at his bankers. It is said that after all this neglect, he, the trustee and executor, has a right to choose the investment in which he is to account for the trust fund, and that the cestui que trust has no such option. I will look at the authorities before I ultimately decide; but my impression certainly is, that the cestui que trust, and not the trustee, is the person entitled to select whether he will have the fund or the stock which the money would have produced at a reasonable time after it had been received (1).

THE MASTER OF THE ROLLS:

I have examined the authorities cited in argument in this case, but I have not found any thing to cause me to alter the opinion which I have already expressed. Upon consideration, I retain the opinion I expressed in Watts v. Girdlestone (1), and think that case was rightly decided.

The trustees had a discretion to exercise. They might at their option have invested the money in the funds; and if the value had risen or fallen, they would have been safe, for they would have

(1) The law upon this point is now settled otherwise by Robinson v. Robinson (1851) 1 D. M. & G. 247, 21 L. J. Ch. 111, 16 Jur. 255. The trustee is

liable only for the principal and interest, and the beneficiaries have no option of claiming the value of the stock and dividends.-O. A. S.