ing that the property should not be subject to the debts of the cestui que trust, and in giving no general power of appointment; and there is nothing in the decision or opinion, in either of those cases, that is adverse to the claims of creditors in the case at bar.

Decree for the creditors.

BEYFUS v. LAWLEY.

(House of Lords. L. R. [1903] App. Cas. 411.)

The Hon. F. C. Lawley under the will of Lady Wenlock had a general power to appoint by will £10,000 which in default of appointment was to go as part of her residuary estate. By a mortgage of April 7, 1892, to secure a loan of £1000 and interest he covenanted that he would immediately after the execution thereof sign his will of even date already prepared, whereby in exercise of the general power under Lady Wenlock's will he appointed that the trustees of her will should stand possessed of the £10,000 and the investments representing it, upon trust to pay to the mortgagee thereout, in preference and priority to all other payments, the £1000 and interest, and that he would not revoke or alter his will without the consent of the mortgagee. The same day he executed his will containing the above provisions and stating that it was his wish that the loan should be a first charge on the £10,000. On his death in 1901 the £1000 with interest was still due. The question then arose in an administration action whether the executors of the deceased mortgagee were entitled to priority as to the trust fund over other creditors of Mr. Lawley. Joyce, J., held that they had not priority, and this decision was affirmed by the Court of Appeal (Vaughan Williams, Stirling, and Cozens-Hardy, L. JJ.). [1902] 2 Ch. 799. The mortgagee's executors appealed.

EARL OF HALSBURY, L. C. My Lords, your Lordships have listened to a very protracted argument in this case, and the only answer I have to give to that argument is that whatever merits it might have had half a century ago, it is too late now. The language which was used by Knight Bruce, L. J., in Fleming v. Buchanan, 3 D. M. & G. 976, 980,* is in accordance with the opinions delivered by each of the three learned Lords Justices of Appeal, and beyond some abstract reasoning which, as it appears to me, would get rid of the rule altogether, I have seen no reason to think that the judgment of the Court of Appeal is wrong.

4 This language is as follows: "On whatever grounds it was originally so held, it is and has for a long time been the settled law of the country, that if a man having a power, and a power only, over personal estate to appoint it as he will, exercises the power by a testamentary appointment, the property becomes subject in a certain order and manner to the payment of his debts, whatever may be the intention or absence of intention upon his part. Not only in point of principle and reason, but of precedent and authority, I apprehend that the same rule applies to real estate where it is subject to a general power exercised by will,"

KALES FUT.INT.-50

I content myself with saying that in view of that language of Knight Bruce, L. J., which has not been challenged for half a century, this appeal against the decision of the Court of Appeal is hopelessly unarguable, and therefore I invite your Lordships to dismiss the appeal with

costs.

LORD MACNAGHTEN. My Lords, I agree. I am of opinion that the passage from the judgment of Knight Bruce, L. J., in Fleming v. Buchanan, 3 D. M. & G. 976, 980, which has been so often quoted in this case, is an accurate statement of the law on the subject, and that it does not require any qualification as Vaughan Williams L. J. seems. to suggest. Whatever the origin of the rule may have been, it is in my opinion much too late to question it now or to attempt to cut it down.

LORD LINDLEY. My Lords, I am of the same opinion. The doctrine. that an appointee under a power derives title from the instrument conferring the power and not from the appointment is well established; but a qualification or exception has been long grafted upon it and is equally well established. For it cannot now be denied that property appointed by will under a general' power is assets for payment of the debts of the appointor, and is not regarded as property of the donor of the power distributable by the donee thereof.

The property appointed is in such a case treated as assets of the testator exercising the power, and the assets so appointed are regarded as property bequeathed by him." When I say assets I do not mean

In O'Grady v. Wilmot, L. R. [1916] A. C. 231, the donee had a general testamentary power and exercised it. The property, subject to the power, was not, however, needed for the payment of debts. If the property subject to the power passed to the donee's "executors as such," the death duty was to be paid by the donee's residuary legatee out of the general assets belonging to the donee. If, on the other hand, the property subject to the power did not so pass, the death duty was payable out of the property appointed. Held: The appointed property did not pass to the donee's "ex ecutor as such." Lord Buckmaster, L. C., said (p. 248): "Property subject to a general power of appointment exercised by deed or will could be made available for payment of the testator's debts by proceedings instituted in chancery. It was considered contrary to good faith to permit a power to be exercised in favour of volunteers so as to defeat the creditors of the donee of the power. The court therefore intercepted the fund-to use the language of Lord Hardwicke, 'stopped it in transitu'-and either by regarding the appointee as trustee for the creditors, or by virtue of saying that in the circumstances the creditors had an equity against the fund, caused it to be applied for payment of the debts; but the fund was not any part of the estate of the donee of the power, nor was it anywhere decided that it passed to the executor."

Lord Sumner said (p. 270): * How and in what sense does the subject of a general testamentary power pass to an executor on the ef fectual exercise of the power? The rule first appears in the seventeenth century. It takes shape in the middle of the eighteenth. In Lord Townshend v. Windham [2 Ves. Sen. 1, 11] Lord Hardwicke says that the Courts 'stop in transitu, as it is called,' and he appears to have accepted in Trough. ton v. Troughton [3 Atk. 656] the expression 'the Court ought to intercept it for the benefit of a creditor.' The rule arose out of tenderness for creditors. It would be a strange thing if volunteers should run away with the whole, and that creditors for a valuable consideration should sit down by the loss without any relief in this court.' Bainton v. Ward [2 Atk.

*

general assets, but assets nevertheless applicable to the payment of the appointor's debts after all his own property has been exhausted. Again, personal property appointed by will under a general power although not a legacy for all purposes is treated as personal estate bequeathed by him.

It is settled that, except by making a creditor an executor, a person disposing of his own property by will cannot by his will prefer one

172], afterwards affirmed in the House of Lords. See Lassells v. Lord Cornwallis [2 Vern. 465]. Since the right to exercise a power is not property, equity, regardless of the facts, assumed that a man in debt, who might have used the power to pay his debts, could not really mean to exercise it so as to benefit a volunteer and leave his debts unpaid. Fundamentally this has nothing to do with executorship, for, provided a court of equity sees that the creditors are paid out of the subject of the power, if need be, the executor's position is at most ministerial. He may be no more than a necessary party. The theory of the executor's position has been developed in various ways since Lord Hardwicke's time, but the theories are so discordant that, with all humility, I think them confusing. The rule now is that the trustees of the fund. are bound to pay it over to the executor whether the appointor's estate is indebted or not, and by doing so they discharge themselves (Hayes v. Oatley [L. R. 14 Eq. 1]; In re Hoskin's Trusts [5 Ch. D. 229; 6 Ch. D. 281]). This is said (In re Hadley, [(1909) 1 Ch. 20, 30]) to be by reason of the probate and because the payee is executor. By exercising the power the testator has been thought to make the subject of the power his own and part of his assets; hence the executor is entitled. Having received the fund, the executor is, no doubt, accountable, and this consideration apparently led to the opinion, expressed in Hadley's Case [(1909) 1 Ch. 20, 30], that a fund of personalty appointed by will under a general power must be classed as legal assets. The authorities do not seem to have been cited on that occasion, and the point is one which has long been of diminishing importance. In the proper sense of the words I do not think that this opinion can be regarded as correct. I cannot find that evidence of receipt of such a fund has ever been admitted where, in an action at law by a creditor, an executor has pleaded plene administravit, and issue has been joined thereon, or that an executor has ever been allowed to exercise his right of retainer against it. The rule is a rule of equity and applies to realty as well as to personalty, while an executor holds a common law office and at common law did not take the realty of his testator. Mr. Joshua Williams thought that the fund vested in the executor, which is inconsistent with the decision in Drake v. Attorney-General [10 Cl. & F. 257]. Again it was contended (per Wilde, S.-G., arguendo) in Platt v. Routh [6 M. & W. 756] that equity by implication makes the donee of the power a trustee for his creditors, if he exercises the power at all. This suggestion seems to have gone no further. Leach, V.-C., in Jenney v. Andrews [6 Madd. 264], said that the appointee was trustee for the creditors. What in the report of that case seems to have been only a dictum is converted by Romilly, M. R., into a decision in Williams v. Lomas [16 Beav. 1]. Nevertheless it is the executor who gets the money and pays the creditors. The appointee does not; he takes what the executor has left, and keeps it. The now appellant's argument is, following the view which Kekewich, J. (In re Treasure [(1900) 2 Ch. 648]), took of In re Philbrick's Settlement [34 L. J. (Ch.) 368], as extended by the language of James, L. J., in In re Hoskins Trusts [6 Ch. D. 281, 283], that the executor becomes a trustee of the fund for the creditors, but, as Buckley, J., points out (In re Moore [(1901) 1 Ch. 691, 695]), he only becomes trustee, in the sense of trustee of the fund for the appointees, subject to another duty which the trustee of the fund had not, namely, the duty before he hands anything to the appointees to take the whole fund, or as much as is necessary to satisfy the debts of his testator.' In truth, as nobody appointed the executor a trustee, as the original trustees of the settlement remain such till they have got rid of the money by paying it to

creditor to another or make a gift by will payable before a debt. A covenant to bequeath property by will does not alter the character of the property bequeathed in accordance with the covenant. What is so bequeathed is still a gift by will and not a preferential debt. The attempt to confine the rule to volunteers cannot, I think, now be supported when speaking of powers to appoint by will."

The order of the Court of Appeals affirmed and appeal dismissed with costs.

him, and as the whole intention of the appointor was to appoint so as to pass his creditors by, I think this theory is only an attempt to state the working rule of administration in terms of a particular and inapplicable category of equity. On the other hand the executor has been said to be an appointee of the fund himself. Here, too, I think the same observation may be made. His relation to the appointed fund has become defined in a series of cases, sometimes casually and sometimes anomalously. He is the proper person to receive it; he ought to apply it, so far as may be necessary, in due order of administration, and in a court of equity is accountable and compellable to do so. Clearly he is entitled to possession of it and is bound to administer it in the course of his executorship. I think that is really all. Be the theory what it may, surely this relation to the appointed fund cannot be correctly described as a passing to the executor as such. It never became bona testatoris in any real sense; before the will spoke the testator was dead, and till the will spoke there was no appointment. The distinction between a will as a testamentary disposition of property naming an executor as the legal personal representative of the deceased, on the one hand, and a will as a prescribed mode of exercising a power with an executor named therein only to effectuate the appointment, on the other, is illustrated by Tugman v. Hopkins [4 Man. & G. 389]; and see In re Tomlinson [(1881) 6 P. D. 209]. What makes him executor, entitled to what had belonged to the testator in his lifetime, is the testamentary disposition, which appoints him. What makes him recipient of the appointed fund and administrator of it is the control which courts of equity have exercised over funds which did not belong to the testator in his lifetime, and to which the will gives the executor no title at all. I think that Lord Hardwicke's language, that equity intercepts the fund or stops it in transitu, is much the clearest guide, and sufficiently explains what is a rule rather than a principle. There is high authority for this view. 'In favour of creditors,' says Lord Thurlow (Harrington v. Harte [1 Cox, 131]), 'this court would arrest the fund in transitu.' 'A rule of equity,' says Lord Abinger, 'subjects a fund so appointed to the debts of the appointor.' Platt v. Routh [6 M. & W. 756, 789]. It is considered as part of the estate of the testator at the time of his death.' Lord Townshend v. Windham [2 Ves. Sen. 1, 11]. It is 'considered as assets, if wanted.' Grant, M. R., in Daubeney v. Cockburn [1 Mer. 626, 639]. And the court will for creditors lay hold of the money when it is appointed for a volunteer.' Holmes v. Coghill [7 Ves. 499, 508]. 'Such property is not the personal or real estate of the testator,' Truner, L. J.; it is resorted to in aid of the testator's estate in a more accurate sense of the word,' Knight Bruce, L. J. (both in Fleming v. Buchanan [3 D. M. & G. 976, 979, 981]). It is treated as personal estate bequeathed by the testator.' Lord Lindley in Beyfus v. Lawley [(1903) A. C. 411, 413]. By thus 'considering' and 'treating' it as what, 'in a more accurate sense,' it is not, the executor is made the recipient of the fund. It is only by the will that property passes to the executor as such."

Lord Parmoor dissented.

See, also, Commonwealth v. Duffield, 12 Pa. 277 (1849).

6 Patterson v. Lawrence, 83 Ga. 703, 10 S. E. 355, 7 L. R. A. 143, semble, that the execution of a testamentary power to validate a title attempted to be conveyed inter vivos is an execution for value, and hence the appointed property was not assets for creditors.

CHAPTER XXVIII

DEFECTIVE EXECUTION

SMITH v. ASHTON.

(Court of Chancery, 1675. 1 Ch. Cas. 263.)

J. S., seised of lands in two counties, conveyed part to the use of himself for life, with remainder, and power to charge the lands so conveyed, with £500 by deed or will in writing under his hand and seal. This conveyance was voluntary, and without valuable consideration, and after by his last will in writing, not sealed, devised the £500 to his younger children, in whose right the bill is exhibited against his son and heir to have the £500.

Against which the counsel for the defendant insisted, that the law was against the plaintiff; and both parties claiming under a voluntary settlement, and the same consideration, (viz.) natural affection, therefore he that hath the law on his side ought not to be charged to the younger children.

THE LORD KEEPER took time to deliberate, and now decreed the £500 though the will was not under seal, and the power not legally pursued. He cited Prince and Chandler's Case, decreed by the Lord Egerton, where there was a power to make leases on a covenant to stand seised to uses, on consideration of natural affection, and the lease was for provision for younger children.

Decreed good against the heir, for two reasons, 1st, for that the law was not then adjudged in Mildmay's Case. 2d. Because the son did claim by the same conveyance by which the power was limited. So 17 June, 8 Car. the jointure of the Countess of Oxford decreed good, where the power was not pursued; yet only part of her jointure depended on the question.

For he that reserveth such a power under circumstances, they are but cautions that another might not be imposed, or made without him. The substantial part is to do the thing, and therefore where it is clear and indubitable, the neglect of the circumstances shall not avoid the act in equity; possibly when from home or sick he remembered not the circumstance of his power; and the powers of this kind have a favorable construction in law, and not resembled to conditions, which are strictly expounded; for a power of this kind may be executed by part, and extinct in part, and stand for the rest; but a purchaser shall defend himself in such case, but with difference, though not exe