[COURT OF APPEAL IN CHANCERY]
PILCHER v. RAWLINS.
[1865 P. 117.]
Trustee - Equal Equities - Legal Estate - Notice - Breach of Trust.
The defence of purchase for value without notice may be sustained, although the Defendant, in order to make out his title to the legal estate, must rely on an instrument which discloses the title of the Plaintiff, the Defendant not having had notice of such instrument at the time of his purchase.
The trustees of a settlement advanced the trust money on the security of real property which was conveyed to them by the mortgagor, the mortgage deed noticing the trust. The surviving trustee of the settlement afterwards reconveyed part of the property to the mortgagor on payment of part of the mortgage money, which he appropriated. The mortgagor then conveyed that part of the property to new mortgagees, concealing, with the connivance of the trustee, both the prior mortgage and the reconveyance. When the fraud was discovered, the cestuis que trust under the settlement filed a bill against the new mortgagees claiming priority:-
Held, that the Court would not interfere to take away the legal estate which passed to the new mortgagees under the reconveyance.
The trustees of a settlement advanced the trust money on the security of real property which was conveyed to them by the mortgagor, the mortgage deed noticing the trust. The surviving trustee afterwards induced the mortgagor
to execute a deed by which the mortgaged property purported to be conveyed to the trustee as on a purchase by him, though no money in fact passed. The trustee then, concealing the prior mortgage, and shewing title under the pretended purchase deed, conveyed the property to a mortgagee without notice:-
Held, that the Court would not interfere to take away the legal estate from the mortgagee.
Decree of the Master of the Rolls reversed.
Carter v. Carter (1) disapproved of.
THIS was a suit to establish the priorities of cestuis que trustas mortgagees over other mortgagees who had obtained the legal estate with, as alleged, notice of the trust.
On the 23rd of August, 1830, a settlement was made by Jeremiah Pilcher, under which J. G. Pilcher, G. Pilcher, and W. H. Pilcherwere to stand possessed of £8373 in trust for Jeremiah Pilcherduring his life, and after his death for his children by a former marriage. There was power to the trustees to vary the investments with the consent of Jeremiah Pilcher during his life. The settlement contained the usual trustees' receipt clause, and a power of appointing new trustees exerciseable by J. Pilcher during his life.
In 1851 the £8373 was advanced to Robert Rawlins on the security of a mortgage deed dated the 23rd of April, 1851, and made between R. Rawlins, of the first part, J. G. Pilcher,G. Pilcher, and W. H. Pilcher, of the second part, and J. Pilcher,of the third part; whereby, after reciting that J. G. Pilcher,G. Pilcher, and W. H. Pilcher had agreed to lend and advance the sum of £8373 (the same being trust money) with the consent and approbation of J. Pilcher, it was witnessed that certain real property, including the Whitchurch property and the Smithfield and New Street property hereinafter mentioned, was conveyed by Rawlinsto J. G. Pilcher, G. Pilcher, and W. H. Pilcher, their heirs and assigns, subject to redemption on payment of interest and of the £8373, on the 23rd of April, 1856.
Upon the execution of this deed the documents of title relating to the property were delivered to W. H. Pilcher, who was a solicitor, to be held by him on behalf of himself and his co-trustees. J. G. Pilcher and G. Pilcher died in 1853, leaving W. H. Pilchersole trustee.
(1) 3 K. & J. 617.
In 1856 Rawlins, who had been a solicitor, made out, with the connivance of W. H. Pilcher, an abstract of title ending with a document earlier than the above-mentioned mortgage, thus shewing a title in fee simple in himself; and induced two trustees named Stockwell and Lamb to advance him £10,000 on the security (with other property) of the Whitchurch property, part of the property comprised in the above-mentioned mortgage; and by a deed dated the 2nd of April, 1856, it was witnessed that Rawlins conveyed the Whitchurch property to Stockwell and Lamb in fee, subject to redemption on payment of the £10,000 in the usual manner.
On the same 2nd of April, 1856, and prior to the execution of the mortgage to Stockwell and Lamb, W. H. Pilcher had executed an indenture, which was unstamped until after this suit had been instituted, and which apparently was not to have been used unless it became necessary to use it. By this indenture it was witnessed that W. H. Pilcher, in consideration of the payment to him by Rawlins of £3500, conveyed the Whitchurch property to Rawlinsin fee discharged from the mortgage debt of £8373. No receipt was indorsed on this deed, which was only produced after the institution of this suit, and was then handed by Rawlins to Stockwelland Lamb, who thus discovered that they had the legal estate, though not by the deeds on which they had relied. Rawlins and W. H. Pilcher appeared to have shared the £10,000 advanced by Stockwell and Lamb; and the title deeds of the Whitchurch property, with the exception of the mortgage deed of 1851 and the reconveyance, were delivered to Stockwell and Lamb.
Under a second settlement also made by Jeremiah Pilcher on the 23rd of August, 1830, W. H. Pilcher was, in 1860, the surviving trustee of a sum of £3000 held in trust for Jeremiah Pilcherand his second wife, and the children of a second marriage. This sum had been advanced to Rawlins on the security of the property comprised in the mortgage of the 23rd of April, 1851, and of certain other property, both of which were conveyed to the trustees of the settlement by a mortgage deed dated the 30th of May, 1854, and containing notice of the settlement. W. H. Pilcher was also co-executor with one J. H. Ward of the estate of one J. Matthews,and having received £3000, part of the estate, he, in November, 1860, agreed to give to J. H. Ward security for the £3000; and with that
in view, W. H. Pilcher and Rawlins acted as follows: By a deed purporting to be a purchase deed, and dated the 11th of April, 1861, Rawlins, in consideration of £2590, expressed to be paid to him by W. H. Pilcher, purported to convey to W. H. Pilcherthe Smithfield and New Street property. A receipt for £2590 was indorsed, but no money actually passed. W. H. Pilcher then delivered an abstract of title, suppressing the mortgages of 1851 and 1854, and shewing a title in fee simple in himself. This was accepted by the conveyancing counsel of the Court of Chancery, and a mortgage was executed by W. H. Pilcher conveying these properties to Ward as security for the £3000.
W. H. Pilcher continued until 1864 to pay the interest due on the trust funds to J. Pilcher. In July, 1865, J. Pilcher called upon W. H. Pilcher to hand over the deeds, and received from him a box containing the two mortgage deeds only, the result of which was that the dealings of W. H. Pilcher and Rawlins were then in part discovered.
Jeremiah Pilcher and his children thereupon filed their bill in this suit against Rawlins, W. H. Pilcher, Stockwell and Lamb,Ward, and others, praying that the priorities of the charges affecting the property comprised in the mortgage of 1851 might be ascertained, and that Stockwell and Lamb as to the Whitchurchproperty, and Ward as to the other property mortgaged to him, and forming part of the securities of 1851 and 1854, might be restrained from dealing with the legal estates vested in them, and that directions might be given for conveying such legal estates for the security of the Plaintiffs.
The Defendants Stockwell and Lamb and the Defendant Ward,by their answers, pleaded that they were purchasers for value without notice, and claimed the benefit of the legal estates vested in them respectively.
The Master of the Rolls was of opinion that the mortgage of 1851 had priority over the mortgage to Stockwell and Lamb and over the mortgage to Ward, and made a decree accordingly, as reported (1), where the facts of the case are more fully stated.
The Defendant Lamb (Stockwell being dead) and the Defendant Ward appealed.
(1) Law Rep. 11 Eq. 53.
The Solicitor-General (Sir G. Jessel), and Mr. H. Humphreys,for Lamb:-
We contend, in the first place, that the mere mention of the fact of the money being trust money was not enough to bind any one to look for the cestuis que trust. Besides, after all, a fair proportion of the mortgage money was actually paid, and to the proper person to receive it; it is true that he has misapplied it, but we are not liable. It was said that the money was paid before the day for redemption, and that only part of it was paid, which rendered the concurrence of Jeremiah Pilcher necessary; but such refinements are shocking to common sense. Any refinements should be on our side, for it was the Plaintiffs, and not we, who, by trusting W. H. Pilcher, and leaving him sole trustee, enabled him to commit this fraud. Carter v. Carter (1) went perhaps too far, but this goes still further. We say that we have the legal estate, and that there is no equity to deprive us of it: Maundrell v. Maundrell (2); Bates v. Johnson (3). The whole doctrine of attendant terms depends upon this. We had, when we advanced the money, neither actual nor constructive notice of the prior mortgage, and our equity is as good as that of the Plaintiffs - in fact better, for they chose to trust a sole trustee. We trusted no one, and took our mortgage in the regular way, and after due investigation of the title. No doubt we were not aware of the reconveyance to Rawlins, but by that means we get the legal estate, and we ought not to be deprived of it. We are purchasers for valuable consideration. We ask no relief; we only ask to be let alone. Ex parte Knott (4) was a clear case. In Jones v. Powles (5) the trustee was interested, as in this case. Dodds v. Hills (6) is in our favour. The Plaintiffs do not venture to ask that the reconveyance should be set aside, but ask that the legal estate conveyed by it may be dealt with to protect them. But why? Why are we to be deprived of it?
Sir R. Baggallay, Q.C., and Mr. Ferrers, for Ward:-
We claim the benefit of all the arguments on behalf of Stockwelland Lamb, but our case is stronger. We have in no sense been
(1) 3 K. & J. 617.
(2) 10 Ves. 246.
(3) Joh. 304.
(4) 11 Ves. 609.
(5) 3 My. & K. 581.
(6) 2 H. & M. 424.
guilty of laches. No doubt the conveyance to Pilcher was intended as a blind, and deceived us; but we have without it the legal estate, and we are purchasers without notice, and with the legal estate.
Mr. Southgate, Q.C., and Mr. Bristowe, Q.C., for the Plaintiffs:-
We, too, are innocent, and we have the earliest equity. It was against conscience that our trustee should deal as he did, and legal estates so obtained cannot be set up. The legal estate can be claimed only through a deed which shews the trust, and thus those who take under it are bound by it. Rawlins' deeds conveyed nothing, because there was a prior deed; and if the deed of 1851 had been produced, as it must be, to make out the title to the legal estate, the mortgagees would have been bound to call for production of the deed of 1830, and then W. H. Pilcher could not have committed these frauds. There is no case in which a trustee has, in derogation of his duty, conveyed the legal estate, and the person taking the legal estate has been allowed to avail himself of it. Carter v. Carter (1) only followed Willoughby v. Willoughby (2) and Saunders v. Dehew (3). No doubt, if you take a conveyance for valuable consideration without notice, you can, when you find out a fraud, protect yourself by getting in a legal estate; but you cannot do so if you have notice at the time; and here the Defendants cannot shew their title without shewing notice. If a man paid his money on a forged deed, he could not afterwards, by getting in the legal estate, protect himself It is not true that the Plaintiffs have trusted the trustee; on the contrary, they gave notice on the mortgage deeds that it was trust money: Phillips v. Phillips (4); Colyer v. Finch (5). Can the Court allow a trustee, who is the creature of the Court, to injure his cestuis que trust in this way? The mortgagees claim under a fraud; we do not. In Jones v. Powles (6) the facts could not, by any reasonable diligence, have been discovered.
Mr. Kingdon, who was with them, was not heard, as two counsel on that side had been heard.
(1) 3 K. & J. 617.
(2) 1 T. R. 763.
(3) 2 Vern. 271.
(4) 4 D. F. & J. 208.
(5) 19 Beav. 500; 5 H. L. C. 905.
(6) 3 My. & K. 581.
Mr. Roxburgh, Q.C., and Mr. Drewry, for the representatives of W. H. Pilcher, who was dead.
Mr. Shapter, Q.C., Mr. W. Pearson, and Mr. H. C. Ward, for other parties.
The Solicitor-General, in reply.
Jan. 29. LORD HATHERLEY, L.C., after stating the facts of the case, continued:-
The Defendant Rawlins could not have transferred the legal estate in the property except through the medium of the reconveyance of 1856, and the Master of the Rolls considered the case to be similar in that respect to the case of Carter v. Carter (1). The authority of that case has been strongly impugned in argument by the counsel for the Appellants, and the decision is, I believe, not approved of by the Lords Justices. That case may be thus briefly stated: John Carter, the mortgagor, believing himself to be entitled, under the will of his father, to certain shares in real estate in fee, conveyed his shares and all other his estate and interest in the property by way of mortgage to the mortgagee. This was done in good faith, but subsequently a later will was discovered by which the mortgagor took an estate in fee, but in trust for himself for life only, and as to the remainder in fee, in trust for several persons and objects mentioned in the will. The mortgagee, a Defendant in the suit, insisted that he was entitled to hold the fee of the mortgaged shares as against the cestuis que trust in remainder, John Carter having conveyed to him the fee of such property without any notice of the trusts under the second will. I held that this could not be so, the only title to the fee in John Carter being that which, on its face, disclosed the title of his cestuis que trust; in fact, that either I must have made John Carter, without any evil intention or want of care on his part, guilty of a gross breach of trust, and have then suffered the fruits of that breach of trust to be enjoyed by his mortgagee, or I must have said that a title was not acquired by the mortgagee against the equitable owner.
(1) 3 K. & J. 617.
I did not follow a case of Fausset v. Carpenter (1), decided by Lords Tenterden and Wynford, but greatly disapproved of by Lord St. Leonards in his treatise on the Law of Property as Administered in the House of Lords (2). In that case a conveyance made by a trustee having both a legal and an equitable interest in the land, and conveying in general terms, was held not to pass the estate held by him as the trustee. I thought that the legal estate of John Carter did pass, it being his clear intent to pass the fee which he supposed to be his own; but I thought that I was entitled to say to the mortgagee: "You cannot say you have contracted for the estate of the cestuis que trust, to which the mortgagor could only make a title by the second will, which will disclosed the trusts."
The case now before us differs in many respects from the case of Carter v. Carter (3). An intentional fraud has been committed, and the parties to it have been enabled to effect their purpose owing to the cestuis que trust allowing the trustee, originally one of three, to become the sole trustee. As sole trustee he necessarily had possession of the title deeds to the mortgaged estate; so that, by the reconveyance to the mortgagor, the mortgagor became repossessed of the legal estate, and, by keeping back the whole mortgage transaction, was enabled to shew a complete legal title to the property. Had he disclosed the mortgage, I think that the mortgage deed would have put the parties dealing with him on inquiry; but as matters were conducted, the mortgagee acquired the legal estate, and entered into possession of the property without notice of the prior charge, and he must, I think, be entitled to hold it.
The plea of purchase without notice states only possession on the part of the professed owner, conveyance of the estate, and absence of notice; and the cases undoubtedly have gone very far (as I had occasion to observe in Carter v. Carter) in shewing that on such a plea, when proved, equity declines all interference with the purchaser, having, as is said, no ground on which it can affect his conscience. I confess that the extent to which this doctrine has been carried was not wholly satisfactory to me when I decided Carter v. Carter. There neither the mortgagees, the purchaser, nor the mortgagor had the slightest notion that the transaction
(1) 2 Dow. & Cl. 232; 5 Bli. (N.S.) 75.
(2) Page 81.
(3) 3 K. & J. 617.
was one in which the mortgagor was dealing with the interest of others. The mortgagees had taken all the estate of John Carterunder the first will, which was found afterwards to be a nullity; the fact of the mortgagor under the supposed will having an estate vested in him, in trust for others, being unknown to both parties. I confess that if this case had been of the same character I should hesitate long before I held that the estates of the cestuis que trustcould be so conveyed, or that the ignorance of the mortgagor could make him guilty of a breach of trust, or that his act executed wholly diverso intuitu could dispose of interests in which he had no concern.
Suppose a conveyance made by a man without title, and that afterwards the real owner makes this man a trustee of a settlement, and conveys the estate to him, would the cestuis que trust lose the estate by the estoppel of their trustee under his conveyance?
Or, suppose that a person who conveyed in the belief that he had a title, and afterwards, as heir of the real owner, acquired the legal estate by the death of a devisee in trust in the lifetime of a testator, and only on the trusts of a will, would the cestuis que trust in that case lose their estate?
I referred in Carter v. Carter (1) to the observations of Lord Eldon in Maundrell v. Maundrell (2), and Ex parte Knott (3), as to the difficulty of allowing a purchaser to hold an estate which was got in by him from a person who could not convey without committing a breach of trust; and it appeared to me then, as now, that Lord Eldon applied his observations to a case in which the purchaser had advanced his money in good faith, but took the legal estate afterwards from one whom he knew to be a trustee for others, distinguishing that case from the case of a legal estate acquired by paying off a mortgage. In itself it is immaterial whether the purchaser knows or not that another has an equitable interest prior to his own, provided he did not know that fact on paying his purchase-money. It may perhaps be sufficient in all possible cases for the purchaser to say, "I am not to be sued in equity at all. I hold what was conveyed to me by one in possession, who was, or pretended to be, seised, and who conveyed to me without my having notice of another equitable title;" and
(1) 3 K. & J. 617.
(2) 10 Ves. 246.
(3) 11 Ves. 609.
that the Plaintiff in equity must disprove the plea before he can proceed any further with his suit. But I know of no case either before or since Carter v. Carter (1), in which the legal estate so conveyed to the purchaser was held by the vendor on express trusts appearing on the face of the only instrument under which the vendor could make a complete title, so that a trustee of a settlement comprising estates of any magnitude, and being in possession on behalf of a minor, for instance, could, by forging a conveyance to himself, pass an indefeasible title to a purchaser.
The present case is not such a case, and I can therefore concur with the view of the Lords Justices that the decree must be reversed.
SIR W. M. JAMES, L.J.:-
I entirely concur in the conclusion to which the Lord Chancellor has arrived.
I do not mean, in the few observations which I am about to make, to refer to a class of cases which appear to me entirely distinct in principle from the case now before us. I mean that class of cases in which a person finding himself in possession under a defective title has cast about to cure that defect by procuring some one else to convey an outstanding legal estate. No doubt it has been held in this Court that a man under those circumstances may get in a mortgage and tack his defective title to the estate of that mortgagee. He has also been allowed to get in an outstanding legal estate from a person who, being a trustee for the real owner, is not a trustee for the person seeking the conveyance. But those cases where the person seeking the conveyance knew the fact that the trustee was trustee for somebody else, and could not convey without a breach of trust, whilst the trustee was left in ignorance - those cases, I say, involve a principle which I have never been able to understand.
I propose simply to apply myself to the case of a purchaser for valuable consideration, without notice, obtaining, upon the occasion of his purchase, and by means of his purchase deed, some legal estate, some legal right, some legal advantage; and, according to my view of the established law of this Court, such a purchaser's
(1) 3 K. & J. 617.
plea of a purchase for valuable consideration without notice is an absolute, unqualified, unanswerable defence, and an unanswerable plea to the jurisdiction of this Court. Such a purchaser, when he has once put in that plea, may be interrogated and tested to any extent as to the valuable consideration which he has given in order to shew the bona fides or mala fides of his purchase, and also the presence or the absence of notice; but when once he has gone through that ordeal, and has satisfied the terms of the plea of purchase for valuable consideration without notice, then, according to my judgment, this Court has no jurisdiction whatever to do anything more than to let him depart in possession of that legal estate, that legal right, that legal advantage which he has obtained, whatever it may be. In such a case a purchaser is entitled to hold that which, without breach of duty, he has had conveyed to him.
In the case of Carter v. Carter (1), which was decided by the present Lord Chancellor, and which was followed by the Master of the Rolls in this case, and with which I am bound to say I am unable to agree, an exception from that rule was, under the circumstances, supposed to exist.
It is very clearly expressed in a few lines of the judgment in that case: "But here the purchaser taking the conveyance under one will, supposed by all parties to be really the last will of the testator, finds himself driven to rely upon another and a second will containing on the face of it all the trusts which the testator has created;" - and that circumstance is supposed to create the exception. To my mind there are to that supposition two short and conclusive answers - the one a matter of principle, and the other a matter of fact. My view of the principle is, that when once you have arrived at the conclusion that the purchaser is a purchaser for valuable consideration without notice, the Court has no right to ask him, and has no right to put him to contest the question, how he is going to defend himself, or what he is going to rely on. He may say, honestly and justly, "I am not going to tell you. I have got the deeds; I defend them, and you will never be able to make me produce them, and you will never be able to produce secondary evidence of them. I am not obliged to produce them
(1) 3 K. & J. 617.
at all; probably before you get half way through your action of ejectment you will find a jus tertii which you will not dispose of; the estate is in the hands of a legal tenant to whom I have let it, and no one can determine that tenancy without notice, and no one can give that notice but myself; I will not give that notice, and no Court has any power to compel me to give it. I have a right to rely, as every person defending his position has, on the weakness of the title of the person who is seeking to displace me." That seems to be exactly the position of such a purchaser as this.
The purchaser in Carter v. Carter (1) did not rely on the will which created the trust; he relied on another title; for the will formed the title of the adverse party. And the answer to that adverse party is, by the good luck which sometimes attends honest men, "Though you produce an instrument which points out your title, and gives the property to some one else, yet I am prepared with a legal defence in a conveyance which was executed before." It appears to me that there is no right in this Court to prevent the purchaser from setting up that defence to the claim so made against him. If there was ever a case in which, according to my judgment, any Court ought to be in favour of a purchaser and against such a title, it is a case in which a testator has, through the grossest negligence, allowed two wills to exist after his death, so that some members of his family produce one will apparently making out a perfectly good title to a mortgagee or purchaser, and then, when a mortgagee or purchaser has been induced unwittingly to pay or advance his money, some other members of the family produce the other will, which has been suppressed or concealed during the whole of that time, and then seek to take the estate away from the mortgagee or purchaser. It seems to me to be a very ingenious device by which a testator would be able to give his property twice over to his family; but, in my opinion, it is a device which ought not to be encouraged in any way in a Court of Equity.
I am therefore of opinion that whatever may be the accident by which a purchaser has obtained a good legal title, and in respect of which he has paid his money and is in possession of the
(1) 3 K. & J. 617.
property, he is entitled to the benefit of that accident, just as a purchaser would be entitled to avail himself of the possession so acquired, without any reference to the rights of the persons who may be otherwise interested.
In the course of the argument it was sought to draw a distinction in these cases where the object is to ascertain priorities; but even in suits of that nature the legal title is inquired into. I apprehend that when a mortgagee is in possession of the legal estate there is no equity to make him reconvey (in my judgment that is the test), and he is entitled to hold it until every part of his incumbrance has been paid.
It was said in argument that where a man has a second incumbrance on an estate, but has the legal right of possession, and the legal right to the possession of the deeds, he has been made to produce those deeds. I apprehend that that cannot be right except under these circumstances: If a man, being, as he may well be, second incumbrance, on an estate, and also in law the owner of the deeds, seeks to avail himself of the assistance of the Court for the purposes of giving effect to his charge upon the estate, then it may be right to force him to bring in anything which he may have. I do not say anything about that, if he is availing himself of the assistance of this Court to redeem the first mortgagee or to be redeemed himself. But where a man has got the deeds, and has got a puisne incumbrance, and says, "I do not want the assistance of the Court; I disclaim any interference on the part of the Court to deal with the property as it pleases; I am perfectly content to rest on my possession of the deeds" - if he is minded to say that, I apprehend that he has as much right to retain the deeds in his box as he would be entitled to keep possession of a box of diamonds if they had been pledged with him by way of collateral security.
The decision in the case of Carter v. Carter (1), which has been so much referred to, is a decision which I have considered for some years, and I have more than once thought it right to express my views of that case. I differ in some respects in my views from those of the Lord Chancellor with regard to that case, but I say that the right of a person without notice is absolute and unqualified, when once he has made it out.
(1) 3 K. & J. 617.
SIR G. MELLISH, L.J.:-
I agree in the conclusion to which the Lord Chancellor and the Lord Justice have arrived. I do not think it necessary to give any opinion whether Carter v. Carter (1) was rightly decided. In my opinion if it is to be supported it must be supported upon the grounds stated by the Lord Chancellor to-day, namely, that there were such peculiar circumstances in that case as to make it inequitable that the purchaser should be allowed to rely upon the second will. But I think it cannot be supported on the grounds upon which the Master of the Rolls thought it had been decided, and upon which the Master of the Rolls acted in the case now before us. The Master of the Rolls, as I understand his judgment, held that a purchaser for valuable consideration, who has obtained a conveyance of the legal estate, is in this Court always to be held to have notice of the contents of the deeds which form a link in the chain by which the legal estate was conveyed to him. And he held that the doctrine of constructive notice ought to be enlarged, and that, although in point of fact the deed in question was never produced to the purchaser - although he had neither knowledge nor the means of knowledge of its contents - although he and his advisers were guilty of no negligence whatever in not obtaining knowledge of its contents - yet, nevertheless, he must in this Court be held to have notice of the contents, if it was a deed which, when ejectment was brought against him in a Court of Law, he would be bound to produce.
It is admitted that that rule has never been laid down prior to the case of Carter v. Carter; there were not even dicta, or any authority whatever that I have been able to find, tending to shew that any such rule had prevailed in this Court; and I am of opinion most clearly that it ought not to be so laid down.
I do not agree with the Master of the Rolls that the purchaser for valuable consideration in such a case as he describes, is approbating and reprobating. A person who approbates and reprobates is acting inconsistently. He must, in fact, be affirming and denying the same proposition at the same time. But I cannot see any such inconsistency here. If an action of ejectment is brought, it is wholly immaterial whether the Defendant in that action of ejectment had or had not at any time whatever notice of the contents
(1) 3 K. & J. 617.
of the deed or instrument on which he rests his title. What inconsistency is there in his saying, "If I am attacked in a Court of Law, and an action of ejectment is brought against me, I rely on this deed as being one of the deeds through which the legal estate has been conveyed to me?" and then, if he is attacked in a Court of Equity, saying, as the truth is, "I had no notice of this deed. At the time when I obtained my conveyance I had no knowledge and no means of knowledge of the deed." I cannot see that there is any inconsistency in his so acting.
The general rule seems to be laid down in the clearest terms by all the great authorities in equity, and has been acted on for a great number of years, namely, that this Court will not take an estate from a purchaser who has bought for valuable consideration without notice; and I find that the Appellants in both the cases before us are very clearly purchasers for valuable consideration without notice. Unless this doctrine of constructive notice, enlarged as it has been by the Master of the Rolls, is to prevail, I am of opinion that the Appellants have made out their case.
As it is admitted that, with the exception of what is supposed to have been said in Carter v. Carter (1), this rule of constructive notices, as laid down by the Master of the Rolls, has never been established, I will proceed to consider it a little upon principle. It happens, curiously enough, that in one, if not in both, of the two cases before us the Appellants are themselves trustees for other cestuis que trust, and the question then arises which of the two sets of cestuis que trust are to bear the loss. Is the loss to fall upon the cestuis que trust whose trustee has fraudulently conveyed away the estate which was entrusted to him? Or is the loss to fall upon those whose trustees have honestly taken a conveyance of that estate and who have advanced the money of their cestuis que trust on the faith of that estate which they have really got?
It is surely desirable that the rules of this Court should be in accordance with the ordinary feelings of justice of mankind. Now if the first set of cestuis que trust, those who will unfortunately have to bear the loss, were asked how it happened that they had suffered this loss, they would answer that their father conveyed the estate to their uncle, and he turned out to be a dishonest man, and parted with the estate. That is an explanation which any ordinary
(1) 3 K. & J. 617.
man of intelligence would understand. It might not be satisfactory to the losers, but they must see at once how it came to happen that they lost their estate. If you trust your property to a man who turns out to be a rogue, it stands to reason that you may lose it. But supposing the Master of the Rolls' doctrine to prevail, and supposing the other cestuis que trust to be asked how they had lost their property, the answer would be, "Our trustee invested our property on mortgage on the faith of a person who said that he had the legal estate, and who had it, and who conveyed it to our trustee as a security for the sums advanced, our trustee being guilty of no negligence whatever, having taken the advice of a perfectly competent conveyancer in order to see that the title was a good one. But the Court of Chancery says that we have lost it because our trustees had notice of the prior mortgage; though they had, in fact, no notice whatever. They had neither knowledge nor means of knowledge, but nevertheless the Court of Chancery says that, according to its doctrine, they had notice." The only conclusion which any one would come to is that these cestuis que trusthad been deprived of their property by the Court of Chancery, for reasons which, to an ordinary mind, were perfectly incomprehensible.
I am clearly of opinion, whether, under the peculiar circumstances of that case, Carter v. Carter (1) was rightly decided or not, as to which I will say nothing, that where a trustee in breach of trust conveys away a legal estate which he possesses, and that legal estate comes into the possession of a purchaser for valuable consideration without notice, that purchaser can hold the property against the cestuis que trust who were defrauded by the conveyance of the trustee; and that it makes no difference whatever that if the purchaser is challenged in a Court of Law, and an action of ejectment is brought against him, he may have to rely upon some deed which was in fact concealed from him, and of which he had neither knowledge nor means of knowledge.
Solicitor for the Plaintiffs: Mr. S. W. Johnson.
Solicitors for the Defendant Lamb: Messrs. Johnson & Weatherall.
Solicitor for the Defendant Ward: Mr. W. Prideaux.
Solicitors for other Defendants: Messrs. Hancock, Saunders, & Hawksford; Mr. J. E. Pilcher.
(1) 3 K. & J. 617.