The Feoffees of Trust and Governors of George Heriot's Hospital v. William Ross and Andrew Ferguson, his Tutor ad litem [1846] UKHL 5_Bell_37

UKHL
The Feoffees of Trust and Governors of George Heriot's Hospital v. William Ross and Andrew Ferguson, his Tutor ad litem
[1846] UKHL 5_Bell_37
It is not competent to award, out of a charity fund, compensation to a party entitled to the benefit of the charity, in respect of his having been deprived of that benefit by the erroneous acts of the trustees for administering the charity.The respondent brought an action of declarator and damages against the appellants, setting forth that George Heriot, jeweller to James VI., had by his will in 1623, bequeathed certain property to “the Provost, Bailiffs, Ministers, and ordinary Councell,” for the time being, of the town of Edinburgh, for founding an hospital for the maintenance and education of “so manie poore fatherlesse boyes freemene's sonnes of that town of Edinburgh,” as the yearly income of what he gave would amount to; the hospital to be erected and governed, and the children ordered, taught, and guided, in such manner as should be appointed by himself, or by Doctor Balcanquall, after his death; that Doctor Balcanquall, in virtue of the powers given to him by the will, enacted certain statutes for carrying the intentions of the founder of the hospital into effect, whereby it was declared, that the governors should admit into the hospital as many poor scholars as the revenue would admit, who should all be children of burgesses and freemen of the burgh, not well and sufficiently able to maintain them; the scholars not to be admitted until they were seven years of age, nor to remain after they were sixteen years of age; to receive an education in reading and writing

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“And farther, in respect the pursuer has, in consequence of the repeated refusals of his said applications to be admitted to the benefit of the said institution, as before mentioned, suffered great hardship, loss, and damage, and his prospects in life have been seriously injured, the feoffees of trust, and governors foresaid, defenders, ought and should be decerned and ordained, by decree of the said Lords, to make payment to the pursuer of the sum of 500 l . sterling, or such other sum, less or more, as the said Lords shall find in the course of the process to follow hereon to be due to him in name of damages he has already sustained, or which he may yet sustain, by and through the conduct of the defenders, in refusing to admit and receive him into the said hospital, and of his having been denied the benefits and privileges thereof, notwithstanding his repeated applications to the said governors, as before set forth.”
The respondents pleaded a variety of defences, in which they admitted that the appellant was a poor fatherless boy, the son of a burgess and freeman, but denied the jurisdiction of the Court to review their proceedings, and insisted that they were entitled to exercise and had exercised a sound discretion in rejecting the appellant in favour of more clamant cases of poverty, although the fathers of the applicants were alive; but they did not question the competency of the action in the form

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The Lord Ordinary ( Moncrieff ) pronounced the following interlocutor:—

to appoint or elect the pursuer, or any other particular individual, or to ordain them to admit him into the benefits of the hospital: and finds, that no jus quœsitum jus quœsitum can be held to have been vested in the pursuer, merely by his possessing all the qualifications necessary for his being so elected and admitted: finds, that this is not a competent process for trying authoritatively, any question concerning supposed abuses in the management of the hospital, or how far the governors may have been in error in their system of management, or in the exercise of their discretion: therefore sustains the second defence pleaded for the defenders; assoilzies them accordingly, and decerns.”“Finds, with reference to the first or declaratory conclusion of the summons, that, at the dates of the several applications of the pursuer, and his mother, for his being admitted into the benefits of the hospital, he, the said pursuer, as being admitted, or not denied, to be a poor fatherless boy, and the son of a burgess and freeman of the town of Edinburgh, above the age of seven, was possessed of all the qualifications required, either by the will of the founder, George Heriot, or by the statutes of Dr. Balcanquall, to render him eligible as a scholar to be admitted into the benefits of the said hospital: finds, that by the express terms of the said will, the said pursuer, as being a fatherless boy, belonged to that class of persons for whom the charity was specially constituted, and that the statutes of Dr. Balcanquall must be construed with reference to, and in consistency with that, as the first and fundamental purpose of the institution: and finds, that, by the Act of Parliament passed on the 14th July, 1836, it is expressly provided, that a preference shall always given in the election, first, to the kinsmen of George Heriot, “and second , to poor fatherless boys, sons of burgesses and freemen:” Finds nothing relevantly alleged in this record, for establishing that the pursuer was not duly qualified to be put in nomination for being elected into the benefits of the said hospital: and finds it admitted, that on both the occasions when he was rejected, there were numerous vacancies, which were not supplied by the election of fatherless boys, the sons of burgesses freemen: but, in respect that, by the nature of the foundation, and the express terms of all the statutes, the sole power of appointment, or election, is absolutely vested in the governors for the time, finds, that it is not competent for this Court to find that they were bound

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The respondent reclaimed only against that part of this interlocutor which denied the jurisdiction of the Court, and the competency of the action, but before his reclaiming note was advised he had reached the age beyond which, upon any construction of the will of the founder and the statutes of the charity, he could not be admitted to its benefit. The Court required the opinions of all the Judges, and thereafter pronounced the following interlocutor:—
“In respect of the opinions of the majority of the whole Judges, alter the findings of the interlocutor of the Lord Ordinary reclaimed against by the pursuer, William Ross; and, in respect of the other findings in the said interlocutor now final in this cause, find that the pursuer, being a poor fatherless boy, and son of a burgess and freeman of the town of Edinburgh, was fully eligible to be elected a scholar and admitted to the other benefits of the said hospital, when he applied to the Governors thereof for that purpose, and ought to have been preferred, elected, and admitted by them accordingly, in terms of his applications for that effect: find that it is competent for this Court to declare that the governors of the hospital were bound to appoint or elect the pursuer on the occasions libelled, in the circumstances and

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The appeal was taken against those parts of the Lord Ordinary's interlocutor which were adverse to the appellants, and also against the interlocutor of the Court. The appeal was founded and fully argued upon the different grounds of defence which had been maintained in the Court below, but at the hearing, an additional defence was, for the first time, raised and argued, which, in the view taken of the case by the House, it is alone necessary to notice. That defence was, that as the respondent could not now be admitted to the hospital, the only conclusion of the summons under which any relief could be given was that for damages; but as it was not so framed as to be personal against the appellants, but was against them in their corporate capacity only, no decree could be made upon it, seeing it was not competent to award damages which could be satisfied only out of the funds of the charity.

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Mr. Solicitor-General and Mr. Anderson for the Appellants.—It is admitted that the respondent is beyond the age at which, in any view of the will and statutes, he could be admitted to the benefit of the charity. The only relief, therefore, which he can ask under his summons, supposing the grounds he has urged in support of it to be well founded, is compensation in damages for the injury he has sustained by being deprived of the benefit of the charity. If his rejection was authorized by the will and statutes, there is plainly an end of any such claim; the act of the appellants was sanctioned by the founder, and could not be complained of. On the other hand, if the rejection was not authorized by the will and statutes, the act was one for which the appellants, having no authority for it, were personally responsible. Had they, therefore, compensated the respondent out of the funds of the charity, they would have committed a breach of trust, for there is no provision in the will or statutes permitting application of the funds to the repair of damage, which the trustees may have occasioned by acts done in an erroneous administration of the trust. If it was not competent for the appellants ex proprio motu to make such an application of the charity funds, it was equally incompetent for the Court to order it by their decree. The principle of the decision of this House in Duncan v. Findlater, Mc L. & Rob . 911, is directly applicable to the present case, and as the summons does not contain any personal conclusion for damages against the appellants, the only relief which, on the authority of that case, the respondent could have asked; there was nothing which remained to be worked out by the action, and the Court should therefore have dismissed it.Mr. Turner and Mr. Bennett for the Respondent.—The case did not come before the Court below, and was not decided by it upon the question of damages. The Lord Ordinary had found that the action was not competently framed for trying a

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With regard to the question raised at the bar, for the first time, as to the competency of awarding damages out of the trust fund, the only authority cited against it is the case of Duncan v. Findlater , Mc L. & Rob . 911, but that case was materially different in its circumstances, and cannot rule the present; there the party complaining was a stranger to the fund out of which the damages were sought to be made effectual; here, according to the final findings of the Court below, the respondent is ascertained to be a party who had an interest in the fund, who was entitled to have been preferred before others for the relief which the fund was intended to afford. It is not, therefore, a misappropriation of the trust fund to apply it for his indemnification, and this may be done by the trustees not

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The counsel for the appellants were not called on to reply.Lord Cottenham .—My Lords, several questions of considerable importance and interest have been discussed at the bar connected with this charity. But it appears to me that there is one point upon which it becomes the duty of this House to dispose of the case, without any further proceedings—not thinking it necessary to hear any observations in reply to the case made on the part of the respondent. And it is one, undoubtedly, of very great importance, as affecting the general course of proceeding in Scotland, as connected with charities or trust funds.The pursuer here complains of having been improperly rejected, that is to say, that he, being qualified, and claiming

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He then goes on, and in his summons prays for the payment of damages as some compensation for the injury he has sustained from his having been, as he alleges, improperly rejected. He sues, not the individual trustees, not those by whose personal act the alleged injury may have been sustained, but he sues, in their corporate capacity, the trustees of the charity. He does not, as I find by the summons, pray that his damages may be paid out of the trust fund; but the summons is so constituted that he could not get any damages except out of the trust fund; and, in fact, it has been understood during the whole proceedings, that if there are to be any damages at all, they must be paid out of the trust fund.Now, my Lords, assuming the whole of the pursuer's case, as far as relates to his eligibility and to the injury that he has sustained by not having been elected at the time when he proposed himself as a candidate for the vacancy which then existed; the point that strikes me is, that according to the facts as admitted on both sides, the question resolves itself into a question of damages. He can have nothing except it be in the shape of damages, and he can have damages only out of the trust fund. The question, therefore, comes simply to this, whether by the law of Scotland a party who complains of improper conduct on the part of those who have the management or trusteeship of any charity or trust fund, can obtain compensation, for an injury which he is supposed to have sustained, out of the fund in the management of those individuals?Now it is quite obvious that it would be a direct violation,

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My Lords,this question came incidentally, (because it was not made a prominent feature of the case,) under the consideration of this House, in the case of Duncan and Findlater; and this House was very much struck to find that such a course of proceeding as I have suggested, had been adopted in Scotland. Although there had been no decision as to the right, yet it was stated, and I have no doubt accurately, that such a practice had crept into the administration of trust funds in Scotland. And the opinion of those noble Lords who attended that discussion, was expressed in disapprobation of any such practice. And observations were made which one would have supposed would have led to a very deliberate consideration in the Court of Session, as to whether such a practice was justifiable by the law of Scotland, or I might say, by the law of any other civilized country. It is true that the date of the summons in this case, appears to be anterior to the case of Duncan and Findlater, which would account for the parties not having taken up that question, in a mode which would naturally have been expected if the proceedings had been subsequent to the decision of the House in that case. But that

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I observe, however, that one, and but one, of the learned Judges seems to have had his attention very much directed to this, I mean Lord Mackenzie . He thus expresses himself:
“I may, however add, that in any view, I should have had difficulty in giving an opinion that damages were due, either by the parties who rejected the pursuer personally, or out of the funds of the institution. The latter is not I think asked.”
Yes, it is beyond all question asked, because the only damages to be paid under this summons, must be out of the trust fund. Then he goes on to say this:
“And I should have great difficulty indeed to adopt it, for I do not think it is in the power of the governors to cause such an application of the funds by any act of theirs.”
No doubt Lord Mackenzie took a very correct view of what was the duty of the trustees, and how inconsistent with that duty it would have been for the Court to direct the application of the trust fund, to pay damages occasioned by the improper act of those who had the conduct and management of this fund.Mr. Turner has referred to a practice which certainly has in some cases existed in this country, and which he considers has tended, at least, to some justification of this mode of proceeding in Scotland. Now, my Lords, it is perfectly true that in some cases, where great hardship would be done by too rigidly enforcing the application of a trust, the Court of Chancery, where application has been made to it, has abstained from exercising its jurisdiction to the prejudice of particular individuals, who would otherwise have been turned out of the charity of which they supposed themselves to be proper objects, and of which they had been admitted members. But that is a very different thing, from the Court actively interfering and directing a breach of trust, if it be a breach of trust so to apply the trust fund. I

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Now, my Lords, finding that there is no decided authority in the law of Scotland upon this subject, finding that it would be directly in breach of the trust under which these funds are held; it does appear to me to be the duty of this House again to discountenance any such practice, if it has existed in Scotland, and to decide this case upon a ground so very clear, and so very free from doubt, as this point appears to be.Some difficulty was supposed to exist from the findings of the Lord Ordinary not having been the subject of a reclaiming note. I do not find it very clearly explained, nor can I, from reading the opinion of the learned Judges, at all satisfy my own mind how that created so much difficulty in their view of the case. But in the view I take of the case, it creates no difficulty at all; because it appears that these findings are very innocent findings, looking at the duty this House has to perform. They go no further than to find the eligibility of the pursuer; because no reasonable doubt can be entertained, nor has any been suggested, that he was a fatherless boy, a proper object of the charity; and the only question has been, whether in respect of these qualifications he was entitled to admission, at all events, before others who had not those qualifications. Under the circumstances that now exist upon a question of damages out of the trust fund, whether the pursuer was or was not more qualified than the Lord Ordinary found him to be, is quite immaterial; because whatever his right or title may have been, if he cannot get damages out of the trust fund, he can get no compensation at all. I do not find, therefore, any difficulty whatever as to that point, and that relieves the case from some embarrassment as to some part of the argument contended for at the bar. I leave these findings where they are. But then it is said, that not having been the subject of a reclaiming note, and yet having been brought here by appeal, a conflict between two Acts of Parliament makes it doubtful how far this is competent. It does not appear necessary for this House to interfere in that

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Lord Brougham .—My Lords, I take entirely the same view of the case as my noble and learned friend. It is quite true, as was stated by one of the learned Judges,— Lord Mackenzie , I think,—that it does not appear that this claim is in terms directed against the fund of Heriot's Hospital Trust. It is so. But it can mean nothing else. The summons really means nothing else. For your Lordships will observe there is a careful suppression of the names of individuals,a. A.b. B. andc. C. D., feoffees in trust and governors of the hospital. If they were named, it would not make any difference; but they are not even named. Search the summons from the beginning to the end, and you do not discover, except by probability, who these feoffees in trust are. And this probability arises from what appears of the history of the charity, from the 13th of July, 1627, to the time of Dr. Balcanquhal,

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Then they are said to have acted by a majority of their number in this case; and the thing complained of is done, not by the whole body of a meeting, but by a majority of their number, having authority to bind the minority as in all corporations; but not having power to bind the minority to the extent of making them liable for the tortious acts done by the majority against which acts the minority are stated in the summons to have actually protested; for Dr. John Lee differed from his colleagues, and protested against their proceeding. Therefore, what we are called upon to do, most clearly is nothing else than to give a compensation in damages, if there be any due at all, not against the wrong-doers for their tortious acts, not against those who committed the injury out of which damnum arose to this party, William Ross, but against the whole corporate body, (against Dr. Lee among the rest,) which means against the fund, for it cannot be out of the fund of the ministers of Edinburgh, it cannot be out of the fund of the town council, “the common good” as it is called of the corporation of Edinburgh, it is against no such fund, but it is the trust fund alone that can be gone against, and which alone was in the contemplation of the summons, and of the Court, namely, the fund of Heriot's Hospital, whereof these respondents are officially the trustees.

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Now, my Lords, the charge against them, upon which this extraordinary claim for compensation out of the fund of the hospital is made, is this, that the governors of the said hospital have illegally and improperly, and in the face of the will and the statutes before referred to, done the act in question; so that the charge is neither more nor less than this modest charge: that because the trustees have illegally and improperly violated their trust, that is to say, violated the statutes under which they hold their office as trustees, therefore what? not that they themselves, the wrong-doers, should pay for having violated the trust, and in the face of the will and statutes done the tortious acts, and committed the injury out of which damage arose to the party complaining: no such thing; but that the fund should be answerable, and that out of that trust fund this compensation should be given for the wrong committed upon Ross, by the misfeasance of the trustees.My Lords,I do not think it is possible to conceive a much more absurd and untenable proposition: it is making one party, namely, those who are interested in Heriot's Hospital, either the persons now actually upon the books, or the community for whose good the fund was established, for whom the hospital was founded and endowed, it is making them suffer, and the fund suffer, because the trustees of that fund are alleged to have done an injury in breach of their trust; it is making those who might have been the plaintiffs, if any one had thought fit to charge the trustees with having done wrong in their office of trustees, it is making them pay, because another party has been injured, namely, Ross; according to that, two parties having a right to complain, namely, the community or the parties interested in the hospital, and this one individual; the object is to obtain, at the expense of one of those parties, compensation for an injury done to the other. I do not think that absurdity, (I speak it with all possible respect,) could go much further than this would go, if it were to be established.

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My Lords,the practical part of the interlocutor is this claim of damages; that is the only matter that remains in the case, because, suppose the Court to have been perfectly right in finding that the preference ought to have been given to the fatherless boy, not only that he was eligible, for I do not deny that he was, I agree entirely with the Judges that he was, but supposing them also to be right in finding, (which I do not think they were,) that he ought to have been elected without more, and therefore negativing the positive discretion given the trustees within certain limits as to qualification; supposing the Court to have been perfectly right in finding that this boy ought to have been elected, and that if another vacancy arose, (which they clearly meant by their finding, because there was no vacancy then,) he should positively be elected, but for his age having become too great, so as to deprive him of his qualification; I say, supposing they were right in that, (which I think they were not,) still I should totally differ from them in coming to the conclusion, for the reasons assigned, that, therefore, damages ought to be paid out of the trust fund, for the wrong done to him.I am clearly of opinion, that this finding was wrong, and that the interlocutor must, therefore, be reversed; and it is only necessary for that purpose to go to one part of it—that which respects his age being too great, which takes away all the practical application of the matter. I am clearly of opinion, that the only practical matter being erroneously found, viz., that damages are payable from the trust fund, it ought to be reversed,—that being the case we have no occasion to add much more.My Lords,as far as regards the interlocutor which was reclaimed against to the Inner House, I really do not find occasion to quarrel with any one part of its findings, except the latter part, which is now before us in the reclaiming note; I do not quite agree with the reasons there given: I do not think it is quite correct to say, without qualification, that the trustees have an absolute right and discretion vested in them, unless it be

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My Lords,I cannot help concurring with my noble and learned friend; I am sorry I feel the necessity of so doing, but it is my duty to do it, in order to prevent the misapplication of doctrines, and the continuance of erroneous decisions. I cannot help joining with my noble and learned friend, who has already addressed your Lordships, in expressing my regret that, although the summons, it is true, was issued before the decision in the case of Duncan and Findlater, in 1839, yet that decision having authoritatively laid down the law upon the matter, which I cannot well distinguish from the present, the Court did not pay some attention to that decision, and that, in fact, it seems to have been much left out of sight by the learned Judges in their opinions. In all the arguments to-day, and in all these proceedings, I can see no reference to the important authority of this House setting right the law, or rather setting right the practice; It is said that the law then laid down for the first time, was new. There was no authority cited in that case to show that it was new; and I am quite sure, if it was for the first time laid down, it was so perfectly clear upon all principle and analogy, and upon every view of common sense that could be taken of the matter, that it was rightly so laid down for the first time; but I have no recollection of any case having been then brought before us, to show us that we were then laying

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Lord Campbell .—I am of opinion that on the 14th of February, 1843, when the interlocutor appealed against was pronounced, the Court ought to have dismissed this action. It is admitted, that at that time no benefit could arise to the pursuer, unless he could be indemnified by the recovery of damages; and the Inner House remitted it to the Lord Ordinary, for the purpose, as I conceive, of assessing the amount of the damages; but they must have been of opinion when they pronounced this interlocutor in February, 1843, that damages in the manner prayed by the summons might be recovered.Now, my Lords, I cannot help expressing my great astonishment that such a notion should prevail for one instant among the Scotch Judges; they seem to have thought that if charity trustees are guilty of a breach of trust, persons who are damnified by that breach of trust, are to be indemnified out of the trust fund: that is a doctrine which they lay down, reducing it into an abstract form, that if charity trustees are guilty of a breach of trust, persons who suffer from that breach of trust are to be indemnified out of the trust fund.My Lords,that is certainly contrary to all reason and justice and common sense; it is a clear perversion of the intention of the donor, and it would lead to the most inconvenient consequences; the trustees in this manner would be indemnified ior their own misconduct, and the real object of the charity, the intention of the founder, as to the objects of his favour, would

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My Lords,a doctrine so strange requires to be supported by very high authority. Now I have the greatest respect for the law of Scotland; I think that it has been framed by men of very great learning and wisdom, and it would astonish me very much if there had been any authority to support a doctrine so absurd; but not a fraction of authority has been produced—not a shred of authority has been produced to support this; there has been no institutional writer cited, no decision has been cited, but only reference made to an understanding.My Lords,I believe that this understanding is of very recent origin in Scotland, and that it probably arose from certain cases to which reference has been made, where an accident happened from the misconduct of persons repairing a highway, and there being a general compassion felt, and the case being pitiable, the party received a sum of money out of the trust fund; there was no one to find fault with that, it met with general approbation, and so the practice became general throughout the country, and from that origin arose this supposed doctrine, that in all cases where trustees are guilty of a breach of duty, the damage is to be made good out of the trust fund.That doctrine was fully examined in the case of Duncan and Findlater, to which reference has been made: I had the honour, at that time, to plead the case at the bar; I heard it

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Lord Cottenham .—As a means of carrying out what appears to be the opinion of the House, I would propose to reverse the interlocutor of the Court of Session, and to vary the interlocutor of the Lord Ordinary in this way; after the word “respect,” to leave out the words that follow, and to introduce these in their place:
“but in respect that the pursuer's case is under the circumstances reduced to a question of damages, and the only damages that could have been recovered by the pursuer, if any, would have been to be paid out of the trust fund, for which the trust fund cannot be liable.”
It is ordered and adjudged, That the said interlocutors of the Lords of Session of the Second Division, of the 15th (signed 16th) of November, 1842, and of the 14th (signed 15th) of February, 1843, complained

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“by the nature of the foundation, and the express terms of all the statutes, the sole power of appointment or election, is absolutely vested in the governors for the time; finds that it is not competent for this Court to find that they were bound to appoint or elect the pursuer, or any other particular individual, or to ordain them to admit him into the benefits of the hospital; and finds, that no jus quæsitum jus quæsitum can be held to have been vested in the pursuer, merely by his possessing all the qualifications necessary for his being so elected and admitted; finds that this is not a competent process for trying authoritatively any question concerning supposed abuses in the management of the hospital, or how far the governors may have been in error in their system of management, or in the exercise of their discretion. Therefore, sustains the second defence pleaded for the defenders,”
and substituting the following words:
“But in respect, that the pursuer's case was under the circumstances reduced to a question of damages, and that the only damages, if any, which could be recovered by the pursuer, would be to be paid out of the trust funds, to which such funds were not in any respect liable: Therefore assoilzies the defenders accordingly.”
Solicitors: Spottiswoode and Robertson — Dunn and Dobie, Agents.