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United Kingdom House of Lords Decisions |
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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> The Reverend Doctor John Inglis and others, Trustees of the late Josiah Walker, Esq. - Dr. Lushingto - A. Wood v. Thomas Mansfield, Esq., Trustee on the Sequestrated Estate of James Stuart, Esq., Late of Dunearn - Sir John Campbel - Keay [1835] UKHL 1_SM_203 (10 April 1835) URL: http://www.bailii.org/uk/cases/UKHL/1835/1_SM_203.html Cite as: [1835] UKHL 1_SM_203 |
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Page: 203↓
(1835) 1 S&M 203
CASES DECIDED IN THE HOUSE OF LORDS, ON APPEAL FROM THE COURTS OF SCOTLAND, 1835.
2d Division.
No. 8
[
Subject_Bankruptcy — Stat. 1696, c.5. — 54 Geo. 3. c. 137. —
A party lent a sum of money on the security of a property which he was led to believe extended to ninety-five acres, but which, from the terms of the description, embraced only five acres; and after the borrower was bankrupt, and his estates had been sequestrated, and a trustee confirmed, and he had fled to another country, the lender obtained from him an heritable bond, embracing the lands originally intended to have been conveyed in security, on which infeftment was taken before the trustee was infeft: Held (affirming the judgment of the Court of Session) that the heritable bond so obtained was inept in a question with the trustee.
James Stuart of Dunearn, W. S., was proprietor (besides other subjects) of nine different parcels of lands in the county of Fife. To three of these parcels he had completed a feudal title; viz. 1st, the lands of Nooklands, 2d, the lands of Torryhills, including those of Sisterlands, and 3d, the lands of Brewery of Newton, afterwards called Hillside. To the remaining six parcels his right was personal, no infeftment having been taken.
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All these properties had been lawfully acquired, and his right to them was not subject to any latent qualification.
In the month of November 1823 Mr. Josiah Walker, Professor of Humanity in the University of Glasgow, employed Messrs. Joseph Gordon and Alexander Stuart, Writers to the Signet in Edinburgh, to lend out for him on heritable security the sum of 6,000 l.; and these gentlemen had been also employed to lend for other two clients certain sums amounting to about 4,500 l. At this time Mr. Stuart of Dunearn (who was stated to be Mr. Gordon's most intimate friend) communicated to Mr. Gordon that he wished to borrow 10,000 l. on the security of his estate of Hillside. It was stated by the appellants that Mr. Stuart represented this property as extending to ninety-five acres or thereby, and as comprehending the whole ground belonging to him which lay adjacent to his house of Hillside. This was not admitted by the respondent; but it was not disputed, that with a view to obtaining this loan Mr. Stuart transmitted to Mr. Gordon a valuation which had been made in the same month by Dr. Coventry, Professor of Agriculture in the University of Edinburgh, and who
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“Contents and Estimated Value of the Lands, Plantations, &c. of Hillside, belonging to James Stuart, Esq., of Dunearn, and lying in the Parish of Aberdour, and Shire of Fife.
I.—Domain lands, east of public road.—84 acres.
1. Arable lands, lawn, &c. 48 acres, at 7 l. 10 s., 360 l.—at 28 years purchase
£10,080
0
0
2. Walled garden, 1 acre, at 15 l., and 24 years purchase
360
0
0
3. Plantations, 10 acres, per summary of estimate
2,119
10
0
£ 12,559
10
0
II. Lands, west of road, adapted for feuing.— 36 acres.
1. Southmost field, including 6 acres of nursery, 15 acres, at 16 l., say 13 l.
£195
0
0
2. Field north of last, 7 3⁄4 acres, at 14 l., say 11 l. per acre
85
5
0
3. Field north of last, 8 ¼ acres, at 14 l., say 11 l. per acre
90
15
0
4. Northmost field, 5 acres, at 12 l., say 9 l.
45
0
0
416
0
0
Whereof 21 years purchase is
£ 8,736
0
0
Page: 206↓
Abstract.
I. Domain lands, 59 acres, at
£ 12,559
10
0
II. West of road, 36 acres, at
8,736
0
0
Add, mansion, offices, lodge, and old timber
1,200
0
0
Ninety-five acres
22,495
10
0
Deduct 28 years purchase of burdens, per state
840
0
0
Inde, estimated value
£ 21,655
10
0
(Signed)
“A. Coventry”
Edinburgh, 17th November 1823.”
The appellants stated, that on the faith of this representation it was agreed to lend the money to Mr. Stuart, and on the 29th Messrs. Gordon and Stuart addressed the following letter to Mr. Stuart:—
“We return Dr. Coventry's letters, and valuation of your Hillside property. We are prepared to lend to you, in first security over this estate, (with the exception of the 1,500 l. you mentioned,) 6,000 l. from one friend of ours, and 4,300 l., in two sums of 3,000 l. and 1,300 l., from a family we act for, provided you show, by searches, that your titles are unexceptionable, and free from burdens, (with the exception specified,) and that there shall be, besides the heritable security, an assignment of the rents of your Cullelo property; with this understanding, that the assignment of the quarry rent is not to be intimated, unless from necessity, through failure otherwise of punctual payment of the interest. The rate of interest, though specified in the bonds to be five per cent., shall be restricted to four and a half, payable half-yearly in Edinburgh, and the rate not to be varied on either side for two
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years. You will please send the titles, searches, &c. on Monday, that the bonds may be prepared.”
On the 1st of December Mr. Stuart returned this answer:—
“I am favoured with your letter of the 29th instant. Your understanding of the terms of the loan is correct in all particulars but one. I offered an assignation in security of Mr. Davidson's rent of 360 l., or of the quarry rent of 700 l., but not of both; and I mentioned to Mr. Gordon, that I preferred the former, because I did not wish to intimate an assignation to the tenant of the quarry. I have no doubt that this explanation will be satisfactory to you. I annex copy of the description of the lands, and shall immediately get the searches completed, and the titles sent you. In the meantime you may be preparing the deeds.”
The description of the lands here alluded to was holograph of Mr. Stuart, and was in these serms:—
“All and whole the lands of Hillside, formerly called the Brewery of Newton, with houses, buildings, yards, orchards, greens, muirs, marshes, coals, coal-heughs, annexes, connexes, parts, pendicles, and whole pertinents of the same whatsoever; together with the teinds included in the said lands of Hillside, all lying in the lordship of St. Colme, barony of Beith, and sheriffdom of Fife.”
On the 3d December Mr. Stuart again wrote the following letter, accompanied with the titles mentioned in it:—
“I now send you search of encumbrances over Hillside, with charter of resignation 1795, disposition 1795, sasine 1795, and renunciation 1797.—There was no infeftment in the lands from 1734, when Alexander Stuart was infeft, until 1795.”
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The titles so sent and referred to in the letter, embraced the three parcels of lands in which Mr. Stuart was feudally vested.
Three bonds were thereupon prepared by Messrs. Gordon and Stuart, one in favour of Mr. Walker for 6,000 l., and the others in favour of the two other clients. The description of the lands which had been communicated by Mr. Stuart was introduced into the drafts of those lands, which were thereupon transmitted to him for revisal; and on the 5th of December he sent them back accompanied by this letter. “I return the drafts of the bonds all right. The assignation of rents is mere surplusage; and I am only averse to it as being contrary to practice, and as appearing to give a greater security than it really does. I don't object to both assignations if you intimate neither; but you must be quite aware, that neither affords any real security to the creditors, as they may be defeated by renunciations, or by other ways,” &c. The bonds were accordingly extended and executed by Mr. Stuart on the 7th, and on the 1st of January 1824 infeftment was taken on the lands of Hillside or Brewery of Newton, and the sasines were immediately recorded.
Interest was regularly paid by Mr. Stuart till the year 1828; and he did not borrow any additional money on any of the above parcels of lands. In that year he suddenly left Scotland in bankrupt circumstances; it was for some time unknown to what place he had gone. An application was made for sequestration of his estates, which was awarded on the 1st of September 1828, and the respondent was confirmed trustee upon his estate on the 6th of October of the same year. A decree of adjudication in his favour was at the
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On examining the titles the respondent became satisfied that the security which had been granted did not extend over the whole ninety-five acres, but was confined to the lands of Hillside proper, which were worth about 1,000 l.; and having intimated his intention to claim the other subjects as free from the burden for the general creditors, an application was made on behalf of the parties to whom the bonds had been granted to Mr. Stuart, then in America, to execute a supplementary deed. Accordingly, while at New York, he granted, on the 20th May 1829, a deed which was denominated a bond of corroboration, reciting in detail the communings for the loan, the transmission of Dr. Coventry's valuation, and the description, the correspondence, and the revisal of the bonds by him, after which the deed set forth,— “that although, from the correspondence and agreement herein-before detailed, and the extent and nature of the transaction, there can be no doubt that the true intent and meaning of the covenants entered into betwixt the parties who made the said loans through their agents, Messrs. Gordon and Stuart, and me was, that the security granted to them, and each of them, should extend over the whole of my lands and estate known by the name of Hillside, and to which the valuation by Dr. Coventry related; and that it was understood and agreed at the time, that the description of lands engrossed in the bonds, and transcribed from the titles exhibited, covered the whole of those lands; yet, as it has been alleged by parties having, or pretending to have, interest in my properties, that the description in the said bonds does not
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Page: 211↓
The respondent as trustee had also required Mr. Stuart to execute a special disposition in terms of the bankrupt act in his favour, which Mr. Stuart accordingly did at New York on the 19th of June, and the respondent was infeft on the 12th of August 1829.
In the month of January thereafter, the respondent as trustee raised an action of reduction against Mr. Walker of the bond of corroboration and sasine, on the grounds, “1. That the foresaid disposition in security was impetrated by the said defender from, and granted by the said James Stuart, for the farther security of the defenders, in preference and to the hurt and prejudice of the other creditors of the said James Stuart, and of the pursuer as trustee for their behoof, subsequent to the period when the said James Stuart had been rendered legally bankrupt in terms of the foresaid statute, 54 Geo. 3, c. 137, s. 1, by which it is enacted, that “every person, whether he be out of Scotland or not, whose estate has been or shall be sequestrated under the authority of any of the acts before recited, or of the present act, shall, in like manner, be holden and deemed a notour bankrupt in all questions upon the act of 1696, from and after the date of the first deliverance on the petition to the Court of Session for awarding the sequestration;” and the said disposition in security, and infeftment thereon, are reducible, as being and proceeding upon a fraudulent alienation in terms of the statutes 1621, c. 18, and 1696, c. 5; and, 2. That the foresaid disposition in security was impetrated
Page: 212↓
In defence Mr. Walker contended, 1. That he had a good title to exclude the respondent as the representative of Mr. Stuart, or of his personal creditors, in respect that the original infeftment must be held to embrace the whole lands which popularly passed under the name of Hillside; at all events, if Mr. Stuart did not thereby actually give such a security, he had been guilty of a fraud by inducing Mr. Walker to lend his money on the faith of a security extending over ninety-five acres; and the respondent, as the representative of general creditors, could not avail himself of that fraud; and, 2. That as Mr. Stuart was under an onerous agreement to grant a bond extending over the ninety-five acres entered into at a time when he was not bankrupt, the execution of the corroborative bond in implement of that agreement did not fall under the act 1696; nor did the decreet of adjudication prevent Mr. Stuart from granting such a deed, nor Mr. Walker from taking infeftment in the lands, seeing that at the time when he did so the trustee had not obtained infeftment.
The respondent, on the other hand, maintained, 1. That although a trustee for general creditors, or an adjudger might be affected by any fraud by means of which a bankrupt had acquired property, or by a qualification, (such as that of trust,) affecting his radical
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Mr. Walker having died, his testamentary trustees were sisted in his place; and Lord Moncrieff appointed the question to be argued on cases. On advising them, his Lordship reported them to the Court, and issued this note of his opinion:—
“The summons in this case states two reasons of reduction; but it comprehends three grounds of law; 1st, That the disposition and sasine called for constitute an undue preference, in violation of the statutes 1696, c. 5. and 54 Geo. 3, c. 137. 2d, That they amount to a fraudulent alienation, contrary to the act 1621, c. 18.; and 3d, That the disposition proceeded à non habente potestatem, in respect that it was granted after sequestration, and after the act confirming the trustee.
The facts are clear. The Lord Ordinary holds it to be proved, 1st, That there was a bonâ fide agreement
Page: 214↓
concluded between Mr. Stuart and Mr. Gordon, as agent of Professor Walker, by which the sum of 6,000 l. was to be given in loan by the latter, along with two other sums, to be lent by other parties through Mr. Gordon, making in all 10,500 l., on the express condition of obtaining an adequate and complete heritable security; 2d, That that agreement was specific, to the effect that the security should extend over the whole lands comprehended in the report of valuation by Dr. Coventry, produced. The Lord Ordinary has no doubt that the proof of these facts is sufficient; for he is of opinion that, in the absence of the original letters of Mr. Gordon, the copies of Mr. Gordon's letters, taken from his books, regularly kept and sworn to, are admissible evidence against the creditors, and are, with their counterparts in the letters of Mr. Stuart, sufficient to establish the true nature of the transaction. It is indeed impossible to raise a doubt as to Mr. Gordon's intention; for, if he did not believe that he was getting a security over the whole lands in the valuation, he must be supposed to have wilfully taken what he saw to be no security at all, at the same time that he professed his determination not to lend except on complete and adequate real securities. 3d, It is admitted on the record, that the lands in the valuation are identically the same lands which are comprehended in the deed under reduction, with one unimportant exception. 4th, This transaction was concluded, and the whole money bonâ fide advanced in December 1823, and bonds were then granted for carrying it into effect. The bankruptcy was in 1828. The bond so granted to Professor Walker, in so
Page: 215↓
far as it was insufficient for giving a security over the whole lands, was so made, contrary to the agreement, on the faith of which the money was advanced; and upon the admitted facts it is clear that it was framed in this defective manner by the fault of Mr. Stuart, whether that fault be considered as proceeding from fraud or from error. The Lord Ordinary sees no evidence of wilful fraud, and cannot presume it; but, taking it to have been by error, it was still by the positive act of Mr. Stuart as the borrower, in misrepresenting the titles, and thereby misleading the party with whom he dealt. It is not the same case as if he had simply sent the title deeds to Mr. Gordon to prepare the bond. With the misrepresentation, the error could not, or could not naturally, be discovered from the title deeds; and the error was of so gross a nature, that, in this question, the act which produced it must be considered as culpa lata quæ æquiparatur dolo. On the other hand, the deed under reduction was not executed till after the sequestration and the confirmation of the trustee.
But the money having been advanced on the faith of obtaining a security over the specific lands contained in that deed, more than five years before the bankruptcy, the Lord Ordinary has no doubt that, if the same deed had been granted before the sequestration, but within sixty days preceding it, it must have been considered, not as a security for a prior debt, but as implement of the previous specific obligation, and therefore within the exception of novum debitum, and not liable to reduction on the act 1696. The cases of Cormack v. Gardner's Trustees, 8th July 1829,
Page: 216↓
and Cranston v. Bontine, 2d February 1830, seem to be conclusive of this point. It can make no difference whether the security was duly made at first, but not delivered till within the sixty days, or the security delivered at first was imperfectly executed, and was only made complete by another deed executed within the sixty days. The act 1621 evidently cannot be applied to the case.
There is, however, great difficulty in the question upon the third ground of reduction, viz. that the deed was executed by the voluntary act of the bankrupt, after the sequestration and the confirmation of the trustee. When the point is stated in the abstract, there can be no doubt that no sequestrated bankrupt can effectually constitute a security over the estate by a voluntary deed. The estate becomes the property of the creditors, and there is an adjudication in the person of the trustee by the act of confirmation; and in this case the adjudication was special, the whole lands having been enumerated. But the present case is not resolved by this general point. For, l. If the original contract be clear, and it be also clear that the first disposition was made imperfect by an error of Mr. Stuart, of a nature equivalent to fraud, the Court must determine whether it is competent to the creditors or their trustee to avail themselves of such an error. Mr. Stuart held the estate subject to a specific obligation to make the security good over the whole lands in the valuation. If the estate passed from him to his creditors, it could only pass as it stood in his person with that obligation; and according to the judgment, and more particularly the opinions delivered
Page: 217↓
in the case of Gordon v. Cheyne, February 5, 1824, the creditors could only take the right of the bankrupt tantum et tale as he held it. 2. The adjudication in the person of the trustee did not divest the bankrupt feudally. An adjudication without charter and sasine has not this effect; and certainly, assuming the existing obligation for a specific security, an adjudication by the defender would have been competent after the trustee's confirmation; and, if first completed, would have excluded him. The point of difficulty is, that here the security was perfected by the voluntary act of the bankrupt; and it has been frequently decided that even diligence in itself competent will be invalid to give a preference, if the creditor has only been enabled to obtain it by the collusive aid of the bankrupt. But, 3. If there was a specific obligation to give the security, and if that obligation was binding on the creditors, the question is, Whether the pursuer has any legal interest to reduce it as granted by the bankrupt, whether the act of itself would in other circumstances have been warranted or not? The deeds are valid in point of form, Mr. Stuart not having been denuded; and if the thing done was an act of justice which the creditors might have been required to do, there can be no interest to reduce it. Frustra petis, &c. Though the question is one of great difficulty, the Lord Ordinary is inclined to think that this is the just and the legal result. Mr. Walker never for one moment agreed to follow the personal faith of Mr. Stuart, or imagined that his money was lent otherwise than on the faith of a complete security over the specific lands agreed on. If the security
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stands, he will get nothing more than that which he had a right to believe was given at first, and which the creditors cannot take from him, without founding on the act of their constituent, by which he and his agent were deceived. There is a separate point in the case, relative to certain parts of the lands which were held by Mr. Stuart by personal titles. With regard to these it seems to be clear, that the trustee must be bound by the latent equities, not limited to those which are in the constitution of the title; and the Lord Ordinary entertains no doubt that, if the security is otherwise not reducible, the defenders had a right to complete the title in the bankrupt. If the trustee had done so, it would have accresced to Mr. Walker's infeftment. He could only avoid this by making up a different title, throwing the bankrupt out of the progress. But a creditor holding a specific security was entitled to put the matter right if he could.
The result in the Lord Ordinary's opinion is, that judgment for the defenders ought to follow from the equity of the statutes and the general principles of law, under the cases of Cormack, Bontine, Gordon, and other similar cases.
Certain lands of Torryhills, which are not in the valuation, have been included by mistake in the last disposition. As to them, the deeds must be reduced, unless the defenders re-convey them at their own expence.”
(Signed) “J. W. M.”
On the question being argued before the Court, their Lordships ordered additional cases, which with the previous cases they appointed to be laid before the other judges for their opinions.
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In these circumstances, the present reduction has been raised by the trustee to set aside the deeds executed by Mr. Stuart after sequestration; and the only fact in dispute beween the parties is, Whether, in sending the erroneous description of the lands, and revising the deeds in which it was adopted, Stuart was guilty of an actual fraud; or whether his conduct proceeded only from inattention and negligence? We do not think that there is evidence of fraud. It is true, that a security which was granted by the late Dr. Stuart to his daughters for their provisions was prepared by their brother, Mr. Stuart, or in his writing office; and that it extended not only over Hillside proper, but the whole estate of Hillside, as well as other subjects belonging to Dr. Stuart; and it is presumable that Mr. Stuart must then have been aware of the distinction. But that happened seven years before the date of the bond to Walker, and in the interval the circumstance may easily have escaped his memory. It is still more material to observe, that an intentional omission of the lands could only have been made with the view of resorting to them afterwards as a fund of credit; but five years elapsed, during which he was in embarrassed circumstances, and often hard pressed for money; yet he never once availed himself of that resource, which, if he acted fraudulently, it was the sole object of his fraud to obtain. It must be admitted, however, that his negligence was highly culpable, first in giving rise to the blunder, and afterwards in suffering it to pass uncorrected.
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The summons of reduction is laid, first, on the statutes 1621 and 1696; and, secondly, on the ground that the deeds challenged were executed after bankruptcy and sequestration. It is clear that the statute 1621 does not apply to the case; and accordingly, that ground of reduction has been abandoned in the pleadings.
But if Walker, the creditor, stipulated in 1823 for a security over the whole estate of Hillside, and obtained a security over Hillside proper only, he remained a creditor for the additional security down to the date of Stuart's bankruptcy in 1828, being a period of five years. If Stuart granted that security after his bankruptcy, or within sixty days of that event, by which Walker obtained a preference over the other creditors, and particularly over one Brown, who appears from the pleadings to have stood exactly in the same predicament as Walker, the case seems to fall directly both under the words and the spirit of the statute 1696.
As it was not the object of that statute to deprive a person of the management of his affairs during the period of the constructive bankruptcy, which it introduced, it has been held not to operate against payments in cash,—against transactions in the ordinary course of trade,—or in the case of what has been called a novum debitum, that is, where there has been a bonâ fide interchange of values, comprehending under that term securities granted for loans at the date of the advance. The last of these exceptions, though proceeding on a simple and equitable principle, has occasioned considerable difficulty in practice. That difficulty arises from a separate
Page: 222↓
Page: 223↓
But all these cases are perfectly consistent with the doctrine, that if a loan is agreed upon, the money advanced, and a security stipulated, but that security not executed by the debtor till after the sixtieth day, any attempt on his part afterwards to remedy the defect is unavailing. It is true, that in Houston and Co. v. Stewart, an opposite view was taken by the Court; but the decision was unanimously disapproved of in the case of Brough's Creditors, which has just been cited; and in Maclean v. Primrose, we are told by Mr. Bell that Lord Meadowbank accompanied his judgment with a note, “in which he condemned the decision in the case of Houston and Co., as clearly contrary to principle, since an obligation to grant a preference cannot constitute an actual preference on an heritable subject in a question with other creditors, and accordingly, it is one of those
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We have been led to examine this point, because the defenders have attempted, from the mass of decisions
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But there is another and a different ground on which, in their last argument, they rely with greater confidence. It is said, that although a bonâ fide purchaser is exposed to no objections but those which constitute a radical defect in the title of the seller, or in feudal property which appear on the face of the records, a creditor-adjudger stands in a different situation, and takes the right adjudged, subject to the conditions and under the equities, though latent, by which it was qualified in the person of his debtor; or, in technical phraseology, he takes it tantum et tale as his debtor held it. That this was at one time the doctrine of the law of Scotland, though not to the extent to which it is now maintained by the defenders, may be granted; and the case of Ireland, which they cite, and others to the same effect, show the opinions at one time entertained. But subsequently to that period the law has been settled otherwise, by a numerous and consistent train of decisions, which are not now to be called in question. Reference may be made to the following cases:—The Creditors of Douglas of Kelhead—the Creditors of Ross of Kerse— Mitchell v. Ferguson—and more particularly to Buchan v. Farquharson, in which a preceding
Page: 226↓
The defenders have perplexed this point, by referring to a class of cases, with which it is nowise connected. It is true that creditors attaching moveables by diligence, are not in the same situation as bonâ fide purchasers. Nothing, except a labes realis, such as that which arises from theft or robbery, can be pleaded against the purchaser; while the arrester or poinder takes the subject under the conditions which affect the constitution of the real right in his deotor, but not under his personal engagements or liabilities on account of it. Thus, the exception of dolus dans causam contractui is pleadable against the arrester or poinder, while that of dolus incidens in contractual is not so. In illustration of this principle various cases cited by Mr. Bell might be adduced; and, it may be added, that the distinction was received at a very early period into our law. In the case of Haitley, reported by Lord Stair, a person had sold goods and received payment of the price, though, in consequence of his fraud or fault, they were not delivered; but, in a competition, his creditor, who had attached them by poinding, was preferred to the seller. Even in the case of moveables, therefore, the creditor using diligence does not take them tantum et tale, as they stand in the debtor, that is, he is not responsible for the personal obligations of the debtor concerning them.
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Incorporeal, and other personal rights, which pass by assignation, stood at one time in a different predicament. With regard to them, the maxim assignatus utitur jure auctoris was carried farther with us than in the civil law, from which it was borrowed. The assignee, whether a purchaser or a creditor, was held only procurator in rem suam, and, on that footing, subject to every exception maintainable against his cedent. But that rule, of which Dirleton doubted and Stair disapproved, was greatly modified, if not overturned, by the House of Lords in the case of Redfearne, and the bonâ fide assignee of an incorporeal subject, for a price paid, placed in the same situation as the purchaser of a moveable. This decision, however, did not touch the case of a creditor adjudging an incorporeal right; and, therefore, in Gordon v. Cheyne, the Court, with perfect consistency, decided, that certain shares of the stock of a shipping company, which a bankrupt held in trust, were not carried by his sequestration, the trust, though latent, affecting the constitution of his right. It is in vain, therefore, for the defenders to argue, as they have done, that the decision in Gordon v. Cheyne revived the doctrine of tantum et tale, which was exploded in Buchan and Farquharson. It decided, that creditors adjudging an incorporeal right, were not in the same predicament with bonâ fide purchasers, but it did not deprive them of the privileges they formerly enjoyed, and it had no concern with heritable property at all.
On these grounds we consider it clear that the pursuer, as trustee for Stuart's creditors, took the heritable estate in which the bankrupt was infeft,
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But it is said that in this cause a fraud intervened; that Stuart obtained the loan by falsely representing that the security covered the whole estate of Hillside, and that his creditors cannot take benefit by that fraud, on the same principle that they could not retain goods purchased on a fraudulent pretence, or paid for by a forged bill. We are of opinion, that this plea admits of various answers. In the first place, as formerly observed, we do not think that there is evidence of fraud or wilful misrepresentation on the part of Stuart; on the contrary, it is more probable that the mistake originated from inattention. In the next place, though the contract was rescinded, there is no specific subject to vindicate, as in the case put of goods sold on a false representation, and still extant. The claim of the borrower, therefore, must resolve into a personal action of damages, which, on the principle already explained, would not confer a preference over the other personal creditors. The case of the Duke of Norfolk and partners against the trustee for the annuitants of the York Building Company illustrates this point. The company, under the authority of an act of parliament, had granted a
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A few words are required on the recent case of Cranstoun and Anderson v. Bontine. Graham of Gartmore, who was debtor to his son Bontine in a large sum of money, agreed in March 1826, to sell his life-interest in that estate to Bontine, for a price to be paid at Whitsunday following. At that term it was arranged by a new agreement that Bontine, instead of paying the price, should set it off against the debt owing by his father. The conveyance was executed in August, infeftment followed upon it, and in September Graham was rendered bankrupt. In these circumstances the Court of Session assoilzied Bontine from a reduction, on the act 1696, at the instance of
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This judgment was affirmed in the House of Lords, and the defenders rely on the opinion reported to have been given on the occasion by the learned Lord who presided. We doubt the accuracy of this report. His Lordship is made to say, that “he could find no case which appeared to give much assistance in the decision of the one before the House; and that their
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It may be true that the point had not previously been considered in the House of Lords; but, as already observed, it has been anxiously argued, and solemnly and repeatedly decided in the Court of Session. The case of Houston and Co. turned entirely upon that point, and it was decided upon the principle laid down by Lord Wynford. That judgment was unanimously condemned by the Court in Brough's creditors, on the principle, “that an obligation to grant a security does not entitle the creditor to fulfil it after he falls under the retrospect of the act 1696.” But it is probable that it had been assumed, at the bar of the House of Lords, that Mr. Bell was correct in holding that the Court returned to the principle laid down in Houston and Co., when they decided the case of the Bank of Scotland v. Stewart, which certainly was not the case.
There is an authority which, though not mentioned in Lord Wynford's opinion, may, perhaps, have had influence with the House of Lords in inducing them to adopt the construction given to the term ‘voluntary’ in the statute 1696, and to which therefore it is
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II. Admitting that the statute 1696 does not apply, the deeds now in question are challenged, on
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If it could be maintained indeed, that even if Stuart had not granted the deeds under reduction, the pursuer would be bound to grant them on the principle of tantum et tale, it might follow that the action should be dismissed, on the strength of the maxim—frustra petis quod mox es restituturus; but it has been shown that that principle is inapplicable to the class of cases to which the present belongs.
In conclusion it may be observed, that if the defences set up against either ground of reduction were to be sustained, it would lead to consequences incompatible with the plain and declared object of all the bankrupt statutes. Whether the principle of novum debitum or anterior obligation be resorted to, it is not alleged, if the insolvent within the sixty days fails to grant a stipulated security, that this will entitle the creditor to the same preference he would have held if it had been granted. The daily and uniform practice of the country is opposed to any such supposition; take, for example, a number of
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The result appears if possible, still more absurd, if this power of preference is held to subsist, as the defenders argue, not only during the sixty days, but after the period of actual bankruptcy, and when the estate has been placed in the hands of the Court by the process of sequestration.
On these ground, therefore, we are of opinion that the deeds challenged in this case ought to be reduced.”
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It cannot, however, be disputed, that either from inattention, or want of ordinary skill, the security, as it has been made out, is in a very imperfect state, great part of the lands, said to be in the view of the parties, not being specified in the disposition, nor in the infeftment which followed. And one question will occur, to whom this defect is to be imputed, whether to the borrower, or to the agents for the lenders, which, in the absence of the latter as parties cannot be determined at this time. It is not easy however, to discover a principle on which the loss should be thrown upon the general body of creditors, to whom no blame is imputable.
The question now is, Whether, supposing for a moment that the defect in the security, as contemplated at the date of the loan, was owing to the fraud or culpable negligence of the borrower, or of the agents for the lender, or of the whole of these parties generally, the corroborative conveyance and security, as it is called, obtained after sequestration awarded against the borrower, is to have any force or effect? At the consultation, Lord Corehouse held, that it might fall under the Act 1696; while Lord Gillies was of opinion, that without an action of reduction, in terms of that statute, it might be declared to be ipso jure ineffectual, upon the ground specially brought forward in the summons, viz. that it had been obtained à non habente potestatem; the whole active powers of the borrower, unless in the cases particularly provided for by the statute, having been by the sequestration itself withdrawn from him. In this way his Lordship thought that the deed was not
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But on a third, and separate ground, it is humbly thought the supplementary security intended to be granted by the second bond can be of no effect, being not only not perfected before the sequestration, but originating in a voluntary act of the common debtor, when publicly insolvent, as well as divested of all power over his estate and effects, in virtue of the bankrupt statutes. Unless for this deed, the defenders could not obtain a decree of adjudication in implement. The original bond per se, could not have authorised it. In this respect, the case is similar to that of M'Kellar v. M'Math, with this difference, that in the former case the object of the bond was merely to give facility to the diligence of one of the creditors; whereas here the obvious and avowed purpose was to create a preference, by affording means to attach the sequestrated estate, by a mode of diligence to which the other creditors could not resort. Without it, the defenders' only course would have been by entering a claim in the sequestration, which, so far as can be discovered from the documents referred to, he could only do with regard to the lands in question, as a personal creditor.
In this view, as well as in that suggested by Lord Gillies, the principle of frustra petis, &c., appears inadmissible to any extent. In the conclusion of the summons referred to, the trustee is not in petitorio. He demands nothing from the defenders, but merely insists for a judgment declaring the bond to be void, as ultra vires of the granter. If the bond is not effectual, the summons and decree of adjudication in implement,
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Yet there are strong reasons in expediency, why, at this conjuncture, and after the full argument and opinions already given, a determination on the whole cause should now be pronounced; and although, generally, I concur in the able and elaborate opinion of Lord Corehouse, I cannot, upon a point of such vital importance to the law of Scotland, refrain from stating what has occurred to me.
It is a rule established with us, beyond all memory, that there are no equities in competitions among creditors. This principle was adopted, and carried to its fullest extent, in the case of the Duke of Norfolk in 1752, to which reference has been made. It has been held that vigilantibus non dormientibus jura subveniunt; and although no one ought to become locupletior alienâ jacturâ yet in damno vitando, every one is entitled to avail himself of the blunders of those whose interests are opposed to his. However clear and honest the intentions of parties may have been, yet, if the writings used are liable to objection in point of form or solemnity, and still more, if, as in this
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These observations are not disputed in the general case. It is the first regular infeftment in real estate,—the first act of delivery in the transfer of moveables,—and the assignation or conveyance first intimated, in personal rights, that is preferred; although before any of these forms have been gone through, an obligation to dispone, or to make delivery, or to give a valid assignation, can be shown. Particularly in recorded real rights, if appearing in the appropriate
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It is, indeed, in one particular case only, that an attempt has been, of late, made to break through the otherwise universal rule, and that is, in the case of adjudications of lands; as to which it has been contended, that if the debtor has previously and bonâ fide engaged to make a conveyance of the subjects adjudged, this should be held sufficient, without any actual transference in the ordinary forms of law, to warrant a judgment in favour of the party having such imperfect right; and this, although the same right had been in the most formal manner attached by adjudication far beyond its value: and this principle, if admitted at all, would be sufficient to set aside a judicial sale under the bankrupt statutes, if resting only on adjudications, or so far as adjudications have been ranked on the price of the lands sold. The decree of sale would not give an effectual title to the lands, unless the infeftment upon it had been followed with uninterrupted possession during the prescriptive period of forty years.
The recent decisions upon this subject have been fully argued upon, and explained by Lord Corehouse; but, at a more early period, there are authorities, it is humbly thought, not less conclusive. Thus, in the case of base rights prior to the establishment of the registers for publication, a later conveyance or adjudication, if followed by possession, was preferred to the former ones, although clearly importing an obligation to make an effectual transmission of the right;
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In the same manner an adjudger, who had gained an easy victory over a creditor or purchaser, with a blundered infeftment will, after all, be obliged to yield to another creditor or purchaser, who, like the defenders, has, as to nine tenths of the lands, no warrant at all.
It is not easy to discover the grounds of such a distinction as has been suggested. Our ancient apprisings were truly judicial sales of lands, subject to redemption within a certain period; and although these were followed by adjudications, which, by authority of special enactments, are to be ranked pari passu, if within a year of the first effectual one, and are in some other respects different from apprisings, the two rights are, in general, of the same nature, and attended with the same effects; and there is no authority, either expressed or implied, for
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But by the statute 54 Geo. 3. s. 29., and in the circumstances here occurring, it is humbly thought, that any difficulty that might formerly exist on this point has been altogether removed. It will be remembered that the awarding of a sequestration is declared equivalent to an inhibition, and the general adjudication which follows is held to operate equally in favour of all the creditors, no other adjudications for debt being permitted. At an after period of the sequestration, with a view to give a feudal right to a purchaser, the trustee is authorized and required to call for a special conveyance of lands from the bankrupt, and in default of this he is to deduce a special adjudication, mentioning the different lands, so far as known to him; and this adjudication which is declared to be of the “nature of an adjudication in implement as well for payment, or security for debt, shall be subject to no legal reversion.” In this manner, the special adjudication is rendered equal to an expired apprising or adjudication, or in other words, a right of absolute property in the trustee, for the benefit of the creditors, according to their rights and interests at the time. The only diligence which can compete with it would be an adjudication in implement, followed with an infeftment prior to that of the trustee, such as the defenders in this case attempted to obtain, but, as it must now appear, to no effect; the defenders producing no obligation to convey in reference
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In the recent case of Bontine, which, in the pleadings, has been held of the same nature with the preceding one of Cormack v. Gardner, although altogether dissimilar, the warrant of infeftment in the former case having been prior to bankruptcy, the circumstances were extremely peculiar. The Lord Ordinary had decided against the defender; but upon a reclaiming note, a majority of the judges altered that interlocutor. The judge dissenting was of opinion that the right was liable to reduction, as made out in defraud of the bankrupt statutes, and also upon the common law, being in fact a fraudulent conveyance made by a person publicly insolvent in favour of his son, a conjunct and confident person, in the most correct sense of the expression. To all this, however, it was answered, that from the manner in which the summons of reduction had been framed, and resting wholly upon the bankrupt statutes, these objections could not, in point of form, be listened to. Instead of bringing a supplementary summons to remedy the defect, an appeal was presented, and the judgment affirmed; although within a few days of the determination in the Court of Session, the defender had applied to the Court for shortening the induciæ of an adjudication brought by him against his father, and the application was complied with, for no less than 100,000 l., reserving, however, as usual, all objections contra executionem.—(See R. C. Bontine v. Graham, 17th December, 1829.) Whether, in virtue of this reservation, a transaction so extremely
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It has been omitted, in reference to the case of M'Math, to mention that of the Creditors of Dunbar v. Sir James Grant, 18th June 1793, F. C., where, in circumstances of peculiar hardship, it was laid down by a great majority of the Court, “That a bankrupt ought to execute no deed by which the situation of his creditors is affected, and that it would be dangerous to support any deed of that nature.”
Professor (now Baron) Hume, in his lectures on the title of adjudication, gives a statement of the decisions upon the point now at issue. Referring to the case of Duncan v. Wyllie, 7th December 1803, he says, that the estate of a bankrupt being sequestrated, the right of the trustee, as adjudger for the creditors in general, was not affected by a latent and private deed granted by the bankrupt. This judgment, he observes, altered the interlocutor of the Lord Ordinary, which proceeded upon the old rule, and was meant to be established for the rule in all such cases as should afterwards occur. He adds, that even when the law was otherwise understood, if a person who was infeft should dispone, and the disponee should allow his right to remain personal, without taking infeftment, and if the creditors of the disponer should adjudge the subject, and be previously infeft, their right would not be liable to be
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“I. Upon a most careful and attentive perusal of the whole facts detailed in the record, it does not appear that fraud can be laid to the charge of the common debtor, neither can any fault be imputed to the lender or his agents. It is perfectly clear to me, that a proper and prescriptive progress of titles was submitted to consideration, sufficient to satisfy any conveyancer, and which could not be discovered as defective, without a topographical examination which never hitherto has been held as the duty of any professional man. What therefore has taken place must be viewed as having proceeded from inadvertency or mistake. This, no doubt, creates an obligation against the common debtor to apply the proper correction,—but this extends no further than the parties immediately concerned. Creditors certainly cannot benefit themselves by fraud, but being certantes de damno vitando they have been always considered to be entitled to take advantage of errors and mistakes, to the effect of obtaining a fair and equal distribution of their debtor's effects.
II. The case of R. C. Bontine v. Graham, 17th December 1829, is to be considered with some caution. The circumstances of the case are correctly stated by
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Lord Craigie. The question was brought before the Court in rather an imperfect shape and form. Permission ought either to have been granted to amend the summons, or the terms of the judgment should have been framed so as to apply to the special circumstances of the case, and the way and manner in which it was brought before the Court. Something of this kind was suggested the day after the opinions were delivered, but the judgment was signed, and the case was immediately appealed. III. The present case stands in a very peculiar situation. The act of the common debtor complained of was subsequent to the sequestration, and so struck at by the 38th section of the bankrupt statute, and therefore, ante omnia, the bond of corroboration should be set aside, and declared null and void.
It will still remain competent to the creditor to claim at common law, and to enforce against the trustee and creditors, as the representatives of the common debtor, any right to withdraw any part of the estate from the common fund of division.”
Considering the circumstances of this case; in particular, that the special security was not only stipulated for, but that all parties seem to have acted under the impression, that it was actually granted at the date of the advance, I think it would be exceedingly difficult
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That there was a definite agreement before Mr. Walker advanced his money; that a specific heritable security over all the particular lands comprehended in the valuation by Dr. Coventry, obtained and exhibited for the purpose of this loan, should be granted in due and sufficient form, unico contextu with the payment to be made, is a fundamental and indisputable fact in the case. Neither the lender nor his agents ever, for one instant, consented to make any loan on the personal credit of Mr. Stuart, or on any thing less than a complete security, covering all the lands in Dr. Coventry's valuation. They even
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It is next clear, that Mr. Stuart, instead of disponing all the lands in the valuation in security of the loan, extending to ninety-five acres, and valued at 21,655 l., had disponed only a very small part of them, consisting of about five acres, and only worth about 1,000 l.; the warrant for infeftment covered nothing more.
The cause of the security having been framed and taken in this imperfect form, contrary to the faith of the contract, and the firm belief of the lenders, is to be found in the facts set forth in the record in articles 8 to 17 of the defender's statement. To the order and result of those facts it is very necessary to attend.
After the agreement had been concluded, on the basis of a security to be given over the lands in the valuation, Mr. Stuart sent a description of the lands— but at first, nothing more; promising at the same time to send searches of encumbrances and the titles,
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The charter 1795 is in process. We have particularly examined it. We find that it contains a precise description of the lands of Hillside, in the very words of the description previously sent by
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With the description previously sent and with this charter and nothing else before them, Mr. Walker's agents made out the bond in the very words of that description, and in precise conformity to the same words in the charter.
It thus appears, that while the description given, and precisely adopted in the bond made out, was expressly represented as applying to all the lands which it was stipulated should be comprehended in the security, the titles sent to the defenders agents contained
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There is a statement in the record that Mr. Stuart subsequently granted a security to a Mr. Brown, the deed being written with his own hand, in which he made use of the same description; and it is also there stated, that at a still later period Mr. Stuart granted a security to his sister or brother, both over the lands of Hillside, and by special description over the other lands in Dr. Coventry's valuation: but it has been explained that both these statements are inaccurate, the bonds to Mr. Stuart's brother and sisters having been executed in 1816, and that to Mr. Brown also previous to 1823.
Mr. Stuart's estate was sequestrated on the 1st September 1828. After his sequestration, and when he was in America, the defect in the security, as covering only five acres instead of ninety-five, was discovered; and then he granted the bond of corroboration now under reduction, proceeding on a clear narrative, that the money had been advanced on the faith of a specific contract for a good security over the whole lands in Dr. Coventry's valuation; and on this
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This appears to be the correct state of the facts, and two questions of law arise—1. Whether the bond of corroboration, &c. is reducible on the act 1696, as a deed in security of a prior debt, executed after bankruptcy or after the commencement of the sixty days preceding the sequestration? and, 2. Whether, supposing that it is not reducible on the act 1696, it is invalid for want of power, or as a fraud at common law, as having been executed after the sequestration?
1. The first of these questions appears to us to be one of very great importance; because, if the deed had been executed before the bankruptcy, we are of opinion that in the circumstances of the case it could not be reduced, without entirely subverting the established law, as we have understood it, and departing from the principle of a very long series of adjudged cases.
The act 1696, c. 5, is a statute against the frauds of persons becoming bankrupt; and in the part of it here in question it has two provisions: 1. That any dispositions, &c. after bankruptcy, or within sixty days before it, ‘in favour of his creditors, either for his satisfaction or further security, in preference to other creditors’ shall be void and null; and 2. That as to this question, all dispositions of heritable rights shall be reckoned as of the date of the sasine taken.
We are of opinion, that in interpreting a statute such as this, expressly made for the prevention of fraud, it could never be construed on doubtful
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But the just rule of construction established by the case of Johnson reached beyond the precise point of the case itself. It might happen that there was a clear specific contract for the advance of money, and the granting instantly, as the condition of such advance, of a special security over a defined heritable subject; and yet neither the conveyance nor the infeftment might be made at the instant of the advance made. Did that fall under the principle of the act 1696? So far from its being a fraud to grant the security subsequently, the fraud must lie in not
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The first important case on the point is Mansfield, Hunter, and Co. v. Cairns, February 25, 1771. In that case both the bond and the infeftment were
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“It was observed on the bench, that where money was advanced in consequence of a communing, that an heritable security should be granted, such bond was truly a novum debitum, and did not fall under the statute.”
In the fuller report of the opinions by Lord Hailes, the principle is distinctly brought out. Lord Pitfour says, “The act 1696 is salutary in itself; it would be quite otherwise upon the interpretation of Mansfield and Co. By that statute a retrospect was wisely, though boldly, admitted. Where the law forbids new security for an old debt, the creditor is not hurt; he has the same security as at first. Money lent on the faith of an heritable security is the same thing as a sale. It is plain that here there was no purpose of parting with the money upon the promise either of the doer or of the debtor.” And President Dundas gives this strong opinion on it:—
“If the act 1696 could have the interpretation put upon it by Messrs. Mansfield, I would certainly move for an application to parliament for a repeal.”
But the Court sustained the security, Lord Monboddo only dissentient.
The next case is that of Houston and Co. v. Stewart, 20th February 1772. The decision in that case has been said to be erroneous; but in so far as it is material here, it only followed the previous case of Mansfield and Co. The bond and the infeftment were both within the sixty days; and the Court again sustained the security. There was, indeed, ground for doubt in the case; because there was no clear proof of the fact that there was a stipulation for the
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“There is satisfying evidence that it was communed and agreed on, that the creditor was to get heritable security, and that the money was advanced on that footing. Had the obligation to grant heritable security been afterwards given, it would have made a difference.”
Lord Pitfour is still more precise:—
“The act of parliament does not reach to this case. The law meant to give a salutary remedy against any partial deed in favour of any creditor; had it meant to go farther, the retrospect would have been intolerable. The law did not mean to interrupt the course of common transactions. There was a novum debitum here, no matter at what time contracted.”
The President:—
“The obligation is to be considered as an heritable bond of that date. The lateness of the infeftment varies not the case.”
Then came the case of Spottiswood v. Robertson Barclay, November 19, 1783. That was the case of an obligation in a marriage contract to secure a wife heritably in a certain annuity, but not specifically. Both the bond granted and the infeftment were within the sixty days; yet the Court sustained the security. There was a reclaiming petition not disposed of; and it is said that the case was compromised. There might be ground for doubt, in so far as the obligation was not specific; but at any rate the judgment was not altered; and in so far as principle was involved, it only followed two previous decisions.
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After these three consecutive decisions, the case of Brough's Creditors v. Duncan, &c. occurred. In that case the obligation of debt was contracted by the cautioners on 23d March; an heritable bond of relief was granted on the 18th May; infeftment was not taken till November 20th; and it was agreed that Brough should be held as legally bankrupt on the 17th January. There was no proof, that in the transaction on the 23d March it had been stipulated that the specific security should be granted; and it was only offered to be proved by the oath of the bankrupt. But as the bond was executed on the 18th May, six months before the commencement of the sixty days, it is clear that according to every opinion now entertained, if the stipulation for the security had been held to have been pars contractus from the first, the security ought to have been sustained, and the decision against it would be wrong. Though the old doubts, however, about the date of the infeftment were revived, the ground of decision is in the concluding observation on the bench:
“This case, however, is attended with no difficulty whatever. The debt to the bank was contracted in March, and the heritable bond was not granted till May. During this interval Messrs. Jollie and Duncan had only a personal claim of relief against Brough; the heritable bond therefore being clearly a farther security falls under the act 1696.”
We conceive the view of the Court to have been, that the granting of the security was not shown to have been pars contractus on the 23d March; if they had assumed that it was, the decision, besides being contrary to three previous cases, would
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The case of Brough's Trustee against Spankie, &c., decided on the same day with that of Duncan, was not very different. There was, indeed, a holograph letter by Brough; but it was objected that it could not prove its own date; and no proof appears to have been offered. The bond in that case was within the sixty days.
But whatever view may be taken of these two cases, we find abundant authorities of a later date confirming the principle of the previous decisions.
The case of Mitchell v. Finlay bears on the point, in so far as, under an obligation in a marriage contract to infeft the wife in a special subject, the husband two years after, and within sixty days of bankruptcy, not merely gave infeftment to the wife, but by voluntary act took infeftment himself, so as to validate it. It was held, however, notwithstanding the facility thus given by the bankrupt to a conjunct and confident person, that the wife was entitled to expede infeftment in the husband's person; and that it should not be taken as his act.
The case of More v. Allan, though it related to personal rights, illustrates the principle. Bills were accepted on the faith of a particular consignment; the consignee refused to take it, and a new consignment and new bills were then framed within sixty days of bankruptcy. It was held that this security could not be reduced; and Mr. Bell states the reason thus:—
“That wherever the bankrupt interfered only to do that which both the parties understood had been done at first, and upon the faith of which
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understanding alone the money was advanced, the act was not objectionable, nor such as could entitle the creditors to separate the security from the advance;”—
a principle which, if correct, is more applicable to the present case than to any other that ever occurred.
In the case of Maclean v. Primrose there was an engagement to grant a security unico contextu with the advance. Maclean became bankrupt without granting it; and the Court (altering a bill-chamber judgment of Lord Meadowbank) gave decree to compel him to grant it. Mr. Bell says that they held, that if the creditors had opposed it, he could not have been compelled to do so; but that is a point which remained untried and undecided.
The next case we observe is that of the Bank of Scotland v. Stewart, &c., which was decided by the Court unanimously in President Blair's time. The transaction was on the 6th May 1801, the heritable bond on the 29th June, the infeftment on the 27th October, and the bankruptcy on the 13th November. But the Lord President takes it as admitted, “That at the very commencement of the transaction, it was stipulated that Mr. Ross was to have this security, and that the title deeds were put into his hands, in order to get the disposition made out.” In all other respects, and particularly in the date of the bond being five months before the bankruptcy, it was identical with the case of Duncan and Jollie; but the judgment was the reverse; and unless, therefore, Duncan's case depended on that difference of fact or evidence, we must conclude that there was a difference of principle, and, at any rate, a plain
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“2. It has also been held, that wherever there is stipulated a specific security over a particular subject, in consideration and on the faith of which an advance of money or transfer of goods is made, the completion of that security, although after an interval of time, and after the term of constructive bankruptcy has begun, is not within the intended meaning of the statute.”
To us it appears that, after all this, the point might well be considered as settled. But Mr. Bell still expresses doubts as to the principle founded on the occasional dicta of Lord Braxfield, Lord Meadowbank, and, perhaps, other eminent lawyers, as to the particular case of Houston, during the progress of the question; and he says, that it may deserve reconsideration. We do not know what may be the limits of the reconsideration of such questions; but, in the present case, the question has been at least twice very deliberately reconsidered, and the same rule has been still farther confirmed.
In the case of Cormack v. Anderson, &c. the
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“It is said the bond was not delivered. That may be of consequence as to voluntary deeds, but this is not a deed of that kind, but one which, by action of exhibition and delivery, the bankrupt might have been compelled to deliver.”
Can it be said that the bankrupt, in that case, was any more bound to deliver the bond within the sixty days, or after bankruptcy, than Mr. Stuart was bound, in this case, to grant the bond of corroboration? In so far as the act 1696 is concerned, the cases appear to be precisely parallel. But, at all hazards, the case of Cormack is directly in the face of the case of Brough's Creditors v. Duncan, unless the latter depended on the want of evidence of the original contract; for in both the bond was executed long before the sixty days.
The concluding case on the subject is Cranstoun v. Bontine. A transaction for the sale of Mr. Graham's liferent right was concluded on the 20th March 1826. No disposition was granted till the 5th of August 1826; infeftment followed on it on the 7th of August; but notour bankruptcy took place on the 6th September 1826. We see no specialties in the case, except
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“But where an obligation to grant a conveyance was entered into previous to the sixty days, as in the present case, the conveyance following upon it, although within the statutory period, was effectual, being only in fulfilment of the pre-existing obligation;”
and he goes on to distinguish this from the case of ‘an agreement to secure a former debt’ That judgment stands affirmed by the House of Lords. It appears to us not to be very necessary to consider what might be the precise observations made in moving the affirmance. If it had been a judgment reversing the decision of this Court, or on a question new to the law, it might be right to weigh the reasons well; but this is only the concluding case of a long series, and the judgment is an adherence to that solemnly given by this Court on clear and distinct grounds. There are points still remaining in that cause; but on this question of the operation of the act 1696 the judgment is conclusive.
On this deduction of authorities, we venture, with
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We look, then, at the present case; the contract, and the bonâ fide advance of the money on the faith of it, are beyond all doubt. If the case were made identical as to the security with that of Duncan, by supposing the bond of corroboration to have been granted six months before the sixty days, it must, according to every opinion which we have yet heard, be sustained, contrary to that decision. But it is identical in the material point with the three first cases and the last, in so far as the act 1696 is involved. We must, therefore, conclude that the act 1696 does not apply to it, and that it cannot be held to apply to it, without departing from the law as it has been long and very carefully settled.
II. But a second part of this case remains for consideration. The bond of corroboration having been
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Here the principle of the act 1696 must be laid aside. That act applied equally to deeds after bankruptcy, and within sixty days preceding it, plainly supposing that a bankrupt might at common law grant effectual deeds after notour bankruptcy. Now, here he has granted a deed on which infeftment has passed, which infeftment must be effectual unless the trustee can reduce it. But it cannot now be said that it is a deed in security of a prior debt; if it were, it would be under the act 1696: it must therefore bear another character.
It is the case, then, of a deed granted for the purpose of doing that which the defender's constituent believed, and had a right to believe, was done at the moment when he advanced his money in the year 1823. It is in implement of a bonâ fide stipulation, intrinsic of the contract, which the defender was misled to believe was implemented at the first. It was not so implemented, by the fault of the bankrupt, whereby Mr. Walker and his agents were directly deceived.
Here the question arises, whether it is to be held that this was done by the fraud of the bankrupt, and it is a very serious question. Mr. Stuart was bound to know the titles by which he held the property which he offered as a security; the more especially, as he ventured to act as his own agent; but he deliberately sends to the defenders' agents a special
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It would be with great reluctance that we should draw the inference, that when all this took place Mr. Stuart had it present to his mind, that the lands were held by separate titles, and that he deliberately intended to deceive Mr. Walker and his agents. We know that there may be unaccountable forgetfulness, and great haste and rashness under difficulties; but we apprehend that there is such a thing as fraud in the eye of law, where not only a criminal purpose could not be shown, but persons of fair and liberal minds, from knowledge of the individual, may be convinced that no such purpose could exist. That Mr. Walker and his agents were, in point of fact, deceived can admit of no doubt; that they were naturally, if not necessarily, deceived by the course which the negotiation took, and the positive acts of the borrower, seems to us to be equally clear.
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We are, therefore, constrained to come to the conclusion, that without necessity of holding that there was a directly fraudulent purpose, there were acts sufficient to constitute as to this question a fraud in the eye of law. Mr. Stuart's readiness to grant the bond of corroboration may tend to impress the belief that he had great regret for the unjust effect which his inconsideration, at least, had produced; but any agent who had done the same thing, however pure he might feel himself from any purpose to mislead, must have answered for it as for a legal fraud. In one word, if this was merely an error, it was an error of such a kind, that, in a question like this, it must stand in the same place with a direct fraud.
When the state of the security actually given was discovered, no one can doubt that there was an obligation on Mr. Stuart to do whatever he could to correct it. If it had been discovered at an earlier period, the defenders would certainly have had a good action to compel him to execute an additional deed, such as that which he did execute; and he could not have resisted it, without rendering the case a very clear one of positive fraud. Whatever view, therefore,
Page: 268↓
A mistake sometimes enters into such discussions, as if it were impossible that the situation of a creditor could be at all altered or improved after sequestration. But in various particulars the law is settled otherwise. A creditor by heritable bond, not infeft, is entitled to take his infeftment after sequestration; and if he obtains it before the trustee is infeft, his preference is secure. In Cormack's case the infeftment was not taken till after sequestration, and, what is more, it was done by the voluntary act of the bankrupt in delivering the deed; and until the last bankrupt act, which made the act of sequestration equivalent to an intimated assignation, the holder of an unintimated assignment could run a race with the trustee for the first intimation. Still farther, there is a series of cases establishing this point, that where the bankrupt granter of a disposition on which sasine may or may not have passed has not been himself infeft, and where the trustee holding the titles avoids infefting him, that he may not validate the security, though the trustee may try to get a title throwing the bankrupt out of the progress, the creditor is entitled to run the race with him, and if he gets adjudication and infeftment first he will be secure. This is clearly implied in the case of Mitchell v. Fergusson, 13th February 1781, though the trustee having the first infeftment was preferred. It is implied also in the
Page: 269↓
This may not resolve the present question; it only goes thus far, that all things are not closed by the act of sequestration, and that a preference not previously established may be made out after it. We know that it is a rule established on sound principle and abundant authority, that, after bankruptcy, the bankrupt cannot give aid to one creditor to complete a preference by diligence which he could not otherwise have completed. But neither does this solve the present question; there may be exceptions even to that rule. But the present case appears to us to stand on different grounds. The power of disponing the lands remained in Mr. Stuart; even the trustee took his posterior title from him by disposition. The question therefore is, whether the bond of corroboration can be reduced, not as proceeding à non habente potestatem, but as a fraud, in respect that he was bound to dispone to the trustee. Was it then a fraud in Mr. Stuart to dispone to the defenders, in corroboration of his previous deed; and can the creditors maintain this reduction on the ground of such a fraud committed?
On the best consideration that we can give to the case, we think that it cannot be so treated. It is not necessary to revert to a principle, at one time held in the law, that all adjudgers must take the right of their
Page: 270↓
This point of distinction is precisely explained by Mr. Bell in a special section, as an existing principle of the law; and he delivers the essential proposition in these words:—
“Against creditors fraud has been thought entitled to full effect, where it is of that kind which lawyers have distinguished as originating the contract—dans causam contractui. In all such cases creditors, in taking the benefit of the property, are considered as adopting the fraud of the bankrupt, by which he acquired the property;”
—a principle clearly comprehending the case of his keeping the property free of a conveyance or security, which but for the fraud would have affected it. Mr. Bell confirms the statement by many authorities, and particularly by reference to the opinion of Lord Braxfield in the case of Thomson v. Armstrong's Creditors, November 16, 1786, which indeed, though its authority might be doubtful on any other ground, was plainly a sound and right decision on this principle. It was stated as the case of a conveyance to an agent with powers to sell and to apply the proceeds for the granter's behoof. The disponee made up a title by charter and sasine, leaving out the qualification; he
Page: 271↓
But we apprehend that, in order to reach this point, it is not necessary that there should be a case established of criminal intention to commit a fraud. We do not see that that was required in the case of Thomson and Armstrong, or in any of the other cases. But the much later case of Gordon v. Cheyne, February 5, 1824, if it did not sanction the more general doctrine that creditors as adjudgers take the rights of the bankrupt tanta et talia, can stand on no other principle than that, without any positive intention to commit a fraud, it would have been a fraud in the bankrupt or his creditors to take advantage of the form in which the right stood. Indeed the principle is expressly laid down in the interlocutor of the Court:—
“In respect the petitioner, as trustee for general creditors, who are neither purchasers nor special assignees, adhere to the Lord Ordinary's interlocutor.”
Many other authorities could be referred to on this point. It depends on a principle, which we imagine must be fundamental in all law, that justice shall be done between the parties in competition. Here the defenders and the other lenders gave their money on the faith of a specific security. Mr. Stuart either believed that he had given it, or there was an intentional fraud. There is no creditor who can say, that he contracted with Mr. Stuart on the faith of the
Page: 272↓
We must further observe, however, that the execution of the deed in question ought not to be considered as a voluntary act on the part of Mr. Stuart. It was an act which he was bound to perform in justice and honesty; and an act which he might have been required by action to perform even after bankruptcy. In the case of Mitchell, the husband, by voluntary act, infeft both himself and his wife in immediate contemplation of bankruptcy; Mr. Gardener delivered his heritable bond and took infeftment for the creditor after sequestration; yet it was held that these were not voluntary acts, simply because they could have been compelled by action; though the necessity of such process might, by delay, have defeated the security, just as much as in the present case; and in Maclean's case the Court actually gave
Page: 273↓
The question is, whether creditors can reduce the deed of the bankrupt, made to give effect to the true contract and the actual understanding, on the ground that it was a fraud against them for him to grant it. It was by a fraud (whether actual or constructive signifies not), that the right was not made perfect at first, and if the creditors were to succeed in reducing the deed, they must take benefit by the fraud which the bankrupt has endeavoured to correct. We are of
Page: 274↓
It is mentioned, that a security had been sometime previous to 1823 given to a Mr. Brown, in the same terms with that originally granted to Mr. Walker. We apprehend, that this cannot at all enter into the present question. It does not appear, under what circumstances Mr. Brown may have contracted with Mr. Stuart. The law, at any rate, must be applied to the present case as it stands.
On the whole, our opinion is, that the defences ought to be sustained.
There is a specialty in the case, however, which ought not to be left out of sight. It appears from the third article of the condescendence, that there were six parcels of lands, in which Mr. Stuart was not infeft, but which he held by personal right. But whatever may be said with regard to lands possessed by feudal title, we have always understood, that, in personal rights, creditors must be affected by the obligations of the bankrupt specially applicable to the lands. In the case of Thomson and Armstrong's Creditors, for instance, there would have been no question at all if the bankrupt had not been infeft; for the conveyance being substantially a trust, that
Page: 275↓
The cause was now put out for advising by the Second Division.
My opinion, I must say, coincides with that of the minority as to the main features of the case; and, I think, it will save a great deal of time in what I have to say, to state, that I take the assumption of facts, as contained, both in the note of Lord Moncreiff, and in the preamble to the opinion by his lordship and
Page: 276↓
On looking at the record with all the attention I can give it, I am decidedly of opinion, that it was actum et tractatum between Mr. James Stuart and the agent of Mr. Walker, that the former was to give, and the latter to receive, a valid, effectual, and complete heritable security, extending over every inch of the lands contained in the report and valuation of Dr. Coventry. I am most thoroughly convinced that it never entered into the contemplation, either of the borrower or of the lender, that the money was to be advanced on any security, except that of the whole of these ninety-five acres. I think that is luce clarius; and, if this be the case, the question comes to be, how is it that this bond of Professor Walker was limited only to the lands of what is called Hillside proper, and which, your lordships cannot overlook, consist of only five acres out of these ninety-five acres in Dr. Coventry's valuation, and over which the bond under reduction extends?
It is correctly stated by Lord Moncreiff, that only certain titles were sent to the lender's agent, and that the description of the lands corresponded generally with the survey made by Dr. Coventry.
The bond was accordingly made out precisely in terms of the titles; but it turned out that no materials were laid before the gentleman who prepared it, from which a doubt could have been entertained that the whole lands were not included under that description. If the titles of the whole ninety-five acres had been sent, and it had appeared that the
Page: 277↓
But it is clear that no materials were furnished to the agent by which this deed could have been rectified; and there was nothing to show that it was not completely effectual over the whole lands. Matters went on in this way for some time, but then the mistake was discovered, and that the security extended only to five acres in place of ninety-five, as contained in Dr. Coventry's valuation. This having been discovered, Mr. Stuart granted the new deed of corroboration, covering the whole ninety-five acres, which were originally understood to be comprehended under the security to the defenders. It is under these facts that the present action is brought for reduction of the deed granted by Mr. Stuart, after bankruptcy and sequestration, when he was out of the country, proceeding on the narrative of what was the intention of the parties in entering upon the transaction, extending that security over the whole lands, and making it effectual against them if he had the power so to do. Infeftment on this deed was taken by the defenders before the infeftment of the trustee; for although the latter had both the general adjudication and a special adjudication, yet he was not infeft till posterior to the infeftment of the
Page: 278↓
Now, I must confess that it is impossible for me to doubt, that if by what took place at the time of the original transaction, in withholding from the agent for the lender all the titles except those of Hillside proper, it was intended by the granter to limit the security to the five acres, it would have been the grossest of all possible frauds, and one which could not have stood a moment's discussion. There could have been no doubt of that being about the most palpable of all frauds, after what we have seen of the real treaty between the parties, and, therefore, I conceive it to be clear, that no fruits or benefits could follow on it in favour of the party guilty of it, or of any one deriving right from that party. But, seeing that, notwithstanding the defect in the security, (which I do not think ever was intended,) Mr. Stuart never endeavoured to avail himself of this blunder; and, when he, by his conduct, in fact, though pressed by his difficulties, says to the defenders, when you ask me to do what I intended to do from the beginning, I do it readily, I think the idea of personal fraud is altogether out of the question. But then, again, while I have no idea of such personal fraud, I cannot doubt, that by withholding those documents regarding the rest of the estate, the neglect of which he was guilty is that which in law is held to be culpa lata quæ æquiparatur dolo.
Then the first question comes to be, Whether, under these peculiar circumstances, this transaction now sought to be reduced, which Mr. Stuart did enter
Page: 279↓
It is admitted, on both sides, that the act 1621 is inapplicable to the case. That is unequivocally admitted, and I am equally clear that the act 1696 does not apply, and that there has been no violation of it.
My opinion is formed both upon the statute and upon the decisions referred to. If the case of Bontine, where the deed granted was merely covenanted to be granted, but was not actually granted till after the notour bankruptcy of the grantee, does not fall under the act, as the First Division and the House of Lords have found, I cannot see, and I defy ingenuity to show, that this case falls under the statute. That case seems decisive on the point, that if a security or conveyance be covenanted for at the time, being before the sixty days, the act 1696 does not cut it down, though granted within that term. If, then, neither the statute 1621 nor the statute 1696 apply, on what other ground can these deeds be challenged or set aside? And that brings us to the second question, Whether, under the bankrupt statute, or at common law, this is a security which is reducible, and from which no fruits or any profit can flow to the party in whose favour it is granted.
Now, I beg to say, that notwithstanding all the ability evinced in the opinions signed by the majority of the consulted judges, I cannot get over the difficulty,
Page: 280↓
Page: 281↓
My Lords, in regard to what is stated, both in the cases for the parties, and in the opinions of some of the consulted judges, as to the effect of certain decisions which are said not to be authoritative, and to have been subsequently superseded, I apprehend that such observations must be taken with great qualification; and, particularly, in regard to the dictum in the report of the case of Ross of Kerse, as to the case of Thomson, it appears to me that it did not take into view the whole circumstances of Thomson's case. For, on looking into the case, and keeping in remembrance the fact, that Lord Braxfield was on the bench when it was decided, it struck me as a remarkable circumstance, that if it had been supposed the Court meant to say that the law laid down in Thomson's case was fundamentally wrong, Lord Braxfield, who was in his vigour at the time, and who was present at that decision, should not have disapproved of it;—to me, my Lords, it is inconceivable that he would have stultified himself by saying the judgment in the case of Thomson was erroneous in point of law.
I must say, therefore, as to these obiter dicta, which are founded on as setting aside the whole doctrine of tantum et tale, in reference to adjudications, that they rest on a very slender foundation.
In the case of Mitchell, the Court gave effect to the plea of the adjudger infeft, and I think that was quite right.
But I pray your Lordships to attend to that case of Thomson, where the Court found, as their judgment expressly bears, that while the allegation of fraud
Page: 282↓
We have been referred to an opinion, said to have been expressed in the case of Ross of Kerse, in these terms:—
“And it was observed, that what had given occasion to so ample a discussion was an opinion expressed on the bench in the case Thomson against Douglas, Heron, and Company,”
that “adjudging creditors stand in a different predicament from disponees, as they must take the right of their debtor tantum et tale as it is in his person, (Fac. Coll. Nov. 15, 1786,) an opinion now stated to have been erroneous.”
Now, I beg to say, that although this professes to state what passed on the bench in the case of Thomson, when Lord Braxfield was one of the judges, it does not state the distinction, as referred to in that former report between heritable creditors infeft and adjudgers; and I must think that the remark in this
Page: 283↓
But we have a much later authority in the case of Gordon v. Cheyne, decided in 1824, where it was found, as stated in the rubric, that in a latent trust the claim of the truster is preferable to that of the creditors the trustee under a sequestration. This decision was pronounced by the First Division in 1824. My Lords, looking to the opinions in that case, and the judgment, so far from thinking from what is there stated, that the law in the case of Thomson was wrong, I think it is conclusive of the contrary, the Court having there used almost the very same words in their judgment. And really, from that last judgment on the point, I cannot find that there is any thing to raise a doubt in regard to the general rules of law and justice applicable to the present case; for I ask, on what ground could that decision be right, if an adjudication, which has not been perfected by an infeftment entered on the records, can put the trustee in a better situation, or give him a better right than that of the person from whom he has adjudged? As to the views and dicta thrown out in these cases that I have before referred to, I see some of them noticed by Mr. Bell; but I must deny that there is any principle in them to which I can assent.
To maintain that, by a process of adjudication, you
Page: 284↓
Is there any one of your lordships who can for a moment entertain a doubt, that if Mr. Stuart had continued solvent, and master of his own property, and having full power over it—that he, on this defect in the security being discovered, could not instantly have been compelled to complete a sufficient one to these defenders, in conformity with the admitted covenant of parties? I apprehend that no one could entertain for an instant a contrary opinion. It would have been impossible to throw the burden upon the agents of the borrower, or to say that they were to suffer. He must have been bound himself to complete that security, which he had covenanted and engaged to give. But if that was the situation in which the matter stood before his bankruptcy, are these
Page: 285↓
Your lordships in the additional cases have a decision referred to, namely, that of Kelty. I looked to that case, of which I had full notes of what passed when it was before us; and I must say, that Mr. Jameson has given a most correct account of it. That decision, I apprehend, establishes this, that if there was nothing illegal in granting the deed of corroboration, which was merely for the purpose of perfecting the transaction between Mr. Stuart and the late Mr. Walker, according as it had ab origine been covenanted, that deed is unchallengeable, and cannot be set aside. The case of Kelty is in this respect directly in point.
There is nothing in the bankrupt act which precludes a party, who has a warrant, from taking infeftment upon that warrant, and making himself secure,
Page: 286↓
Page: 287↓
The reason why the act does not apply to this case in my mind is, that it is not a case where the party lending the money knew that he had not got the security bargained for, and, knowing this, allowed it to lie over without getting it, on taking the means he might have taken to get it completed; for in such a case it would be difficult to say that he was more than a creditor who trusted to get a security. But here the creditor thought he had got that security all along, and it was thoroughly relied on both by the borrower and lender ab initio. Where a party knows he has not got the security agreed on, but trusts to the honour of the debtor to grant it, there may be a question how far, upon the debtor's bankruptcy, a deed having for its purpose to give that security,—the deed being granted after bankruptcy,—could compete
Page: 288↓
As to the statute 1621, it is admitted that the first branch of it does not apply to this case; and, indeed, there could be no doubt about that. As to the second
Page: 289↓
But the creditors say that the right here was granted after sequestration; still they must, nevertheless, stand in the same situation in which they were before it was granted. No doubt Mr. Stuart could do nothing to better the right of the defenders; but if they could in respect of their prior right have opposed the trustee, had he been adjudging the lands, then the trustee would have no interest to reduce the bond of corroboration. Then on this, on the whole, I agree with your lordship in the views you have expressed. It appears to me that there is a mistake on both sides, and particularly on the part of the pursuer, as to the true nature of the doctrine of tantum et tale. It is argued as if, in the case of Thomson, it had been held that the general creditors were in the situation of having incurred a passive title, and that it could meet extrinsic claims; I am persuaded that there was no idea of that in the minds of the judges at the time. The principle seems to be this, that where the objection attaches to and affects the title of the bankrupt, where it actually corrupts and taints his own title, although it is not to be listened to in a question with a completed infeftment, yet in regard to questions with the general creditors taking the bankrupt's right as it stood in his person, it may affect them, although the qualification does not enter the record. In that view, I see nothing against the doctrine.
In the case of Ross of Kerse there was no allegation of the title of the bankrupt (whose right was
Page: 290↓
In the same way, in the case Wylie v. Duncan, there was no vitiosity alleged in the bankrupt's title. The bankrupt held the right just as was intended, and had merely given a personal back-bond, which could not be good against creditors, although the doctrine of tantum et tale were admitted. It is said these are all departures from the doctrine laid down in Thomson's case; but they are not so, unless that case be misunderstood, so as to hold it laying down that the personal creditors are liable to every claim whatever against the bankrupt, which it never meant to do; and I think the objection to the doctrine of tantum et tale has been misapplied here by the trustee. As to how far this case can be assimilated to that of Thomson, it is a different question; the character of the facts in Thomson's case seems to me not to be very different from the present, the facts of which are undeniable, although their character be viewed differently by the different judges. Some of them think that Mr. Stuart was only under an obligation to grant the security; but that is not, in my mind, the correct view. He had not only promised to give, but actually represented himself as having given, the security, and, by his own conduct, led these creditors to believe that they had got right to the whole ninety-five acres under their original bond. That was the true state of the case; that, by his own
Page: 291↓
Supposing, in Thomson's case, all had been adjudgers, I do not see it would have made any difference. The opinions there go merely on the fact of an omission of the trustee to insert the clause qualifying his right in the charter of resignation. Now, in that view, where is the great difference between that and the present? Why, really, I think, in principle at least, they seem very nearly connected. I doubt if there was held there to have been any machinatio to deceive ab initio, but it was considered enough to say that the title sought to be adjudged was tortiously held, and contrary to what the true state ought to have been.
In regard to the act of sequestration, I am not aware that it is to be understood as giving any supereminent right to the trustee, to what would have arisen from an ordinary adjudication by creditors. Then if there had been no sequestration at all here, but merely adjudgers, would the authority and principle of Thomson's case not apply? If an adjudication only had been raised, that moment the creditor in this bond would have become alarmed, and found out what had happened,—that they had not got the full security; they would have opposed the adjudication, and decree would only have been pronounced,
Page: 292↓
The 29th section of the statute bears in explicit terms that the adjudication shall convey every right, title, and interest, which was formerly in the bankrupt, to be now in the trustee; and at the close of the section it is expressly declared, that if the bankrupt's title happens to be entailed, or otherwise of a limited nature, the conveyance to be executed by him, or the decree of adjudication obtained by the trustee, shall only be understood to carry that right and interest in the estate which the bankrupt himself has, and no farther. This is very like a reservation of all objections to an adjudication contra executionem, and, of course, reserving the creditors' claims of preference. I cannot conceive the statute to give a stronger effect. In the case of Wauchope v. Duke of Roxburgh's Trustees, certain lands were not specially included in Duke John's trust deed, and Duke William took them up. His creditors were leading adjudications, when Wauchope raised an action claiming them as Duke John's lands and objecting to the adjudications; decree was given reserving all objections contra executionem.
Page: 293↓
I forgot to notice one point, viz. the difference between the lands in which Mr. Stuart was infeft and those in which he was not infeft, in regard to which last the objection founded on the doctrine of tantum et tale applies very strongly.”
Page: 294↓
Page: 295↓
If there be any thing like a separate right in the person of the defenders, what is to hinder them from claiming under the sequestration? If they have such right they will get the benefit of it there; but if they have not, I have no notion that they can get it through the deed of Mr. Stuart.
I think there was considerable negligence on the part of these creditors, the defenders; for, when they saw that the description of the lands did not comprehend all that was contained in Dr. Coventry's valuation, they should have asked the question at Mr. Stuart, how this had happened? and if the question had been asked, I suppose he would have answered it at once. Then again, a search of encumbrances was furnished which might have shown them the mistake. We have not seen that search What does it contain? Is it limited to Hillside proper, or what lands does it embrace? Stuart may have been much to blame, but I think there was also considerable remissness on the part of the lenders. Supposing it was owing to negligence that the deeds were not complete, what does negligence amount to more than an obligation? I think that Stuart, after the sequestration, was fettered and could not grant such deeds.
But what after all, even at the most, do the circumstances constitute more than obligation to grant a deed? They go no farther. Now, suppose there had been such an obligation five years ago by Mr. Stuart—but he does not fulfil the obligation till within sixty
Page: 296↓
The Court, on the 11th of July 1833, pronounced this interlocutor:—
“The Lords, having resumed consideration of the cause, with the opinions of the Lords of the First Division, and permanent Lords Ordinary, sustain the title of the pursuer to insist in this action: Find, that the defenders have not produced a title sufficient to exclude the action. Reduce, decern, and declare, in terms of the libel: Find the defenders liable in expences.” 1
Mr. Walker's trustees appealed.
Appellants.—1. The appellants assume what is already proved, or at least may be proved, as stated in the record:—
“1st, That there was a bonâ fide agreement concluded between Mr. Stuart and Mr. Gordon, as agent of Professor Walker, by which the sum of 6,000 l. was to be given in loan by the latter, along
_________________ Footnote _________________
1 11 s., D., & B., 813.
Page: 297↓
They also assume, that it is proved that they were induced, without any fault upon their part, by the misrepresentations of Mr. Stuart, to believe that the security actually given embraced the whole amount of security for which they had stipulated, and which Mr. Stuart had become bound to give; that is to say, the whole “lands, plantations, &c., of Hillside, belonging to James Stuart, esq., of Dunearn,” which are minutely specified under this title in Dr. Coventry's valuation, and which extend to about ninety-five acres; and, 3dly, They assume, that the imperfection of the description in the original security (if it shall be held to be so imperfect as not effectually to include within that security all the lands which were represented as being comprehended within this description) was occasioned either by the actual and intentional fraud of Mr. Stuart, or by that culpa lata quæ æquiparatur dolo. It does not appear to be of any importance whether there was intentional fraud, or merely the most gross and extreme degree of culpa lata. Now, although a purchaser of a proper feudal right is not liable to the fraud of the seller, yet such fraud is completely available against an adjudger.
Accordingly, the case of a bonâ fide purchaser, who makes his bargain and advances money solely upon the faith of the records, and who is entitled to trust to those records, has always been distinguished from the case of
Page: 298↓
In like manner, creditors are liable to extrinsic obligations, which limit or qualify the right of their debtor, although he should appear ex facie to be absolute proprietor. This was solemnly decided in the case of Gordon v. Cheyne. 2
The authority of this decision is not denied: but it is said, in the first place, the rule is different in regard to heritable property; and, 2dly, That it does not overturn the authority of prior decisions, by which it is said to
_________________ Footnote _________________
1 4 Stair, 40. 21; 1 Bankton, 10. 65; Stewart's Answer to Dirleton, voce Comprising;
Ireland v. Neilson,
8 Feb. 1755;
5 Brown's Sup. 286;
Gibb, 25 July 1766; Mor. 909; Hailes, 100.
2
5 Feb. 1824. 2 S. & D. 566,
new edition; 675, old edition.
Page: 299↓
_________________ Footnote _________________
1 24 May 1797. Mor. 2905.
Page: 300↓
But it is said, that even the case of fraud could not be available, and the case of the
Duke of Norfolk and others against the Trustee for the annuitants of the York Buildings Company
1 is cited in support of this position. But the report of the decision is altogether silent as to this supposed ground; and the parties, whose bonds of annuity were set aside, never pretended that they had been deceived; or that their ignorance “had been taken advantage of.” All that appears in the first interlocutor as its ground is, that they, from not being acquainted with the laws of Scotland, had “erroneously given up” the old bonds, and taken new bonds in their place. The case was not, in the pleadings, treated even
_________________ Footnote _________________
1
26th June 1752, Elchies, “Competition,”
No, 12. Mor. 7062.
Page: 301↓
But even if this case had supported the view which is taken of it, it never could control or weaken the authority of the great mass of decisions, both before and subsequent, in which it has been found that fraud is pleadable against creditors, and that where it is of that kind which amounts to a vitium reale, tainting the title itself, the creditors cannot take advantage of it. 1
In particular, in the case of Thomson v. Douglas, Heron, and Co. 2 it was expressly found, that adjudging creditors, who had not completed their title by infeftment, could be met by an objection of fraud.
The subsequent case of Pearce v. Russell and others, in 1791, is no exception to the doctrine. The creditors there took, by the adjudication, a title in itself unqualified; their debtor had not even put himself under any obligation. It was a mere competition between them and the heirs of entail, who had failed to take any step whatever to make the entail effectual; and it is therefore impossible to hold that this case overrules the doctrine, involved in the case of Thomson, that a fraudulent or gross culpa on the part of the bankrupt cannot be taken advantage of by his creditors.
The case of
Wylie v. Duncan,
8th December 1803, is equally inapplicable, for the same and even for stronger
_________________ Footnote _________________
1 See cases referred to,
2 Bell, 289, &c.—See also cases,
Brown's Synopsis,
voce Fraud, 765.
2
15th November 1786. Mor. 10,229.;
Hailes, 1002.
Page: 302↓
But at all events it is clear that the parcels of land, to which Mr. Stuart had merely a personal right, cannot be taken by the respondent otherwise than subject to the exemption pleadable against Mr. Stuart himself. The doctrine is well explained by Mr. Bell 1, who, after pointing out the effect of obligations where the debtor was infeft, observes:—
“The rule respecting personal rights to land is, that the conditions and qualities inherent in the constitution of the right are effectual against third parties, both purchasers and creditors, while the right is not made real by infeftment. If, therefore, a person hold a conveyance to land, qualified by a limitation as of trust, or a condition as of pre-emption, and on which no infeftment has taken place, his creditors must take the right as he has it.”
And he refers to various cases where this distinction has been enforced, adding, that “the real right is freed from the condition, which becomes a personal obligation merely, when sasine is taken.” The cases of Burden v. Whiteford 2 and Ireland v. Neilson are direct authorities on this point; and they are confirmed by decision.
_________________ Footnote _________________
1 Vol. i. p. 283.
2 4 June 1742. Elchies, “Fraud,” No. 11.
Page: 303↓
In the case of Paul v. M'Leod 1 an entail not completed by infeftment was sustained against adjudging creditors, where the bankrupt was proved to be in the situation of a trustee, although he had purchased the lands in fee simple, and in his own name, under a decree of sale in favour of himself, his heirs and assignees. Here, therefore, he was only under a personal obligation to execute the entail; and although it was executed, it was never completed by infeftment; and, consequently, could not have been effectual against creditors, except upon the ground that the obligation of trust was pleadable against them. The Court, however, held that it was so pleadable; and “that he was to be considered as a trustee in making the purchase; and, therefore, that the entail was effectual against his onerous creditors.”
The bond of corroboration does not fall either in principle or on authority under the act 1696, c. 5. The statute, after setting forth what shall be held to amount to evidence of bankruptcy, “declares all and whatsoever voluntary dispositions, assignations, or other deeds, which shall be found to be made and granted, directly or indirectly, by the foresaid dyvor or bankrupt, either at or after his becoming bankrupt, or in the space of sixty days of before, in favours of his creditors, either for his satisfaction or further security, in preference to other creditors, to be void and null.”
Both the word and the spirit of the enactment manifestly apply to a preference given to one who previously had no right to it. It is for this reason that the statute strikes only against voluntary preferences, as opposed to those which the debtor had no right to withhold, as
_________________ Footnote _________________
1
20 May 1828. 6 S. & D. 826.
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“In the first place, it seems to have been held, that, wherever the bankrupt interfered only to do that which both parties understood had been done at first, and upon the faith of which understanding alone the money was advanced, the act was not objectionable, nor such as could entitle creditors to separate the security from the advance.”
And he refers to the case of More against Allan, 23d January 1800, the particulars of which, as set forth in the note, on the authority of the express terms of the judgment, fully support his view of the matter, as that which was unanimously adopted by the Court.
“But (he observes) another set of cases has created more difficulty, where the parties were sensible that the security was not at first completed, the advance being made on the faith of the deed being afterwards granted. In such a case it scarcely can be said that the lender of the money is more than a personal creditor merely.” It is in this class of cases alone that there is any discrepancy in the decisions of the Court; and even here, the latter authorities are in
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Referring to the decisions, it does not appear that even in the less favourable case of the failure to complete the security by reason of a delay, in some measure imputable to the creditor himself, there is the least countenance for the assumption, that the bankrupt cannot himself do any thing to aid the creditor, with that view, within the sixty days; nor does it appear that in any of the cases the mere length of the delay was considered of any farther importance than as a circumstance of evidence against the reality of the original transaction. In the case of
Mansfield and Co. or Nesbitt v. Cairns, in 1771
1, the security was both granted and completed within the sixty days. The same was the case in
Houston and Co. v. Stewarts, in 1772
2. In the discussions on the bench, as reported by Lord Hailes, all the judges regarded the true criterion to be the original understanding, on which the money was advanced. In
Robertson Barclay and others v. Spottiswood
3, in 1783, the bankrupt actually did not give the security till three weeks after notour bankruptcy, or after the lapse of the whole of the sixty days; and although great difference of opinion began now to prevail in regard to the whole of this class of questions, it does not appear, that any distinction was rested upon the mere fact, that the bankrupt's interference took place within the sixty
_________________ Footnote _________________
1
Brown's Supplement, vol. v. p. 386.
2
Ibid. vol. i. p. 403.
3
19 Nov. 1783. Mor. 1177.
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In the subsequent case of Brough v. Spankie and Jollie, the security and infeftment were granted and completed on the same day, and both within the sixty days. But as at this time the Court held that the decision in the case of Houston and Co. was erroneous, and that a creditor, who relies for any period of time whatever upon the personal obligation to get a security, cannot found upon that security, if even its completion by infeftment is delayed till within the sixty days, it is immaterial to examine the argument more closely, it being now fixed by repeated decisions that the objection cannot be carried so far. Only it may be observed, that the evidence of the original contract in this case appears, from the report, to have been assailed on a very serious ground, namely, that it rested entirely upon a holograph writing of the bankrupt, and “that a holograph writing cannot prove its date in a question with third parties, and that to pay any regard to it in the present case would prove the source of endless fraud and collusion.”
In the next case of
Maclean v. Primrose
1, the only point which came before the Court was, whether the debtor, who had come under an obligation to grant an heritable conveyance in return for an advance of money, could be compelled by law to grant the security, notwithstanding his having already become bankrupt? The sheriff found that this was no defence. The late Lord Meadowbank altered the sheriff's judgment, expressing a strong opinion against the authority of the cases sustaining
_________________ Footnote _________________
1
16 Nov. 1799. Bell, vol. ii., note, p. 225.
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In the case of the Bank of Scotland v. Stewart and Ross 1, no argument rested upon the date of the conveyance, as contradistinguished from the date of the infeftment; on the contrary, the creditor who objected to the security, instead of taking up the distinction pointed out in the opinion of the majority of the Court in this case, insisted that the date of the security must be held to be that of the infeftment. Ever since this decision the Court has followed its authority; and, accordingly, Mr. Bell 2 has observed it to be the fair result of all the later decisions, “that wherever there is stipulated a specific security over a particular subject, in consideration and on the faith of which an advance of money or transfer of goods is made, the completion of that security, although after an interval of time, and after the term of constructive bankruptcy has begun, is not within the intent and meaning of the act.” This has been fully confirmed by the cases of Cormack v. Gardner's Trustees 3, and the case of Bontine 4, which was affirmed by this house, and as observed by the minority of the Court, “there never was any question of law more fully or deliberately settled than this is.”
The majority of their lordships, indeed, have observed on the case of
Cormack, that although there was an interval between the loan and the granting of the security, that interval had elapsed previous to the period of constructive bankruptcy, and “the debtor, while yet
_________________ Footnote _________________
1
7 Feb. 1811.
2
Vol. ii. p. 226.
3
8 July 1829. 7 S. & D., 868.
4
2 Feb. 1830. 8 S., D., & B., 425; 1 Wilson & Courtenay,
p. 79, 6 July 1832.
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Referring again to the case of Bontine, it is admitted that the security not only followed at a considerable interval, but that it was actually granted within the sixty days; but it is observed that this fact, or rather the distinction founded upon it, “was not brought under the notice of the Court.” This observation is not well founded, for it has been justly remarked in the opinions of the minority, that it is expressly noticed in the deliberations on the bench, and even in the interlocutor of the Lord Ordinary.
It has farther been remarked, that there may have been a misapprehension in affirming the judgment in regard to the meaning of the term “voluntary” in the statute, which on various authorities, it is said, comprehends not only deeds granted ex proprio motu, but deeds which the debtor was previously under an obligation to grant. The appellants doubt whether there be any authority sufficient to make out this latter proposition. If the word voluntary does comprehend obligations forming part of the original contract, it has no intelligible meaning, and no security would be safe from the operation of the act 1696. Personal creditors who have done no diligence are protected by the act 1696, as
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Neither is the bond struck at by the statute 54 Geo. III. c. 137. One great object of the law of sequestration was to combine in that process the whole equalizing diligences, which were previously competent for putting creditors pari passu, where no legal preferences had already been obtained, and to prevent the acquisition of new preferences within the period of constructive bankruptcy. For this purpose the first deliverance on the petition for sequestration has combined in it the effect of all the prohibitory diligence which it was previously competent to use. It operates as an inhibition, and it therefore necessarily prevents the bankrupt from granting any deed, which, previous to the existence of the statute, he could not have granted effectually after inhibition had been used against him.
_________________ Footnote _________________
1 Bell, vol. ii. p. 202, and authorities there cited.
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But the statute nowhere declares that it shall be incompetent for the bankrupt to grant any deed which it would previously have been lawful and proper for him to grant, although inhibition, and every other sort of diligence, had been used against him short of a completed adjudication. The next question is, whether any of the enactments of the statute do by their own force, and without any further proceedings, so divest the bankrupt of his heritable estate, and so vest the trustee, as to render it feudally incompetent for the bankrupt to execute a deed, which was still competent to him, and which, indeed, it was his duty to grant, notwithstanding his bankruptcy, actual or constructive? The defenders submit that there is not.
There is a marked distinction in the statute betwixt the real and the personal estate. With regard to the personal estate, it is declared that the adjudication in favour of the trustee “shall operate as a complete attachment and transfer of the moveable or personal estate, for behoof of all the creditors at the date of the first deliverance aforesaid, without the necessity of intimation.” But with regard to the heritable estate, there is no such divestiture of the bankrupt by the act of sequestration or investiture of the trustee. It is necessary, and it is carefully provided for in the statute, that the trustee should, in order to divest the bankrupt, make up a regular and complete title according to the forms of the law of Scotland. By the 29th section, it is provided, “That the Court shall, when the trustee is confirmed, ordain the bankrupt to execute and deliver, within a reasonable time to be specified in the interlocutor, a disposition or other proper deed or deeds of conveyance or assignment,
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By rendering it imperative upon the bankrupt to grant a formal conveyance, the statute clearly contemplated that without such conveyance, or something equivalent, there should be no divestiture. Accordingly, the conveyance is to be “in such form and style as may effectually vest the right in the trustee.” It is here not merely implied, but expressly declared, that the trustee cannot be vested, nor, of course, the bankrupt divested, by the mere operation of the statute.
But it might happen that a conveyance could not be got from the bankrupt, and it was necessary to provide for that case. The statute therefore proceeds to enact, that whether such deeds be executed by the bankrupt or not, decree of adjudication shall be pronounced, “and the Court shall, in the act or order above mentioned, declare every right, title, or interest which was formerly in the bankrupt, to be now in the trustee, for the purposes aforesaid; and particularly shall adjudge, decern, and declare the whole lands, and other heritable estate belonging to the bankrupt, within the jurisdiction of the Court, and which, as far as known shall be specially enumerated and described, to pertain and belong to the trustee or trustees in succession, absolutely and irredeemably, to the end that the same
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“And in case the bankrupt's own title to any part of the estate, heritable or moveable, real or personal, which belonged to him at that period, or to which he had then
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succeeded as apparent heir, nearest in kin, or otherwise, to any predecessor, have not been so completed as to vest the right properly in him, the trustee shall take the most safe and eligible method of completing the bankrupt's title, in such way and manner as the law requires, which title shall accresce to that already acquired by the trustee, in the same way as if it had been completed prior to the disposition by the bankrupt, or adjudication against him.”
The whole of these enactments demonstrate most clearly, that neither the sequestration, nor the general adjudication, nor the special adjudication are of any effect in divesting the bankrupt of the feudal right, and vesting the trustee. The bankrupt is divested only when the trustee has, by one or other of the modes pointed out by the statute, completed his title by infeftment.
But in the present case the respondent was not infeft till after the appellants had been feudally vested.
Respondent.—1. In arguing that creditors are affected by the fraud of the bankrupt, the defenders confound two cases which are in themselves essentially distinct. A bankrupt may, by fraudulent devices of various kinds, raise money, but unless the particular sums of money so raised can be identified (which, in the case of money, can very rarely happen,) the persons defrauded stand in the same situation with other personal creditors: or the bankrupt may acquire property by fraud, either land or moveables; and if that property be extant, as it is easily capable of identification, the person defrauded has an undoubted claim for restitution.
Supposing it to be true that Mr. Stuart did deceive
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It is quite clear that, if this be a case of fraud at all, it belongs to that class in which the bankrupt has contrived to raise money by fraudulent devices, and in which the creditors can in no degree be responsible, unless it can be shown that they are deriving benefit from the money so procured by the bankrupt.
This distinction is clearly marked by Lord Kilkerran in the case of Ireland. He says,— “If the original purchase was fraudulent, as made when Cormack was in the knowledge of Ireland's prior right, the bond taken to be the foundation to effectuate that purchase was no less so; and, according to the above principle, that fraud must affect his creditors adjudgers:” and Mr. Bell 1 observes, that “while property obtained by fraud is extant in the hands of the bankrupt, the creditors who take that property, or who resist the claim for restitution, are striving to gain by the proprietor's loss; they participate in the fraud of their debtor.”
It is only in this view that the doctrine of tantum et tale applies. The extent of this rule, as finally settled by the decisions, seems to be this, that in the case of
_________________ Footnote _________________
1
1 Bell, 277.
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This distinction was sufficiently explained by the decision in the case of Gordon v. Cheyne. It was there determined, that certain shares of a trading company, which had stood for a course of years in the name of the bankrupt, but which ab initio had been held by him only in trust, did not belong to the general body of his creditors, but to the individual for whose behoof the trust was created. This decision did not pass unanimously, but it went no farther than this, that creditors adjudgers are liable to be affected by conditions or qualifications inherent in the constitution of their author's right, while that right remains personal.
But the case is very different where an individual has himself acquired right by an unqualified title, either to land or a jus incorporate, and, in the enjoyment of that unqualified right, has come under an obligation, express or implied, to convey that right to another. The creditor in such an obligation, if he have failed to demand implement from the bankrupt himself previous to his bankruptcy, is not entitled to demand implement from the
_________________ Footnote _________________
1
Bell, vol. i. p. 283.
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Accordingly, in the case of Mitchell v. Ferguson 1, the disponee of a house not being infeft, the creditors of the disponer adjudged, and were infeft; and they were found preferable to a purchaser from the disponee.
It is true that in a subsequent case, Smith v. Taylor 2, some doubt was thrown upon the authority of the decision of the case of Mitchell, and the Court seemed to sanction the doctrine, that the general body of creditors could take the property of their debtor only tantum et tale as it stood in his person, and so must fulfil the obligation, even although only a personal obligation, which their debtor had incurred in relation to that subject. But, as Mr. Bell observes, “the erroneous opinion, however, which this judgment tended to sanction, did not long prevail;” and he refers, in support of this observation, to the case of Buchan v. Farquharson, 24th May 1797; and this is confirmed by the opinion of the judges in the case of Russell v. Ross's Creditors 3, and by the still more recent case of Wylie v. Duncan. 4
On the above principles it is clear that no distinction applies to the property which was not feudalized in the person of Mr. Stuart.
2. The bond obtained by the appellants is struck at both by the act 1696, c. 5., and the 54 Geo. III. c. 137.
In regard to the act 1696, the leading distinction between the present case and any of those which have occurred, in which the statute has been found not to
_________________ Footnote _________________
1
13 July 1781. Mor. 10,296. Hailes, 880.
2
1 Bell, 288.
3
31 Jan. 1792. Bell's Cases, p. 177.
4
3 Dec. 1803. Mor. 10,299.
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It is true that, in the case of
Mansfield,
Hunter, and Co.
1, it was decided, that where money was advanced in consequence of an agreement to grant an heritable security, such security, even although granted within sixty days of the debtor's bankruptcy, was not reducible in terms of the statute. A decision to the same effect was given in the case of
Houston and Co.
2; but in the
_________________ Footnote _________________
1
15 February 1751.
2
20 February 1772.
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“It never came again to trial, having been compromised. But, if I can judge from the incidental opinions which I have heard of two judges, (in particular Lord Justice-Clerk Macqueen, who sat upon the bench at that time, and Sir Ilay Campbell, who was counsel in the cause,) there is much reason to believe that the ultimate decision would have been different from the first.”
But in ten years thereafter the question was again raised and decided in the case of Brough v. Duncan, and Brough v. Spankie. 2 In both of these cases heritable security had been stipulated for from the first; but in neither had it been actually granted till within sixty days of bankruptcy. In both cases the Court held, that the lender of the money was a mere personal creditor, and that the securities were reducible.
In the subsequent case of
Maclean v. Primrose the late Lord Meadowbank, in a note
3, condemned the decision in the case of
Houston and Co. “as clearly contrary to principle, since an obligation to grant a preference cannot constitute an actual preference on an heritable
_________________ Footnote _________________
1
19 November 1783.
2
5 June 1793.
3
16 November 1799. 2 Bell, p. 225.
Page: 319↓
The result then of these authorities seems to be this, that a security granted within the period of constructive bankruptcy, even although in implement of an obligation previously undertaken, is reducible under the statute; and farther, that after bankruptcy, or during the period of constructive bankruptcy, a debtor can do no act, even although in implement of a previous obligation, by which the situation of any one creditor can be improved at the expence of the rest.
The doctrine which was thus established was not in any degree shaken by the decision in the case of the Bank of Scotland v. Stuart. There the question was, with regard to the validity of a security, the sasine upon which had been taken within the period of constructive bankruptcy. Applying the statute strictly, as had been done in some of the earlier cases, the security must have been set aside in consequence of the date of the sasine; but the answer was, that the deed upon which the sasine proceeded had not been granted in satisfaction of a prior debt, but in consequence of an agreement entered into at the time when the money was advanced. That having been established to the satisfaction of the Court, the date of the sasine, which would have been conclusive against a transaction of a different character, was held to be immaterial.
The only case which can be supposed to give countenance to an opposite doctrine is that of Cranstoun and Anderson v. Bontine. But so far as that case is to be considered as a decision of the Court of Session, its authority is completely superseded by the detailed opinion
Page: 320↓
But even assuming that the case does not fall under the act 1696, c. 5, it clearly comes within the statute 54 Geo. 3.
By the act of sequestration, the whole estate and effects of the bankrupt are withdrawn from the possession and control of the bankrupt, and placed under the management of officers subject to the jurisdiction of the Court. Even before the election of a trustee, the creditors are appointed to choose an interim factor, and failing their doing so, the care and custody of the bankrupt's estate and effects devolve upon the sheriff-clerk.
By the 17th section of the statute it is enacted, “That the said factor or sheriff-clerk, chosen as interim manager, shall be entitled to take possession of the bankrupt's whole estate and effects, and of the bills, notes, and whole other vouchers, title deeds, and instructions of his estate, and also of his books and papers; and the bankrupt shall, if required by him or the creditors, grant powers of attorney, or other deeds which may be deemed necessary or proper, for the recovery of the estate and effects situated in foreign parts, under the pain of fraudulent bankruptcy,” &c.
After the election of the trustee, and after his nomination has been reported to the Court, and approved of,
Page: 321↓
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By the 22d section of the statute, the deliverance upon the petition for sequestration is directed to be recorded in the general register of inhibitions within fifteen days, “and the same shall, from the date of the deliverance, be held equivalent to an inhibition.” The nature and effects of the diligence of inhibition are well known. It gives to the personal creditor, at whose instance it is used, a right to reduce all conveyances of heritable property made by his debtor subsequent to the publication of the inhibition. Upon that ground alone the subsequent conveyance executed by Mr. Stuart, to the prejudice of the respondent, acting for behoof of the personal creditors, would be reducible.
It may be true that, in order to satisfy the rules of feudal conveyancing, something more is required to make the title of the trustee perfect. But that circumstance is of no importance, when the only question is with regard to the validity of a deed impetrated from the bankrupt, during the dependence of judicial proceedings, anxiously published to the world, and in contempt of an order of Court pronounced in the course of these proceedings.
But above all, and keeping in view that the appellants claim a preference solely in virtue of the supplementary deed executed by Mr. Stuart eight months after his estates were sequestrated, and after the Court had adjudged those same estates to belong to the respondent,
Page: 323↓
I will state shortly the grounds on which I think it must be held that Mr. Stuart had not the power to do
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Page: 325↓
_________________ Footnote _________________
1 15th Feb. 1771; Mor. No. 6. App. Bankrupt; Hailes, 403.
2 20th Feb. 1772; Mor. 1170; 1 Hailes, 468.
3 5th June, 1793; Mor. 1160.
4 5th June 1793; Mor. 1179.
Page: 326↓
_________________ Footnote _________________
1 16th Nov. 1799; 2 Bell, 225, note 2.
Page: 327↓
Page: 328↓
The case having stood over till this day,
Page: 329↓
1. With respect to the first point, there is a conflict of authority, and though it becomes unnecessary to decide on which side the balance must be cast, as the second ground is sufficient for our purpose, yet the great importance of the question carries us into this discussion. That infeftment within the sixty days may be validly taken upon a conveyance granted prior to that period seems not be denied. It is agreed that a heritable right may be granted before the sixty days, and sasine may validly be taken upon it within that time, although nothing of the prior right can appear on the record: but the security itself having been here granted after the statutory period, and not merely the sasine had, we need not dwell longer upon that admission; and there is certainly no small discrepancy in the authorities upon this point. Previous to the case of Mansfield v. Cairns, 1771, the decisions were against the validity of a security so granted; but it was then held, that money having been advanced before the time, on an agreement to grant heritable security for the loan, such security might safely be granted within the sixty days; and the same doctrine was upheld in the subsequent case of Houston v. Stewart. As the provisions of the act 1696 strike at preferences, these decisions could only stand upon the
Page: 330↓
Page: 331↓
The other case appears to me to have been itself erroneously decided, at least if the decision is held to strike at an infeftment taken within the sixty days, on a security granted before, which was the case. It is barely possible to consider that the long time which had been suffered to elapse between the date of the conveyance and the completing of the security by infeftment, which was above three years and a half, may have been a sufficient ground for the decision, as evidencing a fraudulent
Page: 332↓
2. But the second point in the cause appears to me encumbered with no doubt; and it is, in my judgment, quite decisive in favour of the decree under appeal. Mr. Stuart was, at the time in question, under the operation of the bankrupt act—the act expressly framed for making the payment of debts more equal, and for
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Page: 335↓
Page: 336↓
Page: 337↓
Page: 338↓
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The House of Lords ordered and adjudged, “That the interlocutor complained of in the appeal, (so far as the same finds the defender liable in expences, and remits the account thereof, when lodged, to the auditor to tax and report,) be and the same is hereby reversed; and it is further ordered, that the said interlocutor in all other respects be, and the same is hereby affirmed.
Solicitors: A. M'Crae— Moncrieff and Webster,—Solicitors.
