(1832) 6 W&S 79
CASES DECIDED IN THE HOUSE OF LORDS, ON APPEAL FROM THE COURTS OF SCOTLAND, 1832.
Subject_Bankrupt — Statute 1696, c.5. —
Held (affirming the judgment of the Court of Session), that a disposition and assignation, and infeftment taken thereon within sixty days of the bankruptcy of the granter, in implement of missives of sale executed several months previously, were not reducible under the act 1696.
William Cunninghame Cunninghame Graham, of Gartmore, was proprietor of the entailed estate of Finlaystone, in the mansion-house of which, his son, Robert Cunninghame Bontine of Ardoch, resided, under a lease from his father. On the 11th of March 1826, Bontine addressed the following letter to his father:
“I hereby make offer to you the sum of 4,240 l. sterling for your life-rent interest in that part of the estate of Finlaystone held by me in lease from you, together with the right to the game on that and the other parts of the estate. My entry to be at the term of Whitsunday next, and the price to bear interest from and to be payable at that date. I likewise offer to purchase from you the whole growing wood or timber on the lands let in lease to me, the
price or value thereof to be ascertained by two arbiters mutually chosen; and in case of their differing in opinion, by an umpire to be fixed on by them; and for the price so to be settled, I shall grant my bond to you and your executors, payable at the first term of Whitsunday or Martinmas after your death. Upon your accepting of this offer, a regular deed of conveyance to be granted at our mutual expence.”
Graham accepted this offer, by a letter of the same month.
When the term of Whitsunday 1826 arrived, no payment was made by Bontine to Graham; but Bontine alleged, that having right to the succession of the estate of Ardoch, as a substitute heir of entail, from his birth in 1799, the possession thereof was held, and the rents from that date drawn by his father, as his administrator-in-law, till he attained majority in 1820. For those rents, and also for large sums intromitted with by Graham, arising from the sales of woods and other property belonging to the son, the father had hitherto failed to render accounts; and there depended in the Court of Session an action against him at the son's instance, concluding for upwards of 40,000 l. sterling. In consequence of this state of accounting, the son asserted, that it was agreed and understood between them, that when the price of the life-rent of Finlaystone fell due, it should be imputed by the son to an extinction pro tanto of the greater debt due him by Graham.
On the 5th August 1826, Graham executed in favour of his son a disposition and assignation, as follows:
“I, William Cunninghame Cunninghame Graham, Esq., of Gartmore and Finlaystone, heir of entail in possession of the lands and estate of Finylastone,
considering, that Robert Cunninghame Bontine, Esq., of Ardoch, by missive letter addressed to me, dated the 11th day of March 1826, made offer to me of the sum of 4,244 l. sterling for my life-rent interest in those parts of the estate of Finlaystone held by him in lease from me, and hereafter more particularly described, together with the right to the game on the said estate, his entry to be at the term of Whitsunday then next, now last past, and the price to bear interest from and to be payable at that date; and upon my acceptance of the said offer, that a regular deed of conveyance should be granted at our mutual expence; of which offer I, the said William Cunninghame Cunninghame Graham, accepted, by letter addressed to the said Robert Cunninghame Bontine, dated the 20th day of March 1826: And now, seeing that the said Robert Cunninghame Bontine has accounted for and made payment to me of the foresaid sum of 4,244 l. sterling, of which I hereby acknowledge receipt, and discharge the said Robert Cunninghame Bontine, his heirs, executors, and successors, for ever: Therefore I have disponed, conveyed, and made over, as I do hereby, in implement of my part of the said agreement, and with and under the declarations contained in the precept of sasine after inserted, dispone, assign, convey, and make over to and in favour of the said Robert Cunninghame Bontine, and his heirs and assignees whatsoever, heritably and irredeemably, all and whole,” &c.
Infeftment followed on the 7th August, which was recorded on the 8th of that month; but on the 6th September Graham was rendered bankrupt, under the act 1696, c. 5. In the year 1824 Graham had accepted
Bontine's pleas in law, in defence, were —
1. As the sale to which the deeds under reduction refer was a bonâ fide onerous transaction, which originated at a time when Graham was to all appearance in circumstances perfectly solvent, and as the deeds were not granted without lawful, just, and necessary causes, they are not liable to reduction under the statute 1621, c. 18.
2. The statute 1696, c. 5. does not apply to cases like the present. The statute was not intended to operate as a bar to the ordinary transactions of life, and it does not annul such transactions, though entered into
3. It was perfectly lawful for the parties to impute the price towards payment of a much larger sum due by Graham to the defender.
4. The defender is entitled to retain and apply whatever sum may be deemed still in his hands towards payment and extinction of the same debt.
June 23, 1829.
The record being closed, and Graham making no appearance, the Lord Ordinary reduced, decerned, and declared, in terms of the reductive conclusions of the libel, and observed in a Note—“This action is brought on the act 1621 and on the act 1696. The parties differ materially in regard to facts, which it would be indispensably necessary to ascertain before disposing separately of either of these grounds of reduction. If, according to the defender's statement, the granter of the deeds was truly indebted to the defender in a larger sum than the consideration for which they bear to be granted, it would be difficult to deny their onerosity; on the other hand, if the defender's statement in that particular be unfounded, the deeds could not well fall under the operation of the act 1696.
But as the defender admits, in the seventh article of his statement of facts, that no money was actually paid, that the disposition and infeftment were granted on the ‘understanding’ that the price or
The only point remaining to be disposed of is the conclusion for the rents.”
Feb. 2, 1830.
Bontine reclaimed to the First Division of the Court of Session, and their Lordships recalled the interlocutor of the Lord Ordinary complained of, “so far as the same reduces and decerns upon the grounds of the act of parliament 1696, and remit to Lord Moncreiff, the junior Lord Ordinary, in place of Lord Fullerton, to proceed and do further in the cause as to his Lordship shall seem proper; reserving all questions of expences hinc inde until the issue of the question presently in dependence.” *
Cranstoun, Anderson, and Trotter appealed.
Appellants.—The letters and disposition and assignation under reduction, which were granted by Graham when insolvent, are clearly struck at by the acts 1696, c. 5, and 54 Geo. 3, cap. 137, sec. 12. The spirit as well as the letter of these statutes apply to this conveyance, which constituted an illegal preference in the
_________________ Footnote _________________ * 8 Shaw and Dunlop, 425.
_________________ Footnote _________________
* 8 Shaw and Dunlop, 425.
These deeds were not followed by seisin till the day Graham absconded, and within a month of his legal bankruptcy; but all deeds challenged under these statutes must be held to be of the date of the registration of the sasine. The application of the statutes is the more undoubted, as, from the admitted circumstances of the case, the agreement between the parties must have been entered into with no other intention at the time than to create an undue and partial preference over other creditors.
Although there had been no express and positive agreement in contemplation of bankruptcy, by which the respondent was to have right so to apply the price of his purchase as to secure a preference over his father's other creditors, the missive letter and subsequent deeds would be still objectionable on the act 1696, c. 5; and this totally independent of any actual fraud or corrupt intention. Under this statute it is sufficient to annul a conveyance or other deed granted within sixty days of the registered sasine, that, in effect, as in the case of the transaction under challenge, it operates as a preference, and enables the creditor, from the period of its execution, to provide for the payment of his debt.
Even if the minute of agreement had constituted a proper sale for a price paid by the respondent to Graham, the statutes 1696, c. 5, and 54 Geo. 3, c. 137,
Respondent. —The act 1696, cap. 5, (and which was assumed as the sole ground by the Lord Ordinary,) has no application to such a case as the present. The object of that act is to cut down voluntary deeds granted by parties bankrupt and insolvent, after bankruptcy, or within sixty days before, for satisfaction or further security of debts then subsisting, such as may operate a preference to the grantee, in prejudice of the granter's other creditors.
As to the original lease, it has not been challenged by the appellants,, the transaction not falling within the period of the statutory prohibition. But neither does the transaction for the purchase of the life-rent
Then how can the disposition and conveyance of the life-rent interest be struck at by the statute? It is impossible to bring that deed under the statutory description of a “voluntary” disposition, granted either for satisfaction or further security of a debt, in preference to other creditors. It was a deed necessarily granted by Graham, to the granting of which he was in law compellable at the respondent's instance, as being merely in implement of the purchase which had been previously concluded. Subsequently to the period of payment, Graham's debt to the respondent was wiped off to the extent of the agreed price of the life-rent. The respondent could not, at any subsequent period, shake himself free of the purchase, had he been ever so desirous; nor could he maintain a claim of debt against Graham to the full amount of his intromissions, but only to that amount minus the agreed purchase money.
But if such was the respondent's situation, it is not less obvious that Graham was brought under a direct obligation to grant a conveyance of the subject for which the price was payable. This was an
It is quite unnecessary to go into any inquiry as to the debt due by Graham to the respondent. In the meantime the respondent is entitled to retain the price he agreed to pay for the life-rent; and whenever the amount of the debt due to him is precisely fixed, compensation takes place, the legal effect of which draws back to the date of the concourse debiti et crediti, and consequently operates virtual payment, as if the respondent had paid down the price. —Johnstone, 29 Jan. 1751, ( Elchies v. Bankrupt, No. 27); Mansfield & Co., 15 Feb. 1771, (F.C.); Mitchell, 12 Nov. 1799, (F.C.); Bank of Scotland, 7 Feb. 1811, (F. C.); Cormack, 8 July 1829, (7 S. & D. p. 868); Kames's Dictionary, vol. I. p. 165; Bankton, B. I. t. 24, § 27; and Erskine, B. III. t. 4, § 12, 20.
The House of Lords ordered and adjudged, “That the appeal be dismissed, and the interlocutor therein complained of be, and the same is hereby affirmed.”
Solicitors: Caldwell and Son— Richardson and Connell,—Solicitors.