Reduction of Alienations made by Bankrupts where the Reducer has done no Diligence.
Subject_3 SECT. V.
Gratuitous Alienations by persons solvent at the time.
Clerk v. Stewart and Watson
Date: 30 June 1675 Case No. No 46.
In support of a gratuitous alienation, made by a debtor, who, at the time of reduction, was bankrupt; it was found relevant, that, when he made the alienation, he had a sufficient visible estate to pay the pursuer and all his other creditors.
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A husband, by his contract of marriage, having got the right of the fee of a tenement of land settled upon him; his wife having resigned the same for infeftment to him and her, and the heirs of the marriage, which failing, his heirs: He and his wife did thereafter enter in a contract with another sister of his wife's, who had right to the equal half of the said tenement, as heir portioner with her sister; by which contract there was a mutual tailzie with consent of the husband; and the right of fee, that, by the former contract, was settled upon her husband, as said is, was disponed to the wife; in so far as both the sisters, with consent of their husbands, were obliged to resign their respective parts, in favours of their husbands and themselves in liferent, and the heirs of the marriage in fee; which failing, in favours of the wife's heirs: Which contract was questioned by a reduction at the instance of a creditor of the husband's; upon that reason, that the said right of fee, granted by the said contract betwixt the husband and the wife, and her sister, was in defraud of the husband's creditors, and null by the act of Parliament 1621; in so far as the husband had a fee of the said tenement, by the contract of marriage betwixt him and his wife; which might have been affected with execution at the instance of his creditors; and the said fee was given, by the said late contract, to the wife, so that the husband had only a liferent.
In this process, it was alleged, 1st, That the act of Parliament did militate only in the case of dyvors, and dispositions granted by them. And, 2dly, That the said act of Parliament doth only rescind alienations that are made without true, just, and necessary causes; and that the said contract betwixt the husband and his wife, and her sister, was made for a true and just cause; and the fee of the said tenement, which the debtor had, was given away in respect of the obligements of the said contract in favours of the husband, the pursuer's debtor, which was as equal, as to advantages, for the pursuer's debtor, as they were for the other party; seeing both the sisters, their parts of the tenement, were provided in the same manner to the respective wives and their husbands, and the heirs of the marriage, which failing, the wife's heirs; and that the pursuer's debtor was a person opulent for the time, according to his quality; and had sufficiency of estate and moveables otherways, that might have satisfied the pursuer's debt the time of the said last contract, and thereafter; so that the said contract being valid ab initio, it could not be taken away upon pretence, that thereafter the husband became insolvent; seeing it cannot be said, that the husband did intend to defraud his creditor, or that there were any fraud upon his part.
It was replied, That though the case of bankrupts, and their fraudful practices, mentioned in the said act being so frequent, did give occasion and also rise to the same; yet it appears evidently by the said act, that it was intended that debtors should not be in a capacity to give away any part of their estate, in prejudice of their creditors, to any person: In so far as the dispositive words of the act are in these terms, that in all causes at the instance of a true creditor, the Lords will decern all alienations and rights made by the debtor, to any conjunct person, without true, just, and necessary causes, and without a just price really paid, the same being done after contracting of lawful debts from true creditors, to be null without further declarator; and the said act does not bear, that all rights made by bankrupts should be null, it being hard to give a character and definition of a bankrupt; so that diverse questions may arise anent the notion of bankrupt; and what debtors should be esteemed bankrupt; and therefore for cutting off the same, the act is conceived in the terms foresaid, and annulls dispositions made by debtors without an onerous cause: And the Lords, by the statute ratified by the said act, do declare, that they intend to follow and practise the laws civil and canon made against fraudful alienations in prejudice of creditors: And, by the civil law, all rights and deeds made and done in prejudice of creditors without an onerous cause, are null, and may be rescinded actione Pauliana: And the law doth presume, præsumptione juris, that they are fraudulent, being prejudicial to creditors ex eventu & re; who are not obliged to say, that they are fraudful consilio, which is in animo and hardly can be proven.
As to that point, viz. That the said contract was upon valuable considerations, it is replied, That the taking of the fee from the husband, and giving the same to the wife, it is a donation as to the wife in prejudice of the creditor; so that there is no onerous cause as to the husband.
The Lords, upon debate at the bar and among themselves, did find, that debtors might dispose of a part of their estate by way of gift, and without an onerous cause, if they retain as much and more than would satisfy their creditors; and therefore they found the defence relevant, that the debtor had as much estate, besides the fee of the said tenement, as would satisfy the pursuers debt.
Some of the Lords were of the opinion, That the case, being of so great consequence as to the preparative, it was fit to be thought upon; and urged these reasons, 1st, That the words and letter of the law appear to be clear, against deeds done by debtors without an onerous cause. 2dly, Though our law were not clear, yet in cases of that nature, when we have not a municipal law, nor custom to the contrary, we ought to follow, though not the authority, yet the equity of the civil law, which is received every where, where there is no custom to the contrary: Specially, seeing it is declared by the said statute mentioned in the act of Parliament 1621, That the Lords are to follow the civil and canon law made against deeds and alienations in prejudice of creditors 3dly, It is hard to put creditors to dispute the condition of their debtors, the time of making donations; and whether they had effects and sufficiency of estate to satisfy their debt, notwithstanding the said deeds; which may be unknown to the creditors; it being sufficient to say, that the deed was without an onerous cause, and that the debtor became insolvent. 4thly, If a debtor should become insolvent ex post facto, though the time of the donation, the residue of his estate might have satisfied the debt, it is more just and reasonable that a donatar, who has a lucrative title, should rather suffer ex eventu than a creditor.——————did argue to the contrary.
Act. Falconer.Alt. Steuart.Clerk, Monro. Præsentia.
Dirleton, No 287. p. 139.*** Stair reports the same case thus:
The two daughters and heirs portioners of —— Stuart, in Glasgow, succeeding to their father in a tenement there, one of them was married to a mason in Glasgow, and, by the contract of marriage, she did resign her half of the tenement, in favours of her future spouse and herself, the longest liver of them two, and the heirs to be procreate betwixt them; which failing, to the husband's heirs; but thereafter, by contract betwixt the two sisters and their husbands, there is a mutual tailzie, whereby in case of failzie of heirs of their body, each of them are substitute to others. Clerk being creditor to the mason in L. 100 Scots, pursues reduction of the second contract, on this reason, that the mason, his debtor, had, after the debt contracted, disponed the half of the tenement, which, by the contract, belonged to him in fee, and, by the second contract, had constitute himself only liferenter, and stated the fee in his wife and the heirs of the marriage; which failing, to her sister and her heirs, in defraud and prejudice of the pursuer and his lawful creditors, contrary to the act of Parliament 1621 against fraudulent dispositions in prejudice of creditors. The defender alleged absolvitor, Because he offered him to prove, that at the time of this second contract of tailzie, the mason debtor was in a good condition, and had much more than would pay all his debt, and was not by that tailzie rendered insolvent, or put in any difficulty to pay this pursuer and all his creditors, not only being a daily gainter as a mason, but having moveables five times above the sum; so that there was no fraud, either by the intent or event of this tailzie; and therefore, albeit it had been merely gratuitous, it neither was against that act of Parliament, or any law whatsoever, for even the actio pauliana behoved to have fraud in prejudice of creditors; but it were very unjust and inconvenient to hinder persons that were in an opulent condition, to grant donations, either upon charity or kindness to children or relations; but, if this reason were relevant, then none such could be granted by any that had debt; for any creditor might not only reduce, but might lie by till the disponer, or his heir, became in worse condition, and then reduce the disposition, which was gratuitous; but creditors ought invigilare sibi, and to obtain and affect their debtors other estate, so that such donations were of times pious and virtuous, and neither fraudulent nor faulty.—The pursuer answered, That he opponed the act of Parliament, though in the narrative it mentions bankrupts and fraudulent dispositions, as the extremest cases, to be motives for passing of the act; yet the statutory part bears, “All alienations made by debtors, of any of their lands or goods, to any conjunct or confident person, without true, just, and necessary causes, or just price really paid, the same to be null at the instance of true creditors, being anterior;” which hath been ordinarily extended against gratuitous dispositions, though not to conjunct persons; and this tailzie is among conjunct persons, and is gratuitous; for albeit the mutual tailzie, and the hope of issue thereby in the whole tenement be advantageous to the children of the marriage, yet not to the husband himself, who quits the fee for the liferent; and if onerosity might be so interpreted, that a debtor might dispone his lands for equivalent causes to be done to his children or others, the effect of this excellent statute might be evacuate, but the onerous cause must return to the debtor, that it may be affected in place of what is alienate.—The defender replied, That the narrative of the statute may very well inprete the intent and meaning of it, to be only against fraudulent dispositions of persons insolvent, or who became by the said disposition insolvent.
The Lords found the defence relevant, that the debtor, the time of this tailzie, had a sufficient visible estate to pay this and all his debts, and admitted to the defender to prove the condition of his estate, and to the pursuer to prove what was his debt.
