Denunciation with insolvency not sufficient foundation to reduce posterior payments made by the common debtor, unless at the same time he had been commonly reputed bankrupt, or the receiver were particeps fraudis.
Click here to view a pdf copy of this documet : PDF Copy
Alexander Tweedie having sold a stock of sheep to John Din, for which he got his bond; he registrate him at the horn, and a few months thereafter, endeavouring to poind, he found the sheep disposed upon to some neighbours; and having arrested in their hands, and pursuing a furthcoming, they deponed, they had got the goods, but that they had bought them, for payment of debts due to them by the common debtor, or wherein they were cautioners for him: But for these their debts, no diligence save registrations of their bonds was used, and the common debtor still continued to trade in buying and felling sheep, &c.
Tweedie now insisting upon the latter clause of the act of Parliament 1621, and alleging, That he was in the precise words thereof; because he had used diligence to affect his debtor's goods, by a registrate horning against a bankrupt and dyvour; and that the other creditors had obtained payment (by the partial favour of the debtor) though posterior to him in diligence; and therefore he had good action to recover what was thus voluntarily paid.
And the co-creditors defenders, having alleged, 1mo, That there was a difference betwixt bankrupt and insolvent, and that the law was only to be understood of the first; and here the common debtor was not bankrupt. 2do, Betwixt creditors partakers of the fraud, and those who are not. 3tio, Betwixt those who had got payment, and such who only were competing for preference, on a subject yet outstanding.
Answered for the pursuer, 1mo, That there is a difference betwixt bankrupt by the act 1696, so to operate the effect of that law, and bankrupt by the act 1621, to afford the benefit of that act: That less is requisite to make one bankrupt by the latter than the former; because the effect of the act 1621, is nothing so general as of the act 1696. So that with respect to the benefit of the act 1621, it was sufficient that a horning was registrate against the common debtor. And this was so found 11th December 1691, the Creditors of Langtoun competing, voce Competition, observed by the Lord Stair, Inst. tit. Reparation, § 15. For there, though single insolvency was not sustained, yet joined with legal diligences, beginning to be raised and execute, was found sufficient. As to the second point, answered, That it makes no difference as to this clause of the act, whether the receiver was particeps fraudis or not; for the former clause of the act does indeed make that distinction and repeats it twice: But the latter clause hath no such quality burdening the prejudged creditor with proving the participation; but all that therein is required, is a prior diligence, and a partial preference; so that the clause being here omitted, it is de industria done; and therefore the addition of it, is against the mind of the law. As to the third, answered, That there is no such distinction to be made, as is plain from the law, for the preference and repetition are joined in one clause, without any difference made; and therefore as the co-creditor would be preferred, so also has he action for repetition; as was found 12th February1675, Veitch contra Ker, infra h. t.
Replied for the defenders, That the import of the act 1621, is very plain, especially if traced up to the common law, from whence (as appears by the express words of the act) it is derived, where there is a manifest distinction made betwixt lucrative deeds in prejudice of creditors, and onerous: In the first, non est quærendum an sciente eo cui donatum, gestum sit, sed hoc tantum an fraudentur creditores. L. 6. § 11. D. quæ in fraud. cred. But where the right is onerous, such as where a true creditor receives his payment, non sufficit si simpliciter sciat illum creditores habere, sed si particeps fraudis sit, L. 10. § 2. D. eod. And consequentially our act of Parliament is divided in two branches, the one with respect to lucrative conveyances, such as the law presumes all those in favours of conjunct and confident persons; and such again as are onerous; and there the act denotes the person, whose deeds are to be reduced by the name of dyvour or interposed persons partakers of the fraud; which necessarily implies, that there ought such circumstances of bankruptcy to appear, as might interpell the party who is onerously contracting, from dealing with the dyvour. As to the decision in the case of Langtoun's Creditors, 1mo, The rights there reduced were rights in security granted after diligence. 2do, There was such a crowd of diligence against the common debtor, that it amounted to a notoriety of his bad circumstances. 3tio, These diligences were so far prosecute, that ex continenti, the common debtor retired to the abbey; All which make that case widely differ from the present. And the decision, Veitch contra Ker proceeds exactly upon the same principle. All which is distinctly cleared by a late decision, Lady Riccarton contra Thomas Gibson, No 128. p. 1035.; the words of the interlocutor are, “The Lords found, That in case of a master's obtaining a disposition from his tenant, though in a competition another creditor, doing diligence might be preferred, yet the master having obtained payment bona fide by virtue of the disposition, is not liable to repeat what he received.” As to the act 1696, it is obvious from the tract of our decisions, that before that act, the difference betwixt a debtor insolvent (but still keeping his trade and credit) and a bankrupt debtor, was well established; and that act did not so much introduce the qualifications making notour bankrupt, as the privilege of reducing deeds done 60 days before the period of bankrupt. Lastly, If it were otherways, there would be a door opened to unspeakable confusion; and a stop put to all commerce, since thus no man could be sure of what he may call justly his own.
The Lords found insolvency of the common debtor, with horning and denunciation against him, not relevant per se, to give the pursuer the benefit of the last clause of the act of Parliament 1621, anent bankrupts, without participation of the fraud, by the creditors receiving payment by goods from the common debtor.
Act. Boswell.Alt. Graham.Clerk; Sir James Justice.
Fol. Dic. v. 1. p. 77. Bruce, No 92. p. 109.*** Dalrymple reports the same case:
Alexander Tweedie, being a creditor to John Din, arrests in the hands of James Din and others, who deponed in the furthcoming that they received certain sheep or cattle at the prices mentioned in their depositions; and that the same were imputed in satisfaction of certain debts due by John Din to some of them, or wherein others stood engaged for him as cautioners, and were ready to instruct the debts due to them, or their engagements as cautioners and payment conform.
It was alleged for the pursuer; That the prices of the sheep or cattle ought to be made furthcoming to him; because he had used horning, and denounced the common debtor, before he delivered the said sheep or cattle to the defenders; and the true cause of the debt due to the pursuer was these very sheep which he had delivered, in defraud of the pursuer's diligence, and at the time when he was ready to have poinded; and insisted upon some other qualifications of the defender's concurring with the common debtor to elude the effect of the pursuer's diligence; and founded upon the last clause of the act of Parliament 1621, which doth provide, That if any dyvor, or interposed partakers of their fraud, shall make voluntary payment or right to any person, in defraud of the lawful and more timely diligence of any other creditor having used inhibition or horning, &c. in that case, &c. the said dyvor, or interposed person, shall be holden to make the same furthcoming to the creditor having first used lawful diligence, who shall be preferred to the co-creditor, who being posterior in diligence, hath obtained payment by the partial favour of the debtor, and shall have good access to recover what was voluntarily paid in defraud of the pursuer's diligence.
It was answered, The pursuer cannot qualify any fraud on the part of the defenders, but in as far as he doth insist upon the said clause of the act of Parliament 1621. The defenders answer shortly, that they received payment bona fide by the price of the goods they received, or the said price was received for relieving themselves of cautionry; and it would be of dangerous consequence, to the hindering of all commerce, if creditors might not receive voluntary payment from their debtors by money or effects, notwithstanding they might be at the horn; for it was not usual, nor consistent with the freedom of commerce, to search registers before accepting of payment of just debts; nor was that the meaning of the act of Parliament, which makes mention only of dyvors or their interposed persons. And esto that probation did instruct the common debtor to have been insolvent, yet he was not dyvor or notourly bankrupt, which is necessarily required by the act of Parliament; for a person insolvent is not reckoned a dyvor, unless his insolvency were notour, or that cessit foro; for a dyvor is called a bare man, and must be in such a condition as no person can be presumed to be ignorant of his insolvency; whereas men that are in use to buy and sell, and have possessions, though really insolvent, may lawfully pay their debt, and their creditors accept payment bona fide.
It was replied: That bankrupt and insolvent were promiscuously used in the said act of Parliament, and by lawyers generally; and the diligence used by the pursuer by denunciation, which doth affect the subject acknowledged to be intromitted with by the defender, in as far as the escheat goods are by law burdened with the debt in the horning, the pursuer is in the precise terms of the act of Parliament; and an insolvent debtor is held to be bankrupt as to creditors using diligence, though he may freely contract or pay debt in prejudice of other creditors. And it is no new thing that payments made to true creditors are repeated at the instance of the users of more timely diligence; as was found the 11th of February 1675, Veitch against Pallet, No 127. p. 1029. where a true creditor, being preferred to the more timely diligence of another who had used horning, and got the gift of the debtor's escheat, was found liable in repetition, although the creditor receiving payment had also used horning, and the debt assigned to him was innovate, and a new bond granted; yet the creditor using more timely diligence, was preferred to that new bond. In which case it was particularly marked, that nothing in that decision did hinder commerce by buying from bankrupts or rebels goods, for present money: But the case was different, where there was no present money or permutation, but goods sold on trust; for in that case, the act of Parliament was to take place.
It was duplied: That, in the foresaid case of Veitch and Pallet, Sanderson the common debtor was not only insolvent, but bankrupt, and his escheat gifted and declared; and likewise the subject of competition was truly in medio: For tho' the bond assigned was renewed, yet the debt was not received by the assignee made by the bankrupt, nor was he found liable in repetition of any sum received; whereas here goods are not in medio, but received in payment, or for just and onerous causes, by a person, though insolvent at the time, yet he was in the possession of two several rooms, and so continued for some considerable time there after. And it was never found, that even the donatar of escheat, could disquiet just creditors receiving payment by the price of goods before declarator, much less can the user of a horning pretend to have affected the moveables without a gift, or render creditors in mala fide to take payment.
‘The Lords found, That denunciation with insolvency was not sufficient to give the pursuer the benefit of the act of Parliament 1621, unless the common debtor had been commonly reputed bankrupt, or that the pursuer can qualify; that the defenders were some way partakers of the fraud.’
1716. December 7.—Tweedie, as a creditor to John Din, arrests in the hands of James Din and others, and pursues a furthcoming, in which the defenders, being five in number, deponed they were noways debtor to John Din; but that each of them had received a certain number of sheep from him, in payment of just and lawful debts. And the pursuer having alleged, That the pretended payment was posterior to his diligence by horning and caption; and that his debtor was insolvent and bankrupt, which he alleged afforded preference to him upon the penult clause of the act of Parliament 1621.——“The Lords found the defenders might lawfully take payment of theirjust debts, unless it could be instructed, that they were partakers of the common debtor's fraud in conveying away his goods from being affected by the pursuer's diligence.”
The pursuer insisted on certain qualifications of the defenders being participes fraudis; whereupon, a probation being allowed, it was proven, that the common debtor, being possessor a grass-room, the pursuer had, in the night time, sent a messenger with a caption to apprehend him; that the messenger missing his person, did search the room of his possession for moveables, where he did find nothing but three stirks, all the other cattle and flocks being driven off his ground; and that the very same morning the five defenders were convened at a place distant from his possession, where they met with the common debtor, and had a notary and witnesses present, to take instruments upon the division of the common debtor's sheep among the five defenders; and all this about the rising of the sun the same morning that the common debtor's possession was searched; and the morning after the common debtor's house had been searched for apprehending his person.——“Which qualifications the Lords found sufficient to elide the allegeance of bona fide payment, and presumed them to be partakers of the common debtor's fraud.”
