Scottish Court of Session Decisions

Subject_1 BANKRUPT.
Subject_2 DIVISION I.

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.

Competition, William Bruce, &c Creditors of Bailie Hay, with Mrs Margaret Scot, Relict of William Hay.

Date: 21 July 1742
Case No. No 54.

A gratuitous bond to a conjunct person, ranked pari passu with onerous creditors, the granter having had a sufficient estate at the date of the bond.

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Bailie Hay's affairs having gone into disorder, he disponed his heritable and moveable estate to a trustee, who having fold his heritable subjects, his onerous creditors craved to be preferred on the price to Margaret Scot, who had been married to the bailie's son, to whom the bailie granted a liferent annuity of 12,00 merks, 23d May 1738, to commence at the first legal term after her husband's decease; upon a narrative, “That there had been no marriage articles between her and his son; and that he wanted to prevent all questions which might arise, if she survive his son; and that he had considered the circumstances of his worldly affairs; which obligation he declares to be in full satisfaction of all terce,” &c.

The creditors urged, That the bailie's funds were not sufficient to pay his onerous debts; so the question was, Whether they who were onerous creditors should be first paid, or if Mrs Scot's debt, which is gratuitous, is to be ranked pari passu with them? It was likewise said, that the bailie had not 1200 merks a-year to live upon himself; and if this relict, who brought no portion, was insisting against him, he would have the beneficium competentiæ; and if the granter would have a good exception against payment of at least a part of it, that is a demonstration that such a gratuitous creditor can never come in pari passu with the bailie's onerous creditors, who are entitled to the utmost farthing, though their debtor should be reduced to absolute poverty. Besides, it is obvious what dangerous consequences would attend the sustaining latent and gratuitous deeds in favours of conjunct persons, so as to bring them in pari passu with onerous debts; if a loss is to be sustained ex event, it is juster the same should fall on the conjunct person, who has only a gratuitous gift, than upon strangers who have become creditors ex causa onerosa. See 12th February 1669, Pot. Stair, v 1. p. 602. voce Fraud; 10th February 1665, Lady Greenhead, infra h. t. Voet. lib. 42. tit. 8. § 5.

Answered for the relict: That, at the time of granting this annuity, the bailie had sufficient funds both to answer that purpose, and likewise for himself; so that, if his affairs are in disorder, it must have arisen from contractions after that period, which is sufficient to sustain her bond, even supposing it were to be considered in the eye of law as gratuitous; for it is only upon the fraudulency of a person's gifting away his effects to a conjunct person, in disappointment of his anterior lawful creditors, that they could be heard to plead; and there is no fraud, if at the time there was sufficiency of effects to answer all the debts, and the donations likewise. But so far is it from being gratuitous, that it is truly onerous, as every husband is bound to provide for his wife; and, if he neglects it, the law takes care to provide her. Nor does it make any difference that it was not her husband, but his father, who granted the bond, seeing he did it, as appears from the narrative, to avoid all after-questions; and, by a proviso therein, he bound her, by her acceptance, to renounce all her legal provisions; So that here was a direct transaction, whereby, in place of legal provisions, the relict was to take herself to this stipulated annuity, which made her rest satisfied, and neither ask her husband to make any settlements upon her, nor enquire what subjects might have belonged to him; and though it may be considered as gratuitous with respect to the bailie, yet it is onerous quoad her. Thus cautionary obligations, though, quoad the debtor, they be gratuitous, yet are onerous quoad the creditor.

The Lords, in respect it was admitted by the procurator for the creditors, that Bailie Hay had a sufficient free estate at the date of the bond, sustained the same.

C. Home, No 203. p. 337.