Decisions upon the act 5th Parliament 1696, declaring Notour Bankrupts.
Subject_3 SECT. II.
What sort of Alienation falls under the sanction of the act 1696.
Andrew Johnston v. Home of Manderston
Date: 29 January 1751 Case No. No 200.
A person became bound as cautioner in a bond of relief. He disponed, in security of this obligation, an heritable subject. Before infeftment was taken, he became bankrupt. The case found not to fall under either of the acts 1621 or 1696.
The act 1696 held not to extend to nova debita.
Click here to view a pdf copy of this documet : PDF Copy
Alexander Home of Manderston, having become bound as cautioner with and for Hugh Thomson to the British Linen Company for L. 100 Sterling, by bond dated the 20th July 1747, got, of the same date with the principal bond, a bond of relief by Hugh Thomson, and George Burnet, his brother-in-law, in which a brewery and certain houses in Edinburgh are made over to him for the security of his relief by Burnet, who himself had right to the same by a disposition without infeftment. In April 1748, Manderston finding that Burnet was become bankrupt, took infeftment, by executing the procuratory contained in the disposition by Burnet's author to him. And Thomson having also failed, Manderston paid the debt to the British Linen Company, and took an assignment.
Andrew Johnston, creditor to Burnet in the sum of L. 55 Sterling, by bill dated January 1747, insisted in a reduction, upon the act 1696, of the said real security granted by Burnet to Manderston. And the reason of reduction was, that the defender having taken infeftment after Burnet's notour bankruptcy, the disposition in his favours, by a clause in the act 1696, must be considered as of the date of the sasine, and consequently null and void upon another clause in the act, as being fictione juris a security granted to a prior creditor within threescore days of notour bankruptcy. Two answers were made to this reason of reduction, 1mo, That the clause declaring dispositions, &c. granted by bankrupts, to be reckoned as of the date of the sasines lawfully taken thereon, does not concern nova debita, such as the present is, but only securities granted to prior creditors. 2do, That the clause does not, at any rate, relate to the present case, which is a conveyance of a disposition upon which the bankrupt himself never was infeft: whereas the words, as well as the spirit of the clause, regard only subjects in which the bankrupts are infeft.
With respect to the first point, the defender, because of the discrepancy among the decisions of this Court, stated at great length the argument for evincing that the clause does not relate to nova debita. It is obvious in the first place, that the whole intendment of this statute is to supply the defects of the act 1621, and to complete the remedy, by tying up the hands of bankrupts from acting partially among their creditors. All other acts of ordinary and extraordinary administration are reserved to them; they can levy their rents, and squander the same; they can borrow money and grant security for the same; nay, they can fell their estates for a just price. Hence, as the plain intention of the statute is, to prevent partiality with regard to creditors, every dark and doubtful clause must be so interpreted as to relate to that case, and not to a case which the statute had not in view, which is that of borrowing money, or of selling land, and which plainly is not reached by any other clause in the statute, if it be reached by this.
In the second place, the clause is so conceived, that it is only applicable to securities granted in favour of prior creditors; for it says expressly, that dispositions, heritable bonds, &c. shall only be reckoned to be of the date of the sasine, as to this case of bankrupt. Now, the circumstance of bankruptcy is of no earthly weight, but singly with regard to securities granted to prior creditors: It is of no importance in the case of bankruptcy, what is the date of a bond of borrowed money, seeing it is true in law that a man, even after his notour bankruptcy, may borrow money.
But what the defender principally rests upon, is the following consideration, that, if the clause in question be found to relate to nova debita, it will have a stronger effect than any person who espouses that interpretation can justify. It must not only cut down heritable bonds for money instantly advanced, where infeftment has been long delayed, but it must cut down every such heritable bond, with regard to real security, where infeftment is taken within threescore days of the bankruptcy, though there be no delay in taking infeftment. The clause makes no distinction whether the infeftment taken be recent or not: It is enacted in general, “That as to the case of bankrupt, all dispositions, heritable bonds, &c. shall be reckoned to be of the date of the sasine lawfully taken thereon.” At this rate, an heritable bond granted 61 days before the notour bankruptcy, for money instantly advanced, upon which sasine is taken two days thereafter, must be annulled, at least as to the infeftment: Nay, a creditor who lends his money during the running of the threescore days, upon an heritable bond, must lose his preference, though he take his infeftment without delaying an hour; for there must always be some interval betwixt the date of the bond and the date of the sasine. It clearly follows from this argument, that the clause under consideration cannot relate to nova debita; for, if it did, no man could have the least security to lend his money to a bankrupt, or for 60 days before the bankruptcy; and yet this consequence was never maintained, nor imagined to be law.
And this opens another view, which is, that unless this clause were intended to prevent the borrowing money, or selling land within threescore days of bankruptcy, which certainly never was intended, it would signify nothing to extend it to nova debita. All that this clause enacts is, that the bond shall be of the same dame date with the sasine: Be it so; the bond is still effectual, and the infeftment upon it; unless it can be maintained, that the commerce of borrowing money within threescore days of bankruptcy is discharged. Had such a thing been intended, the legislature would not have left it to be implied by dark and doubtful inferences. But when the clause is consined to securities granted to creditors, the meaning comes out clear and perspicuous: To declare, that a security granted for a prior debt shall be held of the date of the sasine, is, in other words, to declare, that not only such securities granted within threescore days of the bankruptcy, shall be annulled; but also, that those granted before shall have no preference as real securities, if infeftment be not taken before the threescore days.
To bring nova debita under this clause, a sense is given to it, which is very much strained. It signifies nothing to make an original heritable bond to be considered as of the date of the sasine, though this is all the statute says: In order to come at a challenge, the heritable bond must be split in two; the date of the personal obligation is left entire, and the accessory real security is fictione juris made to be of the same date with the sasine; and the bond being thus metamorphosed into a fictitious corroboration, the former clause of the act is made to strike against it, as if it were a security granted for a prior debt. But not to insist upon it, that there is not the least foundation in the clause for this construction, it must be observed that the reasoning is applicable to heritable bonds only, and not to dispositions of land, where the price is paid at the time of the purchase: No slight of hand can convert such a right into a corroboration, when there is no debt subsisting to be corroborated. Will it be said then, that the clause in question was intended only to force a creditor, who has an heritable bond, to take infeftment? This cannot be, because dispositions and heritable bonds are put upon the same footing: And if it must be admitted, that dispositions in this clause can only mean dispositions granted in security, it must follow, that heritable bonds in this clause must also mean heritable bonds granted in security.
With regard to the second point, the defender insisted, that it is evident, both from the words and spirit of the clause, that it only regards deeds granted by bankrupts infeft in their estates. The words are, “Likeas, it is declared, that all dispositions, heritable bonds, or other heritable rights, whereupon infeftment may follow, granted by the foresaid bankrupts, shall only be reckoned as to this case of bankrupt, to be of the date of the sasine lawfully taken thereon, without prejudice to the validity of the said heritable rights as to all other effects, as formerly.” Here the words are plain, that such dispositions, heritable bonds, &c. are only comprehended, whereupon infeftment may follow, and upon which sasine can be taken. These can only be dispositions, or heritable bonds, containing procuratory or precepts, where the granter himself is infeft. A conveyance of a disposition, or of an heritable bond, is not a deed upon which infeftment can follow, or which can be the warrant of a sasine; because such a conveyance never carries either procuratory or precept: The sasine is not taken upon the conveyance; but upon the deed which is conveyed, containing procuratory and precept.
Nor is this construction supported by the spirit more than by the words of the clause. If the clause have any meaning, it must be to compel creditors to take infeftment, in order to put others upon their guard who deal with the debtor, that they may not trust their money upon the faith of what must appear to them a free fund, when it may be pre-occupied by heritable securities upon which infeftment may be taken in an instant: Now this view is only applicable to the case where debtor is infeft, because no man can trust his money upon the faith of a personal right to land in his debtor, which may be qualified by a backbond, or in a hundred different ways, to render it of very little significancy; but where a debtor is infeft in a land estate, people trust him with their money upon the faith of the records, finding there no notification of any incumbrance: And the statute, justly jealous of private deeds betwixt a person in labouring circumstances and his favourites, gives no preference to securities granted by the bankrupt out of his estate, where they are kept latent, and infeftment only taken after bankruptcy: But it seems unnecessary to enlarge upon a point which has been solemnly decided in this Court, January 1734, Creditors of Scot of Blair contra Charteris of Amisfield; (infra h. t.)
The Judges were unanimous to assoilzie from the reduction, but they differed about the ratio decidendi. Arniston gave it upon this point, that the clause making dispositions as of the date of the sasines, relates not to nova debita.—Elchies was of a different opinion, moved principally by the decision 19th June 1731, Creditor of Merchiston contra Colonel Charteris, (infra h. t.) but was clear for the defender upon the other point, That Burnet was not infeft.—Arniston again, upon this point, thought it was the same, infeft or not infeft.
Rem. Dec. v. 2. No 120. p. 246.*** D. Falconer reports the same case:
George Burnet, brewer in Edinburgh, was debtor to Andrew Johnston, merchant in Anstruther, 551. Sterling per bill, dated 22d January 1747, payable two months thereafter.
Hugh Thomson, weaver in Canongate, Burnet's brother-in-law, and Alexander Home of Manderston, became bound, 20th July 1747, to pay to the British Linen Company, on demand, at any time after six months from the date, 100l. Sterling, credit furnished to Thomson: For which, of the same date, Burnet and Thomson granted to Manderston their bond of relief; and Burnet disponed to him in security, a tenement in Edinburgh, which had been disponed by the proprietor, to a person who disponed it to him; but there had yet no infeftment been taken on the conveyance.
Andrew Johnston rendered Burnet bankrupt by diligence, 9th October 1747, and Manderston completed his right by infeftment, 14th April 1748.
Johnston pursued a reduction of Burnet's disposition to Manderston.
Pleaded for the pursuer: Manderston falls to be considered either as acquiring directly from Burnet, and then there was no cause for granting the disposition; for though he was cautioner for Thomson, yet there was no cause intervened betwixt him and Burnet; consequently the disposition was gratuitous, and fraudulent, after contracting debt: Or, as acquiring from Thomson, who acquired from Burnet; and then, though there intervened a cause betwixt him and Thomson, yet as Burnet's supposed disposition to Thomson was gratuitous and reducible, so is Thomson's to the defender, who knew the relation betwixt them, 24th January 1680, Crawford against Ker, No 118. p. 1012.
To this argument the defender made no answer.
Pleaded further, the disposition in security is to be held of the date of the infeftment taken thereon; and is reducible on the act of Parliament 1696.
Pleaded for the defender: This act regards only securities granted for old debts, not new contractions; and if the ground of debt arose on granting the security, it imports not whether the infeftment was delayed to be taken till bankruptcy supervened; or whether the debtor was already bankrupt or not, 19th January 1726, Chalmers against the Creditors of Riccarton, (infra h. t.)
2dly, The clause in the act does not relate to dispositions of personal rights, anno 1734, Creditors of Scot of Blair against Charteris, (infra h. t.)
Replied: The disposition in security is held to be of the date of the sasine, without prejudice to the personal obligation: And thus the contracting the debt being of a prior date, the disposition comes to be for a prior debt, and reducible, 12th December 1717, Duncan against Grant of Bonhard, (infra h. t.); and 19th June 1731, Creditors of Lowis of Merchiston against Charteris, (infra h. t.) Burnet's binding himself personally to Manderston for relief was a new debt; but the real security being to be held of the date of the disposition, was a security granted for a prior debt.
Observed, That it was once thought personal rights being conveyed, the disponer was denuded; from which it was a consequence the act did not relate to dispositions of such rights; but it being now found that personal rights might be disponed to different persons; and the first completing his title by infeftment, would be preferred; the sanction of the act was applicable to such dispositions.
The Lords found that this case did not fall under either the act of parliament 1621, or that of 1696.
Reporter, Elchies.Act. Swinton.Alt. H. Home.Clerk, Forbes.
D. Falconer, v. 2. No 189. p. 227.*** The same case is also reported by Lord Kilkerran:
Hugh Thomson weaver having obtained a credit from the British Linen-Company to the extent of L. 100 Sterling, for which he and Home of Manderston granted bond to the Company on the 20th July 1747; of the same date with the said bond, Hugh Thomson, and with him George Burnet, granted bond of relief to Manderston, in which a brewery and certain houses in Edinburgh were disponed by Burnet to Manderston, in security of his said relief; whereupon Manderston took infeftment upon the 14th April 1748.
Andrew Johnston creditor to Burnet in the sum of L. 55: 10, Sterling, constituted by bill dated in January 1747, pursues a reduction of this heritable bond, upon the act 1696; on this ground, that Burnet was become notour bankrupt, in terms of the said statute, before Manderston had taken sasine on the bond; and by an express clause in the statute the bond was to be considered as of the date of the sasine.
Two answers were made, 1mo, That the said clause in the statute, declaring dispositions by bankrupts to be reckoned as of the date of the sasine, concerns only securities granted to prior creditors, but does not concern nova debita, such as the debt was, for which the present security was granted. 2do, That the clause in the statute regards only subjects in which the bankrupt-disponer is himself infeft, and on whose disposition therefore infeftment may follow; so the words are, “That all dispositions, heritable bonds, or other heritable rights, on which infeftment may follow, granted by the foresaid bankrupts, shall only be reckoned as to this case of bankrupt, to be of the date of the sasine lawfully taken thereon.” Whereas in this case no infeftment at all could follow on Burnet's disposition, his own right being only a translation from Burnet of Logie, who derived right from one Moffat, the person last infeft, containing procuratory of resignation, and on which procuratory it was that Manderston's infeftment proceeded.
The Lords, without expressing on what point they put their judgment, in general found, “That the case did not fall under the act of Parliament 1696, and assoilzied from the reduction.”
Upon the first point, the decisions had varied: it was found, 12th December 1717, Duncan against Grant of Bonhard, (infra h. t.) that an heritable bond, which bore date some time before the bankruptcy, though granted for ready money, was void and null as to the point of bankrupt, in respect the sasine had not been taken on it till within sixty days of the bankruptcy, and so was to be considered as granted of the date of the sasine; when the Lords seem to have understood the statute as intended to oblige creditors to publish their rights by taking infeftment, whereby others might be put on their guard; without distinguishing, whether the securities were for old or new debts; the contrary whereof was found 19th January 1726*, viz. That the act 1696 concerning bankrupts reaches only securities granted for former debts and not nova debita.
The like question again occurring, 19th June 1731†, where the heritable bond had been granted in 1721, and sasine not taken on it till the 1727, within sixty days of the debtor's notour bankruptcy, the Lords found, that this bond, dated so long before the bankruptcy, fell under the act 1696, that clause in it being intended in pænam of him who kept his precept of sasine latent; and it may be remembered that the Court at that time put this upon a reasoning too strained to
* Chalmers against Creditors of Riccarton, (infra h. t.)
† Creditors of Merchiston against Charteris, (infra h. t.)
be maintained. There is no denying that the statute reaches only securities for former debts. The words are, “All dispositions, &c. made and granted in favour of his creditors, &c. in preference to other creditors to be void.” But to bring the case within the description of a security for a former debt, they considered the personal obligation for the money to be of the date it bore, but considered the accessory real security to be of the date of the sasine, and so to be a security for a former debt.
But this construction appearing to be altogether imaginary, and to have no foundation in the statute; the Lords were now unanimous that the statute did not reach nova debita.
They considered that the statute was only intended to supply the defects of the act 1621, and to prevent the debtor's giving securities to some in prejudice of his other prior creditors; that he nevertheless remains to have power to exercise all other acts of ordinary or extraordinary administration, and therefore may, however notour bankrupt, borrow money and grant securities for the same, or he may sell his land for a just price paid, whereof no creditor can complain, as the bankrupt's funds are not thereby lessened. But to suppose the clause in the statute, which enacts, that the dispositions or assignations shall be held to be of the date of the sasine, did extend to such nova debita, were to suppose, what no body ever dreamed of, that the statute was intended to restrain the commerce of borrowing money by bankrupts; for as the clause makes no distinction, whether the sasine be taken recently or not, a creditor who lends his money upon heritable security, during the running of the 60 days, would lose his preference though he took his infeftment without delaying an hour, as there must always be some interval between the date of the bond and the date of the sasine.
And to add but one consideration more, the most sanguine advocates for extending the statute to nova debita can have no pretence for understanding it to comprehend irredeemable dispositions for a price paid; and surely, if the statute had been intended to oblige creditors, even for nova debita, not to defer taking their sasine; or in pænam, to be subject to that certification in the statute, it must have, with equal reason, done the same with respect to the sasines upon irredeemable dispositions.
As to the 2d point, Whether the clause in the statute respects only dispositions to subjects wherein the bankrupt himself was infeft? The Lords were not so unanimous: That it did only respect such, was found in the 1734, Creditors of Scot of Blair contra Colonel Charteris, (infra h. t.) which was said to be agreeable as to the words, so to the spirit of the law; as it is only to such subjects as a debtor is infeft in, that creditors are supposed to trust. Others again doubted if this was a just construction of the statute; for that the words might well bear a more extensive construction, that every deed, by the means whereof the creditor was entitled to obtain himself infeft, should fall under the clause in the statute: and as to the decision 1734, as it was single, so as the law was then supposed to stand, that by the conveyance of a personal right, the granter was fully denuded, there was more reason for so finding, than now, that, since the decision in the case of Bell of Blackwoodhouse*, it is the first infeftment that carries even such personal right. But be that as it will, the Lords, as has been said, gave no special judgment upon it.
