Decisions upon the act 5th Parliament 1696, declaring Notour Bankrupts.
Subject_3 SECT. V.
Of Securities for Debts to be Contracted.
Creditors of John Brough v. the Heirs of Robert Selby
Date: 2 March 1791 Case No. No 215.
An heritable security in relief granted to a cautioner in a cash-credit, found effectual only as to money advanced prior to the infeftment.
Heritable security, either to bankers for cash-accounts, or to the cautioners in bonds of credit, are now, by subsequent statute, legal.
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Selby was a joint obligant along with Brough in a bond granted to a banker for a credit in a cash account, to the extent of L. 500. Being, however, only a cautioner, Selby at the same time obtained from Brough a bond of relief in common form, and a disposition in security, of a tenement of land in Edinburgh, upon which disposition infeftment immediately followed.
Brough became afterwards bankrupt, having previously operated on the cash-credit to the full amount, though at the date of the infeftment, nothing had been drawn upon it.
Selby having paid the debt to the banker, his heirs after his death, in the competition of Brough's creditors, claimed a preference in virtue of the disposition in security. To this the other creditors objected, That at the date of the infeftment no part of the debt having been contracted, the security was void as having reference to a future debt; and in support of this objection they
Pleaded: It is established by the decisions in the cases of Pickering contra Smith and Others, No 212. p. 1155., and of Stein's Creditors contra Newnham and Others, No 214. p. 1158. that heritable securities for money to be advanced after their date, in consequence of such a cash-credit as that in question, fall under the statute of 1696.
It is true, that here the disponee was not the principal creditor, but a cautioner or creditor for relief. The difference however is immaterial. The only essential circumstance is the debt being contracted prior or posterior to the security, on which surely it can make no variation, whether the claim under the security be made in the one character or in the other. If the contracting of the debt be subsequent to the infeftment, the last will be equally unavailing to a creditor for relief as to a principal creditor. Nor is there any ambiguity as to the nature of the debt, for relief of which the cautioner becomes a creditor. For as upon the money being advanced, and not sooner, the principal debt arises to the principal creditor; so at the same instant, the accessory debt arises to the cautioner, as creditor for relief. Before the actual advance of the money, he is not more to be considered as such, than the advancer of it was to be regarded as principal creditor; for it does not stamp either of them with the character, that they have come under obligations to do what is future, the one in advancing the money, the other in becoming surety for such advance.
Answered: Such securities for relief of cautioner in cash-credits are in practice extremely common;* nor do they seem less agreeable to law that those granted to cautioners for persons obtaining offices of trust, with respect to the validity of which however no doubt can be entertained. There is not an argument which can be urged for supporting an heritable security in either of the cases, that does not apply with equal force to the other.
It has been said, that before the money was actually advanced there was no existing debt, nor any room for a security in relief. But it is plain, that the cautioner had previously come under an effectual obligation to be responsible for the debtor's operations on the cash-credit, while over these he possessed no means of controul; against which obligation, therefore, he was entitled to present relief, so that it cannot be regarded as a future debt.
The cases of Pickering and of Newnham, as they related to securities obtained by the creditor, afford not any precedent for the present, which respects a cautioner.
The Lord Ordinary pronounced this interlocutor: ‘In respect that in the bond of relief John Brough, the principal debtor, is bound to relieve, free, and harmless keep, Robert Selby, the cautioner, from the payment of the contents of the bond of credit, and for that effect to deliver it up to him cancelled, or report a valid discharge thereof, duly registered, against the term of Whitsunday then next; repels the objection.’
On advising, however, a relaiming petition, with the answers,
The Lords altered this interlocutor, and found, ‘That the heirs of the deceased Robert Selby are only preferable, in virtue of his infeftment, for the sums they can instruct to have been advanced at the date of the said infeftment.’
Lord Ordinary, Dreghorn.For the Creditors, Cullen.Alt. Abercromby.Clerk, Mitchelson.
Fol. Dic. v. 3. p. 59. Fac. Col. No 171. p. 351.
* A variety of late instances were produced from the register of sasines.
