Right in security is, in general, not broader than the real debt at the time of granting the security.
The Trustees for the Creditors of John Brough v. The Heirs of Robert Selby
Date: 12 December 1794 Case No. No 28.
An heritable security in relief granted to a cautioner in a cash account, found not to cover sums drawn out at the date of the infeftment, where, in consequence of future operations by the principal debtor, these sums were repaid, and another balance afterwards created, which the cautioner paid, the principal debtor having become insolvent.
Click here to view a pdf copy of this documet : PDF Copy
Robert Selby, on the 17th June 1783, became joint obligant with John Brough, in a cash-account with Sir William Forbes and Company, to the extent of L. 500 Sterling, to be kept in the name of Brough.
Selby being only cautioner for Brough, he, of the same date, got from him a bond of relief containing a disposition in security of some heritable property, on which he was immediately infeft.
Previously to Brough's obtaining this cash credit, he had an account-current with Sir William Forbes and Company, on which, at the date of the bond grapted by Mr Selby and him, he owed a balance of L.402: 16s. for which Mr Selby, by joining m the new security, became liable; but Brough having paid in various sums to his cash-account, between the 17th June 1783 and the 6th August following, this, balance, was wholly extinguished, and a small one created in his favour.
Brough became insolvent in 1788, and, at that time, in consequence of a variety of subsequent operations on his cash-account, there was a balance against him of L.539: 12: 5.
Mr Selby having paid this sum, his heirs claimed to be preferred for it on the price of the subjects over which his security extended.
The Court, however, found, that “they were only preferable in virtue of Robert Selby's infeftment for the sums they could instruct to have been advanced at the date of the said infeftment*.”
In consequence of this judgment, Mr Selby's Heirs limited their demand to the L.402:16s. which had been advanced to Mr Brough before the 17th June 1783.
To their claim thus restricted, the Trustees for the Creditors
Objected, As the L. 402: 16s. due by Brough at the date of Selby's infeftment, were afterwards wholly extinguished, the balance since paid by Selby was entirely a new debt, contracted after the date of his infeftment, and consequently not secured by it; 16th January 1788, Pickering against Smith, Wright, and Gray, No 212. p. 1155.; 14th November 1789, Stein against Newnham, Everett, and Company, No 214. p. 1158.
Answered, It is admitted, that Mr Selby's heritable security at its date, covered a debt of L.412: 16s. Now, an infeftment once legally constituted, cannot be extinguished or diminished by voluntary payments, far less by the daily fluctuation of a cash-account, or indeed in any way, unless by a renunciation duly recorded, or by sums recovered in virtue of legal execution; 16th February 1734, Earls of Loudon and Glasgow against Lord Ross, No 23. p. 14114.; 19th June 1745, Campbell against the Creditors of Auchinbreck, No 33. p. 14129.; 1st March 1781, Bank of Scotland against Bank of England, No 30. p. 14121.
Replied, It may be true, that a real security is not lessened in proportion as the debt is reduced by partial payments; but every partial payment, nevertheless pro tanto diminishes the debt, and when it is wholly paid, the security must necessarily be at an end, for a security cannot exist when the debt it was meant to secure is extinguished: D.l.43. De solut. et liberat. [1ib. 46. t. 3.) l. 129. De regul. juris; Bankton, B. 4. Tit. 45. § 182.
The Court, on the grounds stated for the objectors, pronounced the following interlocutor:
“In respect it appears from the accounts of Sir William Forbes and Company, that the sum due to them by John Brough on his cash-account, antecedent to the date of the infeftment in security in favour of the late Robert Selby, was afterwards fully paid up and extinguished, and that the debt now claimed by Mr Selby's heirs was contracted posterior to the date of
* See 2d March 1791, Creditors of Brough against Heirs of Selby, No 215. p. 1159. voce Bankrupt.
said infeftment; find, That said heirs are not, in virtue thereof, entitled to any preference on the funds in medio.”
Lord Ordinary, Dreghorn.For the trustees, Cullen.Alt. Baird.Clerk, Pringle.
Fol. Dic. v. 4. p. 241. Fac. Col. No 145. p. 333.
