Purchasers must find caution for the price. - Purchasers' right to the rents. - Effect of a judicial sale as to payment of the price. - Is the purchaser obliged to pay before a scheme of division is made?
The Trustee of David Dickson v. The Creditors of John Rae
Date: 4 February 1795 Case No. No 38.
When a creditor on an estate brought to judicial sale, obtains partial payments to account of his debt, in virtue of an interim warrant on the purchaser, and afterward claims for the remainder of it upon the general fund under division, he is not entitled, in a question with the creditors, to impute the payments he has received, periodically towards extinction of the interest which may have grown on his debt since he obtained the warrant, but must turn them into a corresponding, capital, as at the period when the price began to bear interest.
Is a creditor in a judicial sale, who obtains an interim warrant, entitled to the expense of extracting it out of the common fund?
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POINT I.
A process of ranking and sale having been brought by the Creditors of the late John Rae, a decree of ranking was extracted in 1770, and on 19th December of that year, the lands of Hurkledale, part of his estate, were sold to General Stewart Douglas, at the price of L. 6310, which he found caution to pay at Martinmas 1771, with interest from Martinmas 1770.
David Dickson stood ranked upon these lands for L. 1188: 5s, as at Martinmas 1770, at which term it was agreed, that the principal and interest due to all the creditors should be accumulated into one sum, bearing simple interest.
In 1775, he applied for, and after a good deal of opposition, both from the other creditors and from General Douglas, obtained an interim warrant upon the latter, for payment of his debt, and by means of diligence used against the General, he received various partial payments.
In 1791, David Dickson assigned the balance remaining due to him, in trust to John Dickson, writer to the signet.
In 1789, the lands of Hurkledale were again sold by the creditors, for L. 6520, General Douglas having been unable to pay up the balance of the purchase-money, which at this time, after deducting the partial payments made by him to David Dickson and others, amounted with interest to upwards of L. 7000. The cautioners for General Douglas were however able to pay the difference between the price which the lands gave at the second sale, and the balance due by the General on the first.
The price brought by these lands at the second sale, and various other funds belonging to the common debtor, having been recovered, the Trustee for Dickson, in place of proceeding against General Douglas' cautioners, appeared in the process of division, and claimed to be ranked for the balance due upon his constituent's debt, which he alleged amounted to L. 978: 17: 2.
The creditors did not dispute Mr Dickson's right to claim, but objected to his mode of stating the balance on his debt. He, as in progressive accounts, had calculated interest upon his debt from Martinmas 1770, till he received the first partial payment, which he applied to the extinction of the accumulated sum, and then calculated interest on the balance, till he received another partial payment, which he again deducted from the whole debt, principal and interest, then due to him.
The creditors, on the other hand, insisted, that the payments should not be imputed periodically in this manner; but that the sums received by him at different periods should be brought to a corresponding capital, as at Martinmas 1770, i. e. to a sum which, with simple interest upon it from that term, made up the total of what he had received, The account of partial payments stated, in this way, amounted to L. 578: 13: 4, leaving a balance of L. 609: 11: 8, for which Dickson fell to draw along with the other creditors.
In support of their objection, the creditors
Pleaded; Were Mr Dickson's mode of calculation adopted, he would, by means of his repeated accumulations of interest into a principal sum, draw a larger proportion of the funds in medio than the other creditors, whose debts are ranked in the same class with his own. By the mode which they propose, he, like them, will draw for his full accumulated sum, as at Martinmas 1770, with simple interest from that term, which is all he can justly demand. The Court, by granting the interim warrant, did not mean to injure the other creditors nor did he, when he obtained it, desire to have any preference; on the contrary, he offered to find caution to pay back his proportion of any deficiency of the funds, at the ultimate division.
Answered; The method followed by Mr Dickson of imputing partial payments, is the simple and common one, and is always used in accounting between debtor and creditor. General Douglas' cautioners must account in that manner for the balance due by them. By the act and warrant, the sum of L. 1188: 5s. of the price, with all the interest which should become due upon it, was withdrawn from the common fund, in satisfaction of Mr Dickson's debt. The other creditors have no further connection with this sum; and indeed they have no interest to object to the mode proposed, as General Douglas' cautioners, who are solvent, must repay them whatever additional sum he draws from the sums in medio.
Replied; If Mr Dickson were demanding the balance of his debt from General Douglas, or his cautioners, perhaps his mode of calculating it might be well founded; but since, in place of recovering from them in virtue of his interim warrant, he chooses to make his claim out of the funds now under division, he cannot be allowed to state it in any way which will give him a larger proportion of them than the other creditors who did not apply for interim warrants. 17th January 1792, York Buildings Company against Brown, No 36. p. 13339.; and 27th November 1793, Murray against Blair, supra.
The Lord Ordinary “found, That Mr John Dickson was not entitled to impute the partial payments received by David Dickson his cedent, periodically to the interest of his debt.”
The Court, on advising a reclaiming petition for David Dickson's Trustee, and answers for the Creditors, unanimously adhered; “reserving, however, to the petitioner his claim against General Douglas, the purchaser, and his cautioners personally, in settling with them for the balance of his debt, of imputing the partial payments to the interest due at the time such partial payments were obtained, and the remainder only in extinction of the principal sum contained in his act and warrant; and reserving to the said General Douglas, and his cautioners, their objections thereto, as accords.”
POINT II.
The Trustee for Mr Dickson further claimed, that he should be allowed deduction from the partial payments received by his constituent of the expense of obtaining and extracting the interim warrant; and
Pleaded; As the interim warrant is in effect a partial decree of division, it should be on the same footing with a total one, the expense of which is always defrayed from the common fund. Besides, if the warrant had not been extracted, the whole proceedings contained in it would have gone to the ultimate general extract; and as the expense of the latter will be proportionally diminished in consequence of the partial extract, the expense of it should, on that account, be allowed.
Answered; The act and warrant contains nothing but the proceedings which took place on the petition applying for it, which Mr Dickson gave in for his own convenience; and as these proceedings would not have taken place if it had not been presented, the expense of extracting them should be defrayed by himself.
Observed on the Bench; Interim warrants should be very sparingly granted, as they frequently occasion much confusion and litigation, and when they are, the whole expense attending them should be defrayed by those creditors who apply for them.
The Lord Ordinary found, that “John Dickson is not entitled to deduct, from the partial payments, the expense David Dickson was put to in extracting the act and warrant in his favour.”
The Court unanimously adhered.
Lord Ordinary, Craig.For Dickson, M. Ross.Alt. Hay.Clerk, Menxies.
Fol. Dic. v. 4. p. 215. Fac. Col. No 155. p. 354.
