Scottish Court of Session Decisions

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Cite as: [1834] CA 13_4

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SCOTTISH_Shaw_Court_of_Session

Page: 4↓

Stewart

v.

M‘Ra No. 2.

Court of Session

1st Division. B

Nov. 12 1834

Ld. Fullerton, Lord Balgray, Lord President, Lord Gillies, Lord Mackenzie.

Donald Stewart, Pursuer.— D. F. Hope— Anderson. Alexander M‘Ra, Defender.— Jameson— Moir

Subject_Lease—Retention—Right in Security.—

A proprietor stipulated in a lease, that the tenant should be repaid his meliorations at the expiry of the lease, and this stipulation was made bona fide, in the fair administration of the estate,—held, that the tenant was entitled to retain the latter rents of the lease, in extinction of the sum due for meliorations, though the proprietor, during the currency of the lease, contracted heritable debt to an amount exceeding the value of the estate, and a ranking and sale was proceeding, and a judicial factor, under an incidental sequestration, was in possession.

Macleod of Harris granted a nineteen years’ tack of a sheep-grazing farm to Archibald M‘Ra of Ardintoul, who was succeeded during the currency of the tack by his son, Alexander M‘Ra. The term of entry was Whitsunday, 1814; the rent was £400 per annum, payable at Martinmas and Whitsunday; and the tack contained the following clause:—“It is hereby declared, that the said Archibald M‘Ra and his foresaids shall have liberty to build a dwellinghouse and stone dikes upon the lands hereby set, and that, at the expiry of the present lease, he or they shall receive payment for the same; but that only on the express condition that the said dwellinghouse is built of stone and lime, and slated, and that the dikes are sufficient stone dikes; and it is declared that fanks for sheep are to be paid for as stone dikes; which dwellinghouse and dikes are to be valued by persons mutually chosen by the parties at the expiry of this lease; and it is declared, that the claim of the said Archibald M‘Ra, and his foresaids, for building such dwellinghouse and dikes, is on no account to exceed the sum of £800 sterling, and that the said Alexander Norman Macleod, and his foresaids, shall be liable to that extent only,” &c.

M‘Ra made meliorations during the currency of the lease; and, at the term of Martinmas, 1832, retained the sum of £100 of the rent, to account of the meliorations. In 1830, one of the creditors of Harris had raised a ranking and sale of the estate; in the course of which process, a sequestration of the rents was awarded, and Donald Stewart, tacksman of Luskintyre, was appointed judicial factor. The heritable debts exceeded the value of the estate. The judicial factor raised an action against M‘Ra, for payment of the £100 of arrear of rent at Martinmas, 1832, and the £200 due at Whitsunday following; but the creditors, in whose right he insisted, were not possessed of any real right, until several years after the date of the lease granted to M‘Ra. M‘Ra pleaded a right of retention of both sums, as being less titan the amount of the meliorations to which he was entitled under the lease. Valuators were jointly appointed, in terms of the lease, but reserving the rights of the judicial factor and of M‘Ra respectively, The valuators made an estimate, amounting to £506; and although some of the items, particularly as to the expense of a manager's house and storehouse, were objected to by the factor, there remained sum of meliorations exceeding the amount of rents retained by M‘Ra.

The judicial factor pleaded that the meliorations only fell due at the expiry of the lease. Prior to this period, the creditors had made their rights real by infeftment, and the judicial factor was in possession; therefore the tenant's claim for meliorations, when it emerged, could not be preferred to their real right. They were even in a more favourable position than a purchaser, as leases were generally excepted out of the sale of lands; and, at any rate, a purchaser was bound to look at the leases, as they were effectual against him by force of the statute.

M‘Ra pleaded, that a bona-fide and lair stipulation for meliorations was just as effectual against a purchaser as any other stipulation in a lack; ¹ and that an heritable creditor was in no better situation than a purchaser, as he was, in truth, just the purchaser of a right in security. It was his own fault if he did not examine the existing leases before he lent his money.

The Lord Ordinary found “that the defender is entitled to retention of the amount of the meliorations authorized by the clause of his lease; that neither the claim for the manager's house and storehouse,” &c., “fall under that description: but, in respect that, independently of those two articles, the meliorations, as ascertained by the valuators, exceed the sum of rent now pursued for, sustained the defences, and assoilzied the defender from the conclusions of the libel; found no expenses due to either party, and decerned.” ^*

The judicial factor reclaimed, and contended, inter alia, that the Lord Ordinary's interlocutor must be altered, as it had proceeded on a principle so broad, that, even where the lease was of date posterior to the infeftment of the creditor, the stipulation for meliorations would be held to be good against the creditor, whose security would thus be impaired by an act to which he was no party.

M‘Ra also reclaimed against that part of the Lord Ordinary's interlocutor which disallowed his claim for the manager's house, &c.

_________________ Footnote _________________

¹ Arbuthnot, Feb. 5, 1772 (10424). Morrison, Feb. 8, 1787 (10425). Bell, June 14, 1814, F. C. Stotts, Feb. 20, 1817, F. C.

* “ Note.—The question here is, whether a tenant's claim for meliorations exigible under his lease at the expiration of his possession, is good against a judicial factor in a nraking and sale; or, as the averments on the part of the pursuer substantially imply, against heritable creditors who have entered into possession in virtue of their securities. The question, in so fair as the Lord Ordinary knows, has never been expressly decided; but it is now fixed that a claim of the same kind is good against a singular successor, and the Lord Ordinary does not see any good grounds for applying a different principle to the case of a judicial factor or heritable creditor entering into possession, and holding that possession at the expiration of the lease.”

Lord Balgray.—The case involves a general principle which is of importance. There are several classes of persons whose interests may come into competition with the claim of the tenant for meliorations. In regard to purchasers in a ranking and sale, there are generally articles of roup, in which existing leases are excepted out of the clause of warrandice. And where this is done at any sale, the purchaser, ex contractu, has his right burdened with the lease, independently of the effect of the statute. Heritable creditors of the landlord, competing with the tenant, are not in a situation precisely the same with purchasers. But when a creditor lends his money, he ought to look at the terms and conditions of existing leases. This concerns him just as much as it does a purchaser. And it will be observed, that, even after the proprietor of land has burdened it with a debt, he is not thereby deprived of the administration of his estate. If a lease expires, he is bound, in treating for its renewal, to make the best terms that he can with the tenant. If a fair stipulation regarding meliorations appears to him to be beneficial to the farm at letting a new lease, he equally consults his own interest and that of his creditor by agreeing to it. If the creditor will not intrust the administration of the estate to the owner, he should himself enter into possession by a process of maills and duties. So long as he does not do this, he virtually assents to that exercise of power which the owner makes in entering into a bona fide lease. If this lease was granted by the owner tanquam bonus paterfamilias, and if it contain only (air and usual clauses, without any fraud directed against the right of the heritable creditor, I conceive it is as good against him as it would be against a singular successor.

Lord President.—I am of the same opinion. The proprietor, though he contracts debt, remains infeft as proprietor and in possession. It may not even be in the power of the creditor to enter into possession; for, if the interest of the debt he regularly paid up, he cannot take possession in order to levy it by a process of maills and duties. I conceive that a party intending to lend money on land, is just at much bound to look at the leases affecting it as a purchaser is; and in this case the lease was granted prior to the contracting of heritable debt. The lease was fairly entered into, in the bona fide and ordinary management of the estate; and I hold that the stipulation for meliorations is just as good against an heritable creditor as it would have been against a purchaser. I am clearly of opinion that the note for Stewart should be refused.

Lord Gillies.—I concur. After it has been decided that a fair stipulation of the sort in question is good against a purchaser, I think it would be difficult to hold that it should not be good also against an heritable creditor. A purchaser, before offering a price for land, examines, or should examine, the existing leases; and if he sees that they exhibit a rental of £500, but stipulate for ameliorations, at their expiry, amounting to £1000, the purchaser will just offer a price so much the less. In the same manner, the lender will offer so much the smaller loan. And it will be observed, that any landlord, acting bona fide in granting a lease, has an interest which is identified with that of the heritable creditor. Wherever the landlord fairly does the best he can for his own interest, the lease which he grants, though containing a stipulation to indemnify a tenant for meliorations, will be good against an heritable creditor, as well as a purchaser.

Lord Mackenzie.—I am of the same opinion. It is admitted that the lease was granted prior to the heritable debt. That circumstance removes all distinction between the case of a purchaser and an heritable creditor, who is, in truth, a purchaser of a right in security. Had the lease been granted after the heritable debt was constituted, a different principle would have been called into operation. The proprietor being left in the administration of the estate, notwithstanding the contraction of debt, the question would then be, whether it did not necessarily follow that every lease, fairly granted bona fide, should be secure to the tenant, especially as, in such a case, the meliorations would be made on the subject of the creditor's security, after the date of his loan; and the repayment of these, though made out of the rents of the subject, would not make that subject worse security than before the meliorations were made. But that is a point which it is unnecessary to decide.

The Court refused the reclaiming note for Stewart, and awarded expenses against him since the date of the Lord Ordinary's interlocutor; and in regard to M‘Ra's note, their Lordships remitted to the Lord Ordinary to hear parties farther.

Solicitors: Dickson and Steuart, W.S.— Inglis and Donald, W.S.—Agents.

SS 13 SS 4 1834