Scottish Court of Session Decisions

The late Thomas Allan, of Lauriston, a partner of Robert Allan and Son, bankers in Edinburgh, died in September, 1833. His eldest son, Robert Allan, took up the heritable estate; and he also obtained confirmation as executor, qua next of kin, in January, 1834, and caution was found for his intromissions to an amount exceeding £20,000. On 2d September, 1834, the estates of Robert Allan and Son, and of Robert Allan as an individual, were sequestrated under the bankrupt act; and, on 6th October, Robert Christie, accountant in Edinburgh, was confirmed trustee, and found caution to the amount of £2000. On the 10th of October, some of the creditors of the father raised a multiplepoinding, in name of Robert Allan, setting forth his confirmation as executor, and the subsequent sequestration; that he had previously realized part of the estate of his father, and mixed it up with his own private funds; but part of that estate was outstanding and unuplifted; that he was threatened with double distress, at the instance of his father's creditors; and therefore concluded that these creditors should be called to dispute their preferences, &c., in the usual style. Christie lodged objections to the competency of the multiplepoinding, in respect that the whole funds of which Robert Allan was necessarily assumed, in that process, to be the holder, had been carried, under the sequestration, to him, and must be distributed by him under the sequestration, reserving all lawful preferences to the creditors of the father.

The Lord Ordinary ordered minutes of debate.

Parties were at issue whether the estate of the father was insolvent, but the case was argued on the footing that Christie was correct in stating it to be so.

Pleaded by Christie—

1. As Robert Allan was confirmed executor qua nearest in kin, he was an executor suo jure, and was not situated, as to the executry, like an ordinary trustee on a trust-estate, but was truly in the situation of a party having a right and interest of his own, though bound to satisfy the claims of creditors in the first instance. This did not make him a trustee, more than his father had been, who was equally liable to the claims of all creditors. The claims of the other next of kin, as such, had been discharged; and although there were no doubt creditors of the father, yet that circumstance could not change the nature of Robert Allan's right into one of proper trust. Therefore, his right not being a mere trust, but having an estate vested in him proprio nomine, it was carried by the sequestration. Though it might be liable to preferences in favour of the creditors of the father, that interposed no difficulty. The estate of Robert Allan, as an individual, was equally liable to preferences of a certain class in competition with company creditors; but that had formed no obstacle to the, objector acting as trustee on both estates. No difficulty could arise with reference to the cautioner in the confirmation, as he was willing to consent that his obligation should continue as applicable to the trustee's administration of the executry funds. All lawful preferences affecting them would be preserved, and if the trustee erred in adjudicating as to this, his proceedings were liable to summary review. The expense of distributing the executry funds in the sequestration, even including trustee's commission, would probably be less than in the multiplepoinding, and the delay not greater.

2. The matter was ruled by the express enactment of the Bankrupt Act, §31, which declared, that “in case the bankrupt's own titles to any part of the estate, heritable or moveable, real or personal, which belonged to him at that period, or to which he had then succeeded as apparent heir, nearest in kin, or otherwise, to any predecessor, have not been so completed as to vest the right properly in him, the trustee shall take the most safe and eligible method of completing the bankrupt's title, &c., which title shall accresce to that already acquired by the trustee, in the same way as if it had been completed prior to the disposition by the bankrupt, or adjudication against him; declaring that the rules of preference, or ranking, between the creditors of the ancestor and those of the heir, by the law of Scotland, are not meant to be altered by any thing contained in this act.” Since this express provision reached all the estate to which the bankrupt had succeeded, as nearest of kin, even though his titles were not made up, a fortiori it must embrace all such estate actually vested in him by confirmation.

Pleaded by the Creditors—

1. As Robert Allan was heir in heritage, and had never offered to collate, he was a stranger to the executry; and, on taking up the office of executor, it was only as trustee for behoof of all concerned. This was still more clearly the case, on the footing assumed by the trustee, that the estate was insolvent; the executor had then no patrimonial interest of his own, and was a mere trustee for creditors. But neither a trust-office, such as that of executor, nor a mere trust-fund, like this executry, fell under the sequestration of the party holding such office and estate; otherwise the trusteeship on any sequestrated estate would be carried under the sequestration of the trustee; which was never attempted. And as it was the interest of the creditors of the father to maintain that the executry funds had been kept separate and distinct by Robert Allan, while it was the interest of Robert Allan's creditors to maintain that the whole funds had been blended, the same party could not act as trustee for both sets of creditors. Besides, if such executry were carried by a sequestration, the cautioner in the confirmation of the executor, would always have a right to be liberated ; and whatever might be offered by the cautioner in this instance, the question must be decided in reference to the general case in which such cautioner would claim his liberation. Farther, the executor was bound to administer the executry gratuitously, whereas the trustee would charge his commission; and the executry-creditors, by being made to claim under the sequestration, were exposed to the expenses and delays of the sequestration, and also to have their interests governed by the statutory majorities of creditors. They were not bound to submit to this, when the process of multiplepoinding afforded a safe and sufficient method of protecting the interests of all concerned.

2. The clause in the Bankrupt Act referred only to such moveable estate as fell to the bankrupt in his own right, and for his own behoof. And, in particular, the latter clause of the section, as to preferences, referred exclusively to heritable estates.

The Lord Ordinary reported the case.

At the suggestion of the Court, the trustee put in a minute, stating, that should the personal estate of the late Thomas Allan, in so far as still distinguishable from the funds and estate of the said Robert Allan, be permitted to be distributed under the sequestration, instead of being distributed by the said Robert Allan, as executor of the said Thomas Allan, or in the present multiplepoinding, the right of the creditors to the said deceased Thomas Allan to a preference over that estate, in competition with the creditors of the said Robert Allan, whether as an individual or as a partner of the company of Robert Allan and Son, shall not be altered or prejudiced thereby, but shall be reserved entire; and that, in the ranking of the creditors, effect shall be given to any claim of preference in which the said creditors of Thomas Allan may insist, in so far as the same shall appear to the said Robert Christie to be well founded in law.”

At the time when this minute was allowed, it was understood to be the inclination of the Court to ordain the distribution of the executry funds to take place in the sequestration. But parties were further heard, after which the following opinions were delivered. ^*