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SCOTTISH_Court_of_Session_Shaw

Page: 1235↓

016SS1235

Halyburton

v.

Rutherford
No. 248.

Court of Session

1st Division

June 29 1838

Ld. Cockburn. N., Lord Gillies, Lord Mackenzie, Lords President, Corehouse.

Mrs Eliza Halyburton or Stent (Halyburton's Trustees) and Husband, Pursuers.— Counsel:
H. J. Robertson— Shand. James Rutherford, Defender.— Counsel:
D. F. Hope— Russell.

Subject_Summons—Contract—Bankruptcy.— Headnote:

1. The debtor in a heritable bond for £1000 obtained a discharge under a sequestration; he afterwards granted a letter to the creditor, binding himself to “execute a deed,” restoring the creditor to the personal security in the bond; he failed to execute such deed, and the creditor raised an action, libelling on the letter, and concluding for decree “for payment of the foresaid sum of £1000 contained in the bond;” the defender pleaded that the letter contained an obligation to “execute a deed,” and did not support a conclusion for payment of a sum:—Held, that, as the letter bound the defender instantly to execute a deed, which was tantamount to granting a bond for £1000, he was liable, on failure to execute the deed, to pay the amount, and that the conclusion of the summons was therefore sufficiently founded in its premises. 2. Question, whether an agreement, by which a creditor (who has not ranked in a sequestration) stipulates not to rank or oppose an offer of composition, is collusive and invalid under the bankrupt laws.

Facts:

The late Lieutenant-Colonel Halyburton and James Rutherford, W.S., entered into a joint-adventure for building an Episcopal chapel at Porto-bello. They were to hold equal shares. In the progress of building the chapel, Halyburton made advances which largely exceeded his own share, and, under an arrangement with Rutherford, the latter and his father, James Rutherford, senior, granted a heritable bond for £1000 to Halyburton, over various heritable subjects in Edinburgh and Portobello. Under this bond, Halyburton afterwards entered into possession of the subjects, and made some attempts to sell them, but without success.

In December, 1826, the estates of James Rutherford, senior, were sequestrated under the bankrupt act, and in March, 1827, the estates of James Rutherford, W.S., were also sequestrated. In March, 1828, James Rutherford, W. S., was discharged under a composition-contract. In September, 1828, he granted the following letter to Halyburton:—“Dear Sir, I hereby bind and oblige myself, at ray expense, to execute a deed restoring you, notwithstanding the intervening sequestrations of myself and of my father, to the personal security contained in his and my bond to you, dated the 20th November, 1826, and that immediately after my father's offer of composition is approved of by the Court; and I further bind myself in the same deed to continue your security over my half of the Episcopal chapel at Portobello, to the extent of the sums super-advanced by you beyond me on its account, as fixed by the states prepared by Mr Spence, and brought up to 31st December last, so as to give you the same security you at present hold over the chapel for these advances; and in this deed it shall be declared that the interest shall not commence till 31st December, 1827, in consequence of my having settled all interest prior to that date. I am your obedient servant.” James Rutherford, senior, obtained his discharge under a composition-contract in December, 1828. A submission was afterwards entered into between Halyburton and James Rutherford, W.S., as to their mutual claims and accounts, but it fell before coming to a conclusion, and proved abortive. After the death of Halyburton, his widow, who was sole trustee under his settlement, raised an action against Rutherford, W.S., concluding that he should be decerned to pay £1000 “contained in the bond and disposition in security,” with interest from 31st December, 1827, and also the expenses incurred in attempting to sell the subjects comprehended in the bond, but deducting any rents received from possession of the subjects. The action also contained an ulterior conclusion for a certain heritable security. The pursuer had married a second time, and her husband concurred in this action.

In reference to the conclusion for payment of £1000, the defender pleaded, 1st, That the personal obligation in the heritable bond for £1000 was extinguished by the sequestration and discharge; 2d. That the letter of 19th September, 1828, was not obligatory, because it was obtained only on condition of Halyburton's consent to the discharge of Rutherford senior, and it was not actionable, under 54 Geo. III. c. 137, § 60, in respect of its importing a preference to Halyburton over the other creditors. It was true that Halyburton had not ranked in the sequestration, and that, consequently, he had not given a concurrence to the approval of composition, but had merely agreed to refrain from ranking and dissenting, in consequence of that letter. But as his acting in either case was equally contrary to the fair distribution of the estate, and the motive was, in a legal sense, equally corrupt, the letter was not actionable. 3d. Even if the letter could be founded on, it did not bind the defender to make a payment, but to execute a deed, and therefore it could not support a conclusion for payment. ¹ The defender also pleaded a special defence in regard to certain procedure under the expired submission.

The pursuer answered, 1st. The personal obligation in the bond was redintegrated by the letter of 19th September, 1828; 2d. That letter was not, as matter of fact, granted on condition of Halyburton's giving his assent to, or refraining to dissent from, the composition proposed by Halyburton, senior. It had no connexion with that subject, and therefore the
_________________ Footnote _________________

¹ Graham, March 11, 1823 (ante II., 290, or 254, new edition).

pleas rested on that allegation were irrerelant. But were it otherwise, these pleas were unfounded, as Halyburton never ranked in the sequestration, and, consequently, never gave a corrupt concurrence. The statute applied only to that case, and to no other; and, therefore, even if Halyburton had agreed not to rank, on condition of getting that letter, the letter would be valid and binding, as the agreement was not reached by the statute. And this would especially hold, as the letter did not import any new obligation against the bankrupt, Rutherford, senior, but only against the defender, who was previously discharged. 3d. The obligation was to redintegrate the bond for £1000. The defender had not yet done so, and he must be dealt with as having incurred the same liability as if that bond were redintegrated in terms of his obligation. The conclusion for decree for payment was therefore perfectly well founded. In regard to any procedure which had been held under the expired submission, it was of no force except in regard to certain counter-procedure in that same submission, the whole of which had now fallen.

The Lord Ordinary pronounced a judgment disposing both of the conclusion for payment, and of the ulterior conclusion for security; but it is only the first of these which requires to be quoted, in reference to the subsequent procedure. The interlocutor, as to that conclusion, was in these terms:—“Finds, under the first conclusion of the libel, that the defender is bound to make payment to the pursuer of the sum of £1000 sterling, contained in the bond and disposition in security, with the interest due thereon from 31st December, 1827, till payment, and the necessary expenses incurred in virtue thereof; and remits to Mr William Moncrieff, accountant, to make up a state thereof and to report.” ^*

Rutherford reclaimed.

Lord Gillies.—I was at first puzzled by the allegation, that the letter of September 19, 1828, was vitiated by collusion. And if it had been collusively

_________________ Footnote _________________

^* “ Note Both of the conclusions of the summons are objected to in point of form.

“The objection to the first is, that it demands payment, whereas the agreement founded on by the pursuer only binds the defender to execute a deed, &c. This point is not free from difficulty, and the Lord Ordinary cannot be confident in his judgment on it. Hut the circumstances make this case very different from that of Graham, 11 th March, 1823. The defender was originally bound by a bond to pay £1000. The personal obligation of this bond fell by his sequestration and discharge; but, after be became his own master again, be obliged himself by the agreement to restore the pursuer to the benefit of that bond. No doubt he stipulated that he was to do this by executing a deed, which it was his duty to have done long ago. Can he first fail to perform this duty, and then found on this failure as a defence against the restoration? The Lord Ordinary rather thinks not. He considers the agreement as a bar to bis pleading that the bond fell by the discharge, in which case the conclusion for payment is well founded on the bond.

“On the merits, the Lord Ordinary thinks the justice of the case eminently with the pursuer. It seems to him to be clear that the defender is struggling to evade the fulfilment of a plain onerous arrangement, of which he has already taken all the benefit. The whole case resolves into the pleas on which he does so, which are as follow:—

“1. That the agreement was abandoned by the defender in the course of a reference of these matters. It was no doubt‘withdrawn,’ but only as unnecessary to be founded upon in that particular proceeding. The defender made an admission before the arbiter, which the pursuer thought made it safe in him to abstain from saying any thing about this obligation as the foundation of his claim in that submission. But, even though the submission had ended in a decree, a proceeding like this, in the course of conducting one cause, won't conclude even the same parties in another cause though in the same matter. The submission, however, expired without a decree; yet the defender wishes to fix the pursuer down to an adherence to every thing, including all the mutual concessions done in the course of it.

“2. That the agreement was ‘an illegal preference and advantage in favour of the creditor, exacted from the defender as a condition of the discharge of his father.’ There are two grounds on which the Lord Ordinary rejects this. First, Halyburton, the creditor said to have been favoured, had never ranked on the sequestrated estate of the defender's father, who was discharged on a composition. The pursuer accounts for this by saying (apparently truly) that be was so fully secured otherwise, that if he had attempted he could not have ranked. But it is certain that he did not. So he was not given up to the creditors or to the Court as concurring in the composition.

“The defender says that a gratuity may be given to a creditor for not ranking, and thereby for not opposing. But the Lord Ordinary is not satisfied that there is any authority for this in the 60th section of the Bankrupt Act, or in any of the judgments explaining it. The opinions of the Judges in the case of Kerr, 14th February, 1828, seem to assume, that to bring the transaction within the statute, the creditor must be held out to the Court as actually concurring. There is surely some difficulty in imputing bribery to a gift in consequence of which the receiver does nothing, and is not asked to do any thing illegal, but merely abstains from exercising a right, not connected with any duty.

“Secondly, The burden of proving that the agreement was meant as a consideration for concurring in, or for not opposing, the composition, lies on the defender. But he has not proved it, and the whole facts disprove it. The agreement makes a reference to the father's discharge as a date; but there is no glimpse in the proceedings of there having been any idea of any improper design, or of any design connected with the father's sequestration. Such an idea is almost refuted by the single fact, that the person said to be bribed to promote the composition did not even rank, though it. is said that he might have done so. Nor is there a particle of evidence to show that if he had ranked, he would not, though unbribed, have concurred in the composition.”

granted, on the consideration that Lieutenant-Colonel Halyburton should agree not to rank on the sequestrated estate of James Rutherford, senior, or oppose his offer of composition, it might have raised a nice question in bankrupt law, whether the agreement not to rank and dissent was as bad as an agreement to rank and concur. I rather apprehend that to be a new question. But the facts of this case do not raise it. There is no appearance of collusion in them, when fully examined, and the letter is therefore valid and binding. The defender, however, objects that there is some inconsistency between the first and second conclusions of the summons, and that the judgment of the Lord Ordinary is incongruous in decerning for both. I do not look on that objection as free from difficulty.

Lord Mackenzie.—I think the facts here do not raise a case of collusion, but I rather apprehend there might be cases where an agreement not to rank would be liable to the objection of collusion. It is unnecessary, however, to enquire into that in the present case. The defender pleads that immediate payment cannot be sued for, under the letter in question, because it binds the granter only to execute a deed. But that was a deed to redintegrate a bond for payment. I therefore go along with the Lord Ordinary in the view which he has taken. Where a party binds himself instantly to grant a bond for £1000, and fails to do so, he becomes liable for the amount. Perhaps the summons might have been more cautiously framed; and as the express liability in the letter of obligation was to execute a deed renewing the bond for £ 1000, it should have set forth the failure to execute the deed, and have concluded for payment of the £1000, nomine damni. But I think the summons is substantially correct and sufficient, and that it would be refining too much to sustain so critical an objection. There is, however, an ulterior conclusion relative to finding security, which the defender maintains to be inconsistent with the first conclusion for payment. It would appear to be better, at least for the present, to supersede that part of the interlocutor which relates to that conclusion, and to adhere quoad ultra.

Lords President and Corehouse concurred.

The Court pronounced this interlocutor:—“Recal the interlocutor reclaimed against, hoc statu, and find, that, under the first conclusion of the libel, the defender is bound to make payment to the pursuer of the sum of L1000, contained in the bond and disposition in security, with the interest due thereon since 31st December, 1827, till payment; and in the necessary expenses incurred in virtue thereof; but under deduction of any rents received, and of any counter claims which the defender can instruct; and remit to the Lord Ordinary, to ascertain the amount thereof, and thereafter to proceed farther in the cause, as to him shall seem just; and to decide all questions of expenses.”

Solicitors: J. Shland, W. S.— J. Paterson, S. S. C.—Agents.

SS 16 SS 1235 1838