Scottish Court of Session Decisions

This was an action at the instance of the Lord Advocate, on behalf of Her Majesty, against the Marchioness of Lansdowne, for payment of inventory-duty on a bond of annualrent, to which the defender had succeeded on the death of Baroness Keith. The following were the circumstances which gave rise to the action:—

In 1851 Baroness Keith, who then possessed estates in Perthshire and Kinross as heiress of entail, was authorised by the Court, under the Montgomery Act, to execute a bond of annualrent, on the security of the entailed estates, by which she bound and obliged herself “and the heirs of entail in their order successively succeeding to me in the foresaid entailed lands and estates … under and by virtue of the foresaid several deeds of entail, to make payment to myself, the said Margaret Mercer Elphinstone, Baroness Keith and Nairne, Countess de Flahault, and my heirs, executors, and assignees.” of an annualrent of £485, 15s. 6d., or such other annualrent or interest during her life as should correspond to the sum of £9715, 10s. 9d., being three-fourths of the sums expended by her on improvements on the said estates. It was afterwards discovered that the entails under which the Baroness Keith held were defective as strict entails; and she thereupon, upon the narrative that such was the case, executed a new entail in 1866 in favour of herself and a certain series of heirs. The deed contained the following clause:—“And I hereby declare that in case I Shall not during my lifetime, nor by any mortis causa deed or settlement, specially dispone or convey the whole or any part or portion of the foresaid two annualrents, then the whole, or such part or portion thereof as may not have been so disponed and conveyed by me, shall accrue to the institute or heir of entail succeeding under this present deed of entail, and the lands and others above disponed shall be freed and relieved from the same in all time coming.” The deed also contained a power to alter or revoke, but the Baroness never altered the deed or made any bequest of the bond of annualrent. The Marchioness of Lansdowne, who succeeded to the estates as the institute in the above deed of entail, paid the whole succession-duty due in respect of these lands. Thereafter, and in addition, the Crown claimed inventory-duty from her on the bond of annualrent, under the act 23 and 24 vict, c. 80, as money secured upon heritage belonging to the deceased Baroness keith, and to which the Marchioness had succeeded.

The Lord Ordinary pronounced the following interlocutor and note:—“The Lord Ordinary having heard counsel for the parties, and considered the argument and proceedings—finds, in answer to the question submitted for the decision of the Court in the Special Case, that the Marchioness of Lansdowne is liable to pay inventory-duty on the sum in the bond of annualrent, under the statute 23 and 24 Vict. c. 80, as part of the succession of the Baroness Keith, deceased.

“ Note.—By the statute referred to it is enacted that the money secured on heritage shall be liable in inventory-duty as if it had been personal or moveable estate.

That the bond of annualrent in question was in itself of the nature and in the form of an heritable security is indisputable. But the defender contends that, as the entailed landed estate over which the bond bears to be heritably secured turned out not to be entailed at all, but held in fee-simple by the Baroness Keith, and as she was then also the creditor in the bond—or, in other words, as the Baroness was thus at one and the same time in right of the bond and unfettered proprietrix of the lands over which the sum in the bond was heritably secured—the latter became extinguished confusione. It appears to the Lord Ordinary that this contention of the defender is not well founded.

As a general principle of law, it is no doubt true that when the same person comes to be both debtor and creditor in an obligation, it is to be held as extinguished confusione. But it is equally clear, on the authorities which will be afterwards referred to, that this principle is subject to modification and exception according to the circumstances in which it arises.

When the bond of annualrent in question was constituted by the Baroness Keith, she was the heiress in possession of what are referred to in the Special Case as certain entailed lands. But whether these lands were held under the fetters of a strict entail or not, it is at least certain that, by the title to them, they were destined, as stated in article 4 of the Special Case, to the Baroness and her husband, ‘and longest liver of us two, in conjunct fee and liferent, and to the heirs-male of our present marriage, and to the heirs-male of their bodies, whom failing, to the heirs-female of our present marriage, the eldest heir-female succeeding without division,’ and so on, according to a certain order of succession. Now, whether the lands and estate so destined were strictly entailed or not, it is indisputable that, so long as the destination referred to remained unaltered, they would

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descend in terms of it, and that after the death of the Baroness and her husband, leaving only two daughters, the elder of them would succeed as the proprietor. It is true that by the Baroness's trust-disposition and settlement, referred to in article 2 of the Special Case, the lands referred to, supposing they were not entailed, would come to belong to her two daughters equally. But then this trust-disposition and settlement was superseded by the disposition and deed of entail, which was executed by the Baroness in 1866, whereby, on the assumption that the lands and estate referred to were not entailed, but belonged to her in fee-simple, she disponed them to her eldest daughter, the present defender, whom failing, to the eldest son of that daughter, whom failing, to the younger sons to be procreated of her, and so on in such an order of succession as to render the prospect of her younger daughter succeeding a very remote one.

So standing the titles and destination of the lands over which the bond of annualrent in question was heritably secured, what falls next to be attended to is the destination in the latter. According to the statement in the fifth article of the Special Case, the bond is taken payable in the usual terms to the Baroness herself, and ‘her heirs, executors, and assignees;’ so that, unless otherwise destined and disposed of by the Baroness, it would devolve on her death to her two daughters as heir-portioners, while her landed estate would, as already explained, wholly devolve, under the disposition and deed of entail thereof executed by her in 1866, upon the defender, her eldest daughter. But then by this disposition and entail the Baroness, in reference to the bond of annualrent, declares that in case I shall not during my lifetime, nor by any mortis causa deed or settlement, specially dispone or convey the whole or any part or portion of the foresaid two annualrents, then the whole, or such part or portion thereof as may not have been so disponed and conveyed by me, shall accrue to the institute or heir of entail succeeding under the present deed of entail, and the lands and others above disponed shall be freed and relieved from the same in all time coming.’ And it is also important to keep in view that by this disposition and entail the Baroness expressly reserved (p. 14 of the Special Case) her liferent of the lands and estate thereby disponed, ‘and full power and liberty to myself, at any time of my life, and myself alone, without the consent of my said husband, to alter and revoke these presents in whole or in part.’

No alteration or revocation, however, having been made by the Baroness, the result is that the bond of annualrent in question has upon her death devolved upon her eldest daughter, the defender, as institute under the entail of 1866 of the landed estates; and in this way it may be said that the bond then came to be extinguished confusione in the person of the defender. But the duty now claimed is on the inventory, not of the defender's estate, but of that of the deceased Baroness Keith. In these circumstances, the Lord Ordinary thinks that in the person of the Baroness the bond had not been extinguished confusione or otherwise, but, on the contrary, must be held to have subsisted down to her death as a separate and independent heritable right, and that equally whether the landed estates are to be considered as entailed or unentailed when the bond was executed. It may be that, while and so long as the Baroness lived, and was herself in right both of the entailed lands and the bond of annualrent, the latter was dormant, but not extinguished, for she might, in the Lord Ordinary's opinion, have destined and left it not to the defender, but to her younger daughter, or any one else she pleased. It is true that she left it to the defender as institute in the entail of 1866, but of itself this shows that it had been down to her death a separate part of her estate, and so dealt with. Accordingly, if she had not by her deed of 1866 specially disposed of the bond in the way she did, the succession to it, and to the entailed lands, would have been different, the bond going to her two daughters equally, and the entailed lands devolving, in the first instance, wholly upon her elder daughter.

The views entertained by the Lord Ordinary in regard to this case, as now explained, are supported, he thinks, by the authorities, Stair, 1, 8, 19; Ersk. iii. 5, 27; and Bell's Principles, sec. 580. According to these authorities it is clear that confusio does not always, when the two rights come to be vested in the same person, effect an extinction of either right. Thus, in the words of Mr Erskine,—‘Sometimes it produces only a temporary suspension of it, while the debtor and creditor continue one and the same person, or while the same person is entitled to the succession of the two several rights from the different destinations of which the confusio flows. But when the succession of these rights happens again to divide in two, the obligation or right which lay for a while sunk or dormant confusione, revives and recovers its first force.— (Stair, Dec. 21, 1680; Cunningham (Dict., p. 3038), Jan. 4, 1726; Cumin (Diet., p. 3045), cited (folio) Dict. i. p. 196; Stair, b. 1, t. 18, § 9.) Hence the conveyance of a debt affecting an entailed estate in favour of the heir of entail and his heirs whomsoever, does not import a perpetual extinction of the debt. The debt is indeed dormant during the life of the disponee; but if the heir-at-law and the heir of entail happen at any time after to be different persons, the ground of the extinction, or rather of the suspension, ceaseth, and consequently the debt will revive in the person of the heir-at-law against the heir of entail, for it is considered as a separate estate in the absolute power of the heir who purchased it, and affectable by his creditors.—Fac. Coll., II, 63, art. 2 (Gordon, Dec. 1, 1757, Dict., p. 11,164.) Nay, though the deed assigning the debt to the heir of entail should also contain a discharge of it in his favour, as having made the payment, the discharge bath not the effect of extinguishing it confusione, seeing that part of the deed which assigns it is a sufficient indication of the heir's intention that it should still continue to subsist in his person.—Fac. Coll. II, 101 (Kerr v. Turnbull, Feb. 15, 1758, Dict., p. 15,551.)' Mr Bell states the same doctrine thus:—‘Where the creditor has an interest to keep up the debt, it is held to be suspended, not extinguished. So the debt may be assigned, and money borrowed on it; or it may be kept up for the benefit of children, as by an heir of entail; or in contemplation of a divergence of the lines of succession, it may be made available to a particular heir,’—and both the learned authors refer for illustrations of the doctrine they state to numerous decided cases.

It was argued, however, for the defender that the doctrine and decided cases referred to can have no application except where one of the rights relates to an entailed estate, the destination of which is beyond the power of the proprietor to alter. It no doubt appears to be true that in most of the

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decided cases the question has arisen where one of the rights related to an entailed estate; but the doctrine, as stated by the commentators, is not limited to such cases, and the decisions do not in every instance relate to entailed estates. For example, in the case of Lady Halgreen v. Burnett, July 30, 1702, vol. 4 of Broun's Supplement, p. 533, where it was held that one having first acquired an infeftment of annualrent and then the right of property, he was entitled to use both as separate rights, the property was not entailed.

The defender, besides maintaining that the authorities and cases which have been now referred to were favourable rather than adverse to her, cited and seemed to rely on the case of Burnett v. Burnett, April 30, 1766, (Paton's Appeals, vol. 2, p. 122). The principles of decision, however, in that case appear to be inapplicable to the circumstances of the present. The destination of both the rights there, although expressed in different terms, were held to result in the same thing; and it was on this ground, and having regard to what clearly appeared to be the intention of the party, that no separate estate was to be kept up, it was decided that confusio had taken effect.

For the reasons which have now been explained, the Lord Ordinary has, although not without difficulty, come to the conclusion that the question in the Special Case ought to be answered favourably for the Crown, and he has accordingly so answered it.”

The Marchioness of Lansdowne reclaimed, and maintained that the Baroness Keith having, at the time of the execution of the bond, held the unfettered right to the lands, the bond was a nullity, as one cannot be debtor and creditor to himself, and that the execution of a bond by a party in favour of himself over his lands, which he holds absolutely, cannot create money belonging to that party, and does not make him hold money heritably secured. Further, that if the bond was not a nullity it was extinguished by confusion, as the debtor and creditor were the same, and there never could be any divergence in the succession to the estate and the bond. Further, that the Baroness Keith, by her deed of entail, freed and relieved the estates of the bond, and the deed of entail did not carry the bond to the Marchioness of Lansdowne, who never had any right to, or beneficial interest in the same, and who could not assign it or keep it up as a debt against the estate. And the unburdened estates conveyed to the Marchioness of Lansdowne as institute under the entail, having paid the whole duties exigible by the Crown, the claim for inventory-duty was unfounded.

The Crown maintained that the disposition and deed of entail of 1866 being revocable, was testamentary, and was one of the instruments forming the will of the Baroness Keith, and that the said entail of 1866 being unrevoked, and no other testamentary deed disponing of the said bond of annualrent having been made by the Baroness Keith, the bond was carried by the destination in the entail to the Marchioness of Lansdowne, who was liable in duty accordingly.

At advising—