Scottish Court of Session Decisions

In the first of these two actions the Scottish Heritable Security Co. (Limited) were pursuers, and Allan, Campbell, & Coy., manufacturers, Newburgh, Fifeshire, and John Carmichael Allan, the only individual partner of that firm, were defenders.

The facts of the case, so far as material, were as follows:—By a bond dated the 13th April

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1874, the defenders acknowledged that the sum of £1500 had been advanced to them by the pursuers, and, inter alia, bound themselves to pay interest at the rate of 6 per cent, upon that sum from the date of the bond. They further bound themselves to pay the capital sum of £1500, with interest, by half-yearly instalments of £103, 10s. by Whitsunday 1884. The deed specially provided and declared that the pursuers should have “all the rights and powers of absolute proprietors in and over the said subjects and others conveyed by the said disposition,” so long as any part of the loan remained unpaid, and should have full power, at any time during the continuance of the said loan, “to enter into possession of the said subjects and others, to draw the rents thereof, to output and input tenants, to grant tacks or leases of the said subjects, or any part thereof, at such rents and for such periods of endurance as they may think proper, to appoint factors, and generally to exercise the whole rights of absolute proprietors in and over the said subjects and others; provided always, that before entering into possession of the said subjects and others as aforesaid,” the pursuers should be bound through their manager to give to the defenders “fourteen days' previous intimation of their intention so to do.” By the said bond it was also specially provided and declared that in the event of the defenders allowing one full half-year's payment of £103,10s., or any part thereof, to remain unpaid for two months after the date when it fell due, then, and in that event, it should be lawful to and in the power of the pursuers, upon giving to the defenders “one month's intimation in writing under the hands of their manager without further intimation or process of law whatever, to sell the said subjects, and that either by public roup or private bargain,” and to grant dispositions thereof in favour of the purchaser or purchasers. Of the same date with the bond, viz., on 13th April 1874, the defenders, as heritable proprietors of certain subjects in Newburgh, granted an ex facie absolute disposition of these subjects in favour of the pursuers. This deed, which was recorded on 16th April 1874, was qualified by a back-letter, also dated 16th April, and granted by the pursuers to the defenders, by which it was declared that the disposition, though ex facie absolute, was truly granted, and the subjects and others thereby conveyed were to be held by the pursuers as in security only of the advance of £1500, and binding the pursuers to reconvey the subjects upon payment of the sums due under the bond. The pursuers never entered into possession of the subjects, which remained in the hands of the defenders or their trustee John Gilroy, in whose favour John Carmichael Allan executed, on 17th November 1874, a general trust-disposition for behoof of his creditors, and who was accordingly sisted as a defender in the process. The interest due under the bond at Whitsunday 1874 was duly paid, but at Martinmas of the same year the defenders failed to pay the instalment of £103, 10s. then due, thus leaving a debt to the pursuers of the whole sum of £1500. The pursuers accordingly intimated to the defenders on 11th January 1875, in terms of the provisions of the bond, that they were to enter into possession of the subjects on the expiry of fourteen days, and to sell them whenever they thought proper after the expiry of one month. The fourteen days expired on 25th January 1875, but instead of entering into possession the pursuers proceeded to poind the ground, a proceeding which the defenders refused to allow. Thereupon this action of poinding of the ground was raised, in answer to which the defenders pleaded, inter alia—“(1) The action is incompetent in respect the pursuers are barred by the nature of their titles from having recourse to poinding the ground. (2) The debt due by the defenders Allan, Campbell, & Company, and John Carmichael Allan, to the pursuers, not being debitum fundi, an action of poinding the ground is incompetent. (3) The recording by the pursuers at their own hands, on 2d February 1875, of a duplicate of the back-letter granted by them on 16th April 1874. without the consent of the defenders Allan, Campbell, & Company and John Carmichael Allan, was illegal, and did not create the debt due by the said defenders to the pursuers a debitum fundi, and an action of poinding the ground is therefore incompetent thereon. (4) Under the whole deeds constituting their security the pursuers had, at the date of raising the action, all the rights and powers of absolute proprietors in and over the subjects embraced in the conclusions, and the action is therefore incompetent.”

The second action was one of the same nature, at the instance of the same pursuers against John Watson & Sons, coalmasters near Bathgate, and in Glasgow, who had borrowed money from the pursuers in circumstances precisely similar to those narrated in the case of Allan, Campbell, & Company, except that in this case the defenders had not prepared and recorded a duplicate back-letter. William Mackinnon, trustee on the sequestrated estate of John Watson & Sons, was also called as defender. The defenders stated pleas in law in terms similar to those stated by Allan, Campbell, & Company, and in addition pleaded—“(3) Under the 102d and 108th sections of the Bankruptcy (Scotland) Act, 1856, the defender, as trustee, acquired an absolute preference over the whole of the bankrupts' effects situated in and upon the said heritable subjects qualified only by a reference to the creditors' right to poind the ground, as defined in the 118th section, and the said 118th section being repealed, the defender's right is preferable to that of a creditor poinding the ground after the date of sequestration. (4) In the circumstances the pursuers' preference is limited to the specific subjects conveyed to them under the ex facie absolute title, in so far as the same may be found to be of an heritable nature, and to the rents thereof, so far as the same may lawfully be attached, and the pursuers cannot, by poinding the ground after the date of the sequestration, acquire a preference over the bankrupt's moveable estate.”

The Lord Ordinary pronounced the following interlocutor in the action against Allan, Campbell, & Company:—

Edinburgh, 2 d July 1875.—The Lord Ordinary having heard parties' procurators on the closed record and productions, and considered the debate and whole process—Finds (1) that the sum for which the pursuers conclude that warrant for poinding the ground should be granted is not debitum fundi; and separatim (2), that the title of the pursuers to the ground, the moveables on

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which are the subjects to be attached by the proposed diligence, being a disposition ex facie absolute, is that not of creditors but of proprietors, and consequently is not a foundation for the diligence of poinding the ground: Therefore sustains the second plea in law, and also the first plea in law for the defenders, dismisses the action, and decerns: Finds the defenders entitled to expenses, of which allows an account to be given in, and remits that account when lodged to the Auditor for his taxation and report.

Note.—The pursuers are creditors under a personal bond for £1500, and they are infeft in the heritable subjects described in the summons on an ex facie absolute disposition. The reality of the situation, however, is that they are not out-and-out proprietors, but must reconvey the property on receiving payment of their debt. A back-letter establishing this obligation was granted immediately after infeftment was taken, but this document never was recorded. A duplicate, however, written out and signed by the manager of the pursuers' company, was recorded by the pursuers the day before the present action was instituted. No authority for this proceeding was given by the defenders, who, consequently, contend that the pleas of parties relative to the competency of poinding the ground must be disposed of as they would have been if the back-letter had not been recorded. The Lord Ordinary thinks that the solution of this question is not necessary for the decision of the cause.

1. There is no doubt that a debt for which the ground can be poinded must be debitum fundi, and hence the first question here is, Whether that due to the pursuers is a debt of this description? The bond for £1500 is only a personal bond, and the disposition is not the constitution of any debt whatever. Nor would the recording of the back-letter accomplish that which the disposition leaves unperformed, all which would thence ensue being merely the limitation of the sum for which the property conveyed could be retained to the debt as it stood when the back-letter was recorded. The amount of that debt behoved to be otherwise established. Quite true, through the instrumentality of the disposition security is in effect afforded. But how? Not by the imposition of the debt as a burden upon subjects belonging to the debtors, but by the right to withhold these subjects from the debtors till the debt is paid or otherwise extinguished. They can demand retrocession only after this condition has been fulfilled, but till payment and retrocession the subjects are not theirs but their creditors. This, as the Lord Ordinary thinks, involves the conclusion that the debt is in legal acceptance not debitum fundi, because the opposite view would make the debt a burden or charge upon the property, not of the debtors, but of the creditors.

2. Proprietors cannot poind their own ground, and if the pursuers are proprietors in the sense of this rule, they as such are excluded from recourse to that diligence. In a matter of this kind the actual title, the Lord Ordinary thinks, is all that can be regarded. In heritable securities properly so called, the debtor is proprietor and the creditor only incumbrancer. But where an ex facie absolute disposition has been granted the property no longer remains with the debtor, He has been feudally divested, his creditor has been invested, and there must be a formal reconveyance before the estate can be restored. The ground, according to the title, is the ground of the disponee, the tenants are his tenants, and if he refrains from doing all that an owner might in the levying of rents and in the management of the property, all that can be said is that he refrains from doing things which are within his competency. His infeftment gave him real, actual, and corporal possession, and there is no other sasine of the property. This is the view of the law which received the sanction of the Court in the well-known case of Garthland v. Lord Jedburgh, March 2, 1632, Mor. 10,545–6. That decision is the foundation of all the dicta to be found in the books on this subject, and the Lord Ordinary is of opinion that the doctrine for which it is the authority is well explained in Ross' Lectures, vol. ii. p. 431, where it is laid down ‘that no title upon which a man may enter into the natural possession of land can be a foundation for the diligence of poinding the ground, and hence the holders of adjudications, liferent rights, wadsetters, and others of that class, cannot demand the ground to be poinded. They must enter like other landlords, and if the tenants will not pay them, the possessory action of mails and duties is the proper step to be taken.’ Analogous passages are to be found in other books of authority, as, for example, in Erskine, b. iv. t. i. s. 11. What is thus presented is, as the Lord Ordinary conceives, the law by which, in so far at least as the first of the defenders' pleas is concerned, the present action must be determined.

“The reasons which have now been explained are those by which the Lord Ordinary has been led to pronounce the prefixed interlocutor.”

A similar interlocutor was pronounced in the action against John Watson & Sons, and the Lord Ordinary further referred to the note annexed to the previous interlocutor.

The pursuers reclaimed in both actions, and argued:—The Lord Ordinary had dealt with the case as if the disposition were the only deed to be looked at. The three deeds, when taken together, showed the pursuers to be creditors merely, not absolute proprietors, and their remedies were therefore only those of creditors. The case of Garthland (No. 10,545 and 10,546) proceeded on the footing that the party seeking to poind had entered into possession; and was not an authority for the proposition that a creditor with an absolute disposition, who had no possession, might not poind. The fact that the creditor might enter into possession should not exclude his right to poind.

Authorities— Garthland v. Lord Jedburgh, March 2, 1632, M. 10,545 and 10,546; Henderson v. Wallace, Jan. 7, 1875, 2 B. 272; Wylie v. Scottish Heritable Securities Investment Company, Dec. 22, 1871, 10 Macph. 253; Nelson v. Gordon, &c., June 26, 1874, 1 K. 1093; Gardyne v. The Royal Bank, March 8, 1851, 13 D. 912; 1 Macq. App. 358; and with reference to Watson's case, 2 and 3 Vic., c. 41,§ § 78, 95, and 118; Campbells Trs. v. Paul, Jan. 13, 1835, 13 S. 237; Barston v. Mowbray, March 11, 1856, 18 D. 846.

The defenders argued — There was no precedent for the remedy proposed by the pursuers.

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They had founded in their summons on an absolute disposition, and in order to arrive at a sum for which to sue, they had to refer to a personal bond. Poinding of the ground was only competent on what was debitum fundi, which this sum was not. It was not the back-letter but a duplicat, not of the same date, which was recorded. Even if the back-letter were held to be recorded, the recording did not alter the title nor make the debt a debitum fundi. The title of the pursuers was an ex facie absolute disposition.

Authorities—Ross' Lectures, p. 431; Erskine's Inst., iv. 1, 2.

Watson & Co. further argued — By 37 and 38 Vic., c. 94, § 55, it was declared that sequestration now operated as if poinding of the ground had taken place. That did away with the limited right which the creditor had of poinding the ground after sequestration. As their rights now stood, the trustee had by the Act of Sequestration the same right over the ground as if the poinding of the ground had taken place at the date of the sequestration.

At advising—