Scottish Court of Session Decisions

On 15th May 1854 Thomas Pearson, clothier in Glasgow, granted two bonds and dispositions in security over certain subjects in Glasgow belonging to him, and known as the Arcade property, for £5000 each, in favour of A. J. Brown of Balloch, and the trustees of the deceased Mrs Meiklam respectively. The grantees were infeft on the precepts of sasine in the bonds. The said bonds and dispositions in security contained all usual and necessary clauses, including a power of sale, and were declared to be pari passu securities; at the date of granting them the said Thomas Pearson was infeft in the subjects conveyed. By disposition dated 21st December 1852 Pearson disponed the said subjects to John Stewart, but excepted from the warrandice the foresaid bonds. The said John Stewart was infeft in said lands conform to instrument of sasine dated 21st January 1856. The disposition to him, however, though ex facie absolute, was really in security, being qualified by a back-letter dated 21st December 1855, signed by Stewart and Pearson, and which bore that the said disposition was to be held by John Stewart in security, and for payment and relief of such sums of money as he had advanced or might thereafter advance to Pearson, and of all obligations undertaken, or that might thereafter be undertaken, by him for Pearson. This back-letter was never recorded. By disposition dated 24th April 1856 John Stewart disponed the Arcade property to the Western Bank, who were infeft on 4th June 1856, but this conveyance, though ex facie absolute, was also in security only for debts due by John Stewart. John Stewart thereafter became bankrupt, and was sequestrated on 16th January 1861; in October 1863 he was discharged without a composition, but was retrocessed in his whole heritable and moveable estate in July 1866 and December 1872. The Western Bank, by disposition and assignation

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dated 12th and 23d February 1866, conveyed the said subjects to James, son of the said John Stewart, who completed his title by recording said disposition and assignation on 10th March 1866.

Meantime in 1858 the foresaid bondholders, Brown and Meiklam's trustees, finding that they were unable to recover payment of the interest on their loan of £10,000 from the Arcade property, resolved to sell under the powers contained in their bonds and dispositions in security.

It is enacted with regard to such bonds and dispositions in security by 10 and 11 Vict. c. 50, sec. 3 (Heritable Securities Act 1847), the statute then in force—“The clauses reserving right of redemption and obliging the granter to pay the expenses of assigning or discharging the security, and on default in payment granting power of sale, shall be in all respects as valid, effectual, and operative as if it had been in such bond and disposition in security specially provided and declared.. that if the granter or his foresaids ( i.e., his heirs and succcesors) should fail to make payment of the sums that should be due by the personal obligation contained in the said bond and disposition in security within three months after a demand of payment intimated to the granter or his foresaids, whether of full age or in pupillarity or minority, or although subject to any legal incapacity, personally or at their dwelling-places if within Scotland, or if furth thereof at the office of the Keeper of the Record of Edictal Citations above mentioned by a notary-public and witnesses, then and in that case it shall be lawful to and in the power of the grantee or his foresaids, immediately after the expiration of the said three months, and without any other intimation or process at law, to sell and dispose, in whole or in lots, of the said lands and others by public roup at Edinburgh or Glasgow, or at the head burgh of the county within which the said lands and others, or the chief part thereof, are situated, or at the burgh or town sending or contributing to send a member to Parliament, which, whether within or without the county, shall be nearest to such lands, or the chief part thereof, on previous advertisement, stating the time and place of sale, and published once weekly for at least six weeks subsequent to the expiry of the said three months, in any newspaper published in Edinburgh, and also in any newspaper published in such county, or if there be no newspaper published in such county, then in any newspaper published in the next or a neighbouring county, the grantee being always bound, upon payment of the price, to hold count and reckoning with the granter or his foresaids for the same, after deduction of the principal sum, secured interest due thereon, and liquidate penalties corresponding to both which may be incurred, and all expenses attending the sale, and for that end to enter into articles of roup, grant dispositions containing all usual and necessary clauses, and in particular a clause binding the granter of the said bond and disposition in security, and his heirs, in absolute warrandice of such dispositions, and obliging him and them to corroborate and confirm the same, and to grant all other deeds and securities requisite and necessary by the laws of Scotland for rendering such sale or sales effectual, in the same manner and as amply in every respect as the granter could do himself, and as if it had been thereby further provided and declared that the said proceedings should all be valid and effectual whether the debtor in the said bond and disposition in security for the time should be of full age or in pupillarity or minority, or although subject to any legal incapacity, and that such sale or sales should be equally good to the purchaser or purchasers as if the granter himself had made them; and also that in carrying such sale or sales into execution it should be lawful to the grantee and his foresaids to prorogate and adjourn the day of sale from time to time as they should think proper, previous advertisement of such adjournment being given in the newspapers above mentioned once weekly for at least three weeks, and as if the granter had bound and obliged himself and his foresaids to ratify, approve of, and confirm any sale or sales that should be made in consequence thereof, and to grant absolute and irredeemable dispositions of the lands and others so to be sold to the purchaser or purchasers, their heirs and assignees, and to execute and deliver all other deeds and writings necessary for rendering their rights complete.”

On 3d February 1858 the said A. J. D. Brown and the said Mrs Meiklam's trustees served instruments of intimation, requisition, and protest for payment of their respective bonds on Pearson, John Stewart, and the Western Bank, by which it was intimated that failing payment within three months the said subjects would be sold. In consequence, however, of the then unfavourable state of the market, the intended sale was postponed, and arrangements were made for the management of the property by a factor, who was to draw the rents and apply the same in extinction of the interest on the said bonds. On the 20th April 1864, without any fresh premonition, but after due advertisement for six weeks previously, Brown and Meiklam's trustees exposed the subjects to public roup at the upset price of £11,000. No person having offered the upset price, the sale was adjourned to the day of. This blank was afterwards filled up on 1st August 1866, when the subjects were again exposed for sale in manner to be immediately mentioned, with the date “1st August 1866,” but it remained until that date had been fixed on as the date of the second exposure. On 1st August 1866, without renewed requisitions and intimations of sale, but after advertisement for three weeks (being the period required for advertisement in the case of an adjourned sale), the subjects were re-exposed at the reduced upset price of £10,000, and James Morrison, auctioneer, Glasgow, became the purchaser at that price. On 13th July 1866, while these advertisements were being made, James Stewart wrote to Mr Keyden, the agent for the heritable creditors, stating that he observed the advertisement, and requesting an account of the intromissions of these creditors, and stating that if he found that account correct he would take an assignation to the debt, and take the property into his own hands. This letter is quoted infra in the opinion of the Lord President, as is also a letter written after the sale intimating that James Stewart would hold the heritable creditors liable for any prejudice to his interest arising from the sale. Morrison obtained a disposition from Brown and Meiklam's trustees, as heritable creditors, dated 24th, 27th, 29th, and 30th August, and 3d

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September, which was recorded on 6th September 1866. Thereafter Morrison, by disposition dated the 13th May 1874, sold the subjects to the Scottish Lands and Buildings Company (Limited), who recorded their disposition on 16th May 1874, and were the proprietors of the subjects when this action was raised. James Stewart died in March 1873, and John Stewart in November 1874.

This was an action of reduction which was raised in November 1875 at the instance of John Russell Stewart, artist, Glasgow, immediate elder brother and heir of conquest of James Stewart, and the trustees and executors of John Stewart, against (1) A. J. D. Brown and Mrs Meiklam's trustees, the original bondholders; (2) James Morrison, the first purchaser; (3) The Scottish Lands and Buildings Company (Limited), the second purchasers; and (4) the assignees of the bond granted to Mrs Meiklam's trustees. The pursuers concluded for reduction of (first) the disposition of 1866 in favour of James Morrison, and (second) the disposition of 1874 in favour of the Scottish Lands and Buildings Company (Limited), and for declarator that the pursuers had “the only good and undoubted right and title to the lands and to possess the same, and to uplift the rents, maills, and duties thereof, and that the defenders had no right or title thereto.”

The pursuers pleaded—“(1) The pretended sale of the said lands and others to the defender James Morrison was illegal, because—(First) The intimations required by the statute, and on which the sale pretended to proceed, had fallen by arrangement of parties, or otherwise by mora, and were not renewed. (Second) The subjects not having been sold when first exposed, the day of sale was not adjourned to any specified time. (Third) Assuming that the sale was validly adjourned, the adjournment was to a time too distant, and the intimations which had been made fell by mora or otherwise subsequent to such adjournment. (Fourth) The bondholders did not advertise the adjourned sale.”

The defenders A. J. D. Brown and Meiklam's trustees pleaded—“(1) No title to sue. (6) The sale of the property under the defenders' bonds having been validly carried out in compliance with the statute libelled, the defenders are entitled to absolvitor. (9) The pursuers are barred by acquiescence, taciturnity, and mora.”

The action originally depended before Lord Curriehill (Ordinary), who on 23d February 1876 allowed the defenders a proof of their averment that Stewart's original right was limited; this order, however, was discharged on the discovery of the back-bond. On 13th June 1876 an interlocutor was pronounced by the Lord Ordinary finding, inter alia, “that the pursuers have right to the property libelled, and to the rents thereof, under the disposition by Thomas Pearson to John Stewart, dated 21st December 1855, and to sue for the same, subject to the conditions contained in the said disposition and relative back-bond.” This finding was recalled by the First Division on 16th November 1876, and the cause was remitted back to the Lord Ordinary, who on 29th June 1877 remitted the accounts between the late John Stewart and Thomas Pearson to Mr William Mackinnon, accountant, Glasgow. A second remit was made on 22d February 1881, and the accountant finally reported that a balance of about £600 was due to the pursuers. Thereafter on 16th June 1882 the Lord Ordinary ( M'Laren), after a proof, assoilzied the defenders from the conclusions of the action.

“ Opinion.—This case was argued before me very elaborately, and raises some interesting questions in the law of real property, particularly with reference to the powers and duties of heritable creditors. But in the view I take of it, my opinion may be very shortly stated.

The pursuers are the representatives of John Stewart, house agent in Glasgow, and of James Stewart, his son. They claim to set aside a sale of certain heritable subjects in Glasgow described in the proceedings as ‘The Arcade property,’ at the instance of heritable creditors, in the assumed exercise of the powers of their bond, on the ground of alleged informalities in the proceedings preliminary to the sale. The action is directed against (1) the heritable creditors; (2) Mr James Morrison, the purchaser; and (3) The Scottish Lands and Buildings Company (Limited), purchasers from Mr Morrison. From the nature of the action it might be supposed that it was instituted by the former proprietor, who would have a direct interest to challenge a sale by his creditors to his prejudice. But this is not the case. Mr Pearson, the proprietor, is not objecting to the sale, and Mr John Stewart, whose representatives are prosecuting the action, was not the proprietor of the subjects, but a heritable creditor secured by ex facie absolute disposition subsequent in date to the bonds of the heritable creditors. His son James, who is also represented by the pursuers, is identified in title with his father. The father had at one time granted a sub-conveyance to the Western Bank, and afterwards became bankrupt. After the termination of the proceedings in bankruptcy the Western Bank reconveyed the subjects, not to the father, but to the son. John Stewart, the father, was only a heritable creditor, and it is plain that James Stewart, the son, who was a gratuitous disponee acquiring right to the subjects mediately from his father, could have no higher title than that which the father himself possessed—that of a creditor secured by a disposition qualified by a separate obligation.

The first objection to the sale is, that it was not preceded by an instrument of intimation, requisition, and protest, in terms of the statutory power of sale as defined by 10 and 11 Vict. c. 50, the Act of Parliament regulating the contract. It appears that an instrument in regular form was on 3rd February 1858 served on the proprietor Thomas Pearson, and also on Mr John Stewart and the Western Bank of Scotland. But the subjects were not exposed to sale until 20th April 1864, and the actual sale only took place on 1st August 1866, eight years after the notarial requisition. It is contended by the pursuers that the requisition of 1858 had become ineffectual through lapse of time, and that their constituent was entitled to a second notarial requisition, preceding the sale by the customary interval of three months.

If it were necessary for the purposes of the case to offer an opinion on the question, I should have great difficulty in assenting to the pursuers' proposition that the effect of a notarial requisition and protest can be neutralised or displaced by delay on the part of the heritable creditor in bringing the subjects to sale. No such suggestion

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has ever been made with reference to a notarial protest upon a bill of exchange, and I am not aware that a different principle has been held applicable to notarial protests applicable to bonds. The object of the requisition and protest is to certiorate the debtor in the bond that the contract of loan or agreement for the forbearance to demand the principal of the debt is to come to an end at the next half-yearly term. It converts the borrower's obligation from a conditional promise to pay at the first term to which a demand is applicable into an unqualified obligation to pay at the next ensuing term. On the expiry of the period of premonition the debtor is in mora, and the creditor is entitled to use all the powers which his deed of security confers. These powers have relation to the unpaid debt, and I presume they continue until the debt is extinguished by discharge or prescription. That the debtor should be a second time informed by a notary that his debt is unpaid, and that the creditor may any day exercise his powers of sale, appears to me, to say the least, to be a superfluous proceeding. I do not proceed, however, upon this ground at all. I am of opinion that neither John nor James Stewart were parties to whom a notarial requisition should properly be addressed. They were not debtors in the bond. A charge of payment directed against either would have been instantly suspended, and would have rendered the charger liable in damages. The Stewarts were heritable creditors secured by mortgage, or, as we term it, ex facie absolute disposition and back-bond—a common form of security to banks and public companies. Such companies would be surprised to be told that they were liable to be called to pay the debt of a prior creditor secured by bond and disposition in security. For the same reason I can give no effect to the pursuers' objections to the heritable creditors' proceedings founded on the factory granted by Stewart. This was merely an arrangement of convenience while the powers of sale were in suspense. The act of the heritable creditors in calling up the bond did not in any way displace the creditors' heritable security or deprive them of the right to levy maills and duties from tenants. The granting of a factory to obviate recourse to legal proceedings would not, in my opinion, militate against the creditors' rights to enforce their power of sale when a favourable opportunity should occur.

2. The next and only other objection to the sale is, that it was adjourned from April 1864 to August 1866 by a minute blank in the date of the adjournment, the blank having been filled up apparently before the sale actually took place, and that the adjourned sale was preceded by the advertisements appropriate to an adjourned sale instead of the advertisement for six successive weeks required in the case of a first exposure.

No authority was cited in support of the objection to an adjournment in blank, and the practice is entirely opposed to the pursuers' contention. It is quite settled that blanks in matters immaterial may be filled up by the writer of the testing-clause. It would be in the highest degree inexpedient that the auctioneer, where no offerer appears, should then and there be obliged to fix a day for a re-exposure. The statute requires that re-exposures should be advertised. This is the proper and only useful notice, and if it is fairly given the filling in of the date in the minute is of very little consequence.

As I hold that the sale on 1st August 1866 was an adjourned sale and not a new exposure, it follows that the advertisements were legally sufficient. I do not overlook the circumstance that the adjournment extended over a period of two years, and it is to be regretted that the agents in the sale did not advertise during six successive weeks as in the case of an original exposure. The interests of postponed creditors are under the protection of the Court, and if Mr Stewart had applied for interdict against the intended sale on the ground of insufficient notice it is most probable that the Court would have ordered further advertisement, in order if possible to ensure competition. But no complaint was made, and I cannot say that the advertisement was legally insufficient, nor do I think that there is any evidence of fraud or unfairness in the proceedings of the heritable creditors. Mr Stewart was aware of the sale, because shortly before it was appointed to take place he wrote to the agents demanding an accounting, and offering to pay the debt, but making no objection to the proceedings on the ground of informality. It is clear that Mr Stewart at that time had not the means of paying the debt, and I cannot regard his letter as a bona fide offer of payment. Such an offer could not possibly oblige a heritable creditor to stop a sale. There ought to have been a tender of the principal sum at all events, or an offer to consign that sum in bank pending inquiry into the heritable creditors' intromissions with the rents.

In the circumstances I will assoilzie the defenders with expenses. I understand that my general finding of expenses entitles the Auditor, under the provisions of the Act of Sederunt, to disallow the expenses of a previous part of the case in which the defenders were unsuccessful, and leaves open the question how far the two defenders are entitled to the expense of separate appearances in a case in which their interests were to a great extent identical so far as regards the conclusions of the action.”

The pursuers reclaimed, and argued—They had a good title to sue, as being absolute disponees, and because the accountant in his report had brought out a balance in their favour. No intimation had been made to them of the exposure in 1864, and the intimation given in 1858 having fallen by mora, the provisions of the statute had not been complied with. A person holding an ex facie absolute disposition qualified by a back-bond is proprietor in all questions, except that the debtor has a right to redeem, and therefore John Stewart was entitled to intimation. The minute of adjournment being to the day of, instead of to a day certain, was invalid, and the sale following was not an adjourned sale but a new exposure, and therefore required advertisement for six weeks instead of three. The creditors were bound by the terms of their bonds, and this was not a case in which the debtor was entitled to waive any of his rights.

Authorities— Hagart v. Robertson, December 20, 1834, 13 S. 234; Morrison v. Millar, June 18, 1818, Hume 720; Gardyne v. The Royal Bank of Scotland, March 8, 1851, 13 D. 912— rev. May 15, 1853, 3 Macq. 358; Liquidators of City of Glasgow Bank v. Nicolson's Trustees, March 3, 1882, 9 R. 689; Leckie v. Leckie, November 21, 1854, 17 D. 77; M'Bain v. Wallace & Co., &c.,

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January 7, 1881, 8 R. 360; Fleming v. Imrie, February 11, 1868, 6 Macph. 363; Bell's Lect. ii. 1154; Bell's Comm. (5th ed.) ii. 292; Melville v. Dundas, January 28, 1854, 16 D. 419; Hope v. Moncrieffe, January 26, 1833, 11 S. 324; Dickson v. Magistrates of Dumfries, January 15, 1831, 9 S. 282; Menzies' Lect. (3d ed.) 860; Nisbet v. Cairns, March 12, 1864, 2 Macph. 863; Ersk. Inst. ii. 8, 25; Stair, ii. 10, 22; Campbell v. Bertram, November 10, 1865, 4 Macph. 23; Cowan v. Kinnaird, December 15, 1865, 4 Macph. 236.

The respondents argued—The position of James Stewart was merely that of a postponed creditor, and as such he was not entitled to notice under 10 and 11 Vict. c. 50, sec. 3, his interest being protected by sec. 8, which imposes an obligation on the creditor selling to account for the balance of the price. The statute does not prescribe any term of adjournment, and therefore this case was different from the cases of Hope, Melville, and Nisbet cited by the reclaimers. The adjournment was made in the usual form. The reclaimers' contentions rested on form only, and they did not aver prejudice; but a postponed creditor has no right to interfere with a sale by a prior bondholder without qualifying substantial injury. The reclaimers having been all along in the knowledge of these merely technical objections, were not now entitled to appeal to the equitable jurisdiction of the Court.

Authorities— Wilson v. Stirling, March 14, 1843, 8 D. 1261; Dunlop v. Marshall, January 19, 1821, Hume 666; Bell's Comm. (5th ed.) ii. 292; Beveridge v. Wilson, January 17, 1829, 7 S. 279; Moffat v. Calderhead, June 16, 1825, 4 S. 98; Keir v. M'Arthur's Trustees, December 23, 1848, 11 D. 301; M'Kenzie v. Mitchell and Others, June 25, 1872, 10 Macph. 861; Glas, &c. v. Stewart, May 29, 1830, 8 S. 843.

At advising—