Scottish Court of Session Decisions

Under a settlement made in contemplation of marriage between Henry Thomas Lumsden and Susannah Edmonstone, dated 28th April 1832, there were inter alia conveyed, for the purposes of the settlement, two sums of £5000 and £3500 3 per cent. consols. These sums Mr Lumsden subsequently borrowed on separate occasions from his marriage-contract trustees, and the stocks were transferred from their name to his. In return, by two bonds and dispositions in security, dated respectively on 28th March 1849 and 9th November 1858, and duly recorded, he bound and obliged himself, his heirs, executors, and representatives whomsoever, at any time during his life or after his death when required, in manner provided for in the bonds, “to purchase and transfer, or procure to be transferred in the books of the Governor and Company of the Bank of England, unto and into the names of the trustees or the survivors or survivor of them, or their representatives,” the capital stocks or sums of £5000 and of £3500 three pounds per centum Consolidated Bank Annuities, “and that upon or within the day or time to be specified in the notice to be given to or left for me in manner after mentioned.” He also bound himself and his foresaids to pay to the grantees sums equal to the interest and dividends which would have accrued on the stock had they remained in the grantees' names, and at the time when such dividends would have become payable. In security of these obligations he disponed to the trustees the lands of Guisway or Cushnie, of which he was fee-simple proprietor.

By disposition and settlement dated 28th October 1867 Mr Lumsden granted and disponed the lands of Guisway or Cushnie to his wife Mrs Susanna Edmonstone or Lumsden, in the event of her surviving him, in liferent, for her liferent use allenarly, and to the heirs of his body in fee, whom failing to certain other parties. The disposition and settlement was recorded in the Register of Sasines on September 17, 1886.

Mr Lumsden died on 19th November 1867, and up to that date he had regularly paid and accounted for the interest or dividends on the two sums of £5000 and £3500 consols; but had not retransferred these stocks to the trustees under his marriage settlement.

In virtue of the disposition and settlement Mrs Lumsden succeeded on Mr Lumsden's death to the estate of Guisway, and enjoyed the life-rent of it till her death on 18th April 1886. She was succeeded by Sir William Samuel Seton.

The present action was brought by Charles Welland Edmonstone and William Trotter, the surviving trustees under the marriage-contract.

They called as defenders the heirs of entail of the lands of Guisway, and sought, inter alia, to have it declared that by the bonds and dispositions in security before mentioned, valid securities had been created over the lands of Guisway for the obligation to purchase and transfer to the trustees the two sums of £5000 and £3500 3 per cent. consols, or for the sums of £5000 and £3500, or for a sum equal to the value of the stocks either at the date of the bonds or of citation in the summons, or for an annual payment of £255 till the stocks should be transferred.

The defenders pleaded—“(2) The said two bonds are not effectual incumbrances upon the said estate, in respect that they are truly obligations ad factum prætandum, or otherwise are obligations for the payment of an indefinite and unascertained amount. (3) The obligation undertaken by the granter of the said bonds being of a personal nature, is primarily enforceable against his moveable estate, and the holders of his moveable estate have no right of relief against his heritable estate.”

The Lord Ordinary pronounced the following interlocutor on 31st January 1888:—“Finds that

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the bonds and dispositions in security libelled in the summons create good and effectual securities over the lands thereby disponed, and that the heirs or gratuitous disponees of Henry Thomas Lumsden take the said lands under burden of the said securities without relief against his executors: Appoints the cause to be put to the roll for further procedure, &c.

“ Opinion.—The first question is, whether the two bonds and dispositions in security libelled in the summons are good charges upon the lands thereby disponed? The late Mr Lumsden had borrowed from his marriage-contract trustees two sums of £5000 and £3500 3 per cent. Consolidated Annuities standing in their names in the books of the Bank of England. These sums were accordingly transferred from their names to his, and by the bonds in question he binds himself, and his heirs, executors, and representatives, when required, in a certain manner, or if not required during his life, then within six months after his death, to purchase and transfer, or procure to be transferred to the trustees, the like sums of £5000 and £3500 3 per cent. consols, and in the meantime to pay to them the amount of the interest which would have become due and payable to them upon the transferred stock if it had been left standing in their names. In security of these obligations he dispones his lands of Cushnie or Guisway and others; and in case the granter or his heirs or executors shall make default in transferring the stock or in paying interest, each of the bonds contains a provision that in that case it shall be lawful for the trustees to recover payment of such a sum as will at the time be sufficient to purchase the stock and replace the interest which may be due.

The defenders maintain that these are not effectual securities upon the lands, because the obligations secured are ad factum præstandum, or otherwise are obligations for payment of an indefinite and unascertained amount. The primary obligation to purchase and transfer a certain amount of Government stock is in form an obligation ad factum præstandum. But it results in the payment of money; and it does not appear to be very material to the question whether it is in form an obligation to pay or an obligation to transfer.

There can be no doubt that an obligation ad factum præstandum may be made a real burden on land, and the only question in either view is, whether it is sufficiently definite to satisfy the rule of law that no indefinite or unknown burden can be created on land.

On this question I am of opinion that the defenders' plea is not well founded. An obligation to assign a definite proportion of thse National Debt is not, in my judgment, an indefinite obligation in the sense of the rule upon which they rely. I do not think that the cases cited of Stein's Creditors and Tod v. Dunlop are apposite, But even if it were to be held that an obligation to transfer the specified amount of Government stock when required to do so is too indefinite to be well secured on land, the same objection would not apply to the obligation which is immediately prestable to pay annuities equal to the interests payable in respect of such stock. It is said that the undertaking to pay interest is merely accessory, and that the validity of the security must depend upon the character of the principal obligation alone. But the amount of the interest is in no way affected by the considerations which are said to make the principal obligation uncertain. It is not the interest upon an indefinite or variable capital sum that is to be paid, but a sum equal to the interest which the Government pays upon £5000 or £3500 of 3 per cent. consolidated annuities. In other words, it is an annuity equal to 3 per cent. upon each of these specified sums. The obligation to pay such annuities is perfectly definite, and there appears to be no reason why it should not be made a burden upon land.”

The defenders reclaimed, and argued—(1) As to the capital sums. The obligation here sought to be imposed was really an obligation to pay money, but not a definite sum, and owing to its indefinite nature it could not be made the subject of a good and valid burden upon land. Suppose the obligation were held to be an ad factum præstandum obligation, there was no instance of an ad factum præstandum obligation not being inter naturalia of the right of possession being held to be validly imposed as a real burden upon land. (2) As to the interest. This was merely an accessory obligation to the payment of the capital sums, and if the principal obligation were not validly imposed upon the lands neither was the accessory. It was also not an obligation of a continuing nature, but merely lasted so long as the capital should be unpaid, whether such payment were made by the heir or the executor—Bell's Comm. (7th edition) i. 730 (5th edition, i. 690); Newnham (Stien's Creditors) v. Stewart March 25, 1791, and March 10, 1794, 3 Pat. App. 345; Magistrates of Edinburgh v. Begg, December 20, .1883, 11 R. 352; Coutts v. Tailors of Aberdeen, December 20, 1834, 13 S. 226; Tod v. Dunlop, December 13, 1838, 1 D. 231.

The respondents were not called on.

At advising—