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(1831) 5 W&S 256
CASES DECIDED IN THE HOUSE OF LORDS, ON APPEAL FROM THE COURTS OF SCOTLAND, 1831.
2 d Division.
No. 21.
Subject_Assignation — Partnership — Tack. —
Circumstances in which held (affirming the judgment of the Court of Session) that an assignation of the share of company stock, consisting of leases, had been effectually transferred.
Subject_Right in Security — Retention. —
Held, (affirming the judgment of the Court of Session,) that an ex facie absolute assignation of the share in a company, qualified by a declaration in a back bond, that it was granted in security of a specific debt, entitled the assignee to retain in security of a general balance arising on other debts subsequently contracted.
This was the sequel of the case reported ante, I. 621.
On the 13th of March 1745 a co-partnery was formed, for working quarries at Easdale, under the name of the Marble and Slate Company of Nether Lorn, and on the 23d of May 1748 Lord Glenorchy granted two leases to the partners of that company. Eventually Colin Campbell of Carwhin and John Campbell, cashier of the Royal Bank, Edinburgh, became the sole partners. The son of Campbell of Carwhin succeeded to the estates of Lord Glenorchy and the earldom of Breadalbane, and also to his father as a partner in the company. He was thus the landlord of the company, and also one of the two constituent partners. Thè business of the partnership was carried on by an overseer at the quarries, who superintended the workmen and managed the business generally, while the cash department was confided to the partner, John Campbell, who resided in Edinburgh; he was also agent and manager of the Earl's estates. In March 1813 Campbell obtained, for his accommodation, two bills from the Earl, one for 5,000 l., and the other for 1,000 l.; and in security of the Earl's relief, Campbell, on the 23d of june thereafter, executed an ex facie absolute and unqualified conveyance of “his interest or share in the stock and effects of the Marble and Slate Company of Netherlorn, with all profits or dividends arising therefrom, from and after the 11th day of November last, or from whatsoever day may happen to be the date of the last annual balance of accounts of said company, and all right, title, and interest which he (John Campbell) had thereto, or to the said profits or dividends, or to the tacks, subjects, stock, utensils, instruments, tools, and other implements
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The bill for 1,000 l. was retired by Campbell, but the Earl was obliged to pay the one for 5,000 l.
The deed of assignation was delivered, at the time of its execution, to the Earl, but nothing farther took place till 1818. In that year Campbell was indebted to the Earl, as managing his estates, in upwards of 10,000 l., and announced his inability to pay the amount. In consequence of an arrangement made for
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“My Lord,—I have the honour of your Lordship's letter of the 2d, which I shall have the honour of answering in a day or two. Meantime beg to intimate, that Mr. Clerk, advocate, will point out the steps necessary to be adopted for your Lordship's complete and exclusive interest in the quarries, to prevent any obstruction from the other creditors; and if any thing is necessary, these steps shall be immediately adopted. The disposition in favour of your Lordship was prepared under the advice of the first counsel, and, I should suppose, was all that was necessary, you being entitled to enter into possession whenever you please, and the form of doing this will be pointed out by Mr. Clerk. In the meantime, the money that may come in will be lodged as your Lordship directs, in your own name, for the quarry, at the Royal Bank.”
The Earl had also directed his factor, Duncan Campbell, to require the overseer to take the bills payable in future to the factor. In consequence of this the overseer wrote to John Campbell, stating, that “Lord Breadalbane's factor called here this morning, and intimated his Lordship's wishes, that the bills were to be drawn in future payable to his Lordship's factor. To this I answered, that I would write you on the subject. You will please, therefore, send me the exact form you wish, and the kind of indorsation, to prevent any inaccuracy hereafter, as I find myself at a loss how to act till I hear particularly on the subject.” On the 18th
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Accordingly all the bills drawn after the 31st of May were taken payable to the factor, and delivered to him, and accounts were opened with banks at Glasgow and Leith (where several of the acceptors resided), in the Earl's name simply, and also one with the Royal Bank, which was entitled “The Earl of Breadalbane for Easdale Company.” Payments were drawn by the factor, and the Earl operated on the accounts by orders in his own name.
On the 26th of June a notarial intimation of the assignation was made to the overseer; and, as this was considered to be defective in form, another intimation was made on the 31st of July.
Campbell was rendered bankrupt on the 21st of August 1818, and having executed a disposition in favour of Claud Russel, accountant, in trust for behoof of his creditors, he brought an action of reduction of the assignation on the acts 1621 and 1696, but relying chiefly upon the latter, in respect that intimation had not been made till within sixty days of the bankruptcy. Lord Pitmilly, upon this latter ground, decerned in terms of the libel, and the Court, on the 3d of December 1822, adhered to this interlocutor:
“In so far as it finds, that in respect the granter of the conveyance, or assignation challenged, was allowed to continue in possession of the subject conveyed, and that no intimation of the assignation was made till within sixty days of his bankruptcy, the assignation was not completed to the effect of giving a preference to the assignee, in a question with the creditors of the cedent; but before answer, remit to his Lordship to hear parties further on the conclusions of the libel, and do as he shall see cause.”
The Earl having appealed, a remit was, on the 28th of June 1825
*, made, “to review generally the interlocutors complained of in the said appeal; and in reviewing the same, the Court is especially to consider, how and to whom intimation
_________________ Footnote _________________ * Ante, I. 621.
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Under this remit, the following opinion was delivered by the Lords President, Balgray, Craigie, Gillies, Cringletie, Meadowbank, Mackenzie, Corehouse, Medwyn, and Newton, being the consulted Judges:
“In consequence of the investigations which have taken place, and the productions which have been made in this case since it returned from the House of Lords, we think that the question as to the mode of completing an assignation to a lease does not arise in it. For it appears, that the predecessors of the parties in this case, along with other persons, entered into a copartnery (13th March 1745), under the name of ‘The Marble and Slate Company of Nether Lorn.’ On the 23d May 1748 Lord Glenorchy granted two leases of certain subjects to the partners nominatim, ‘who, by contract, bearing date 13th March 1745, have all entered into copartnery, under the name and title of 4 The Marble and Slate Company of Nether Lorn.’ Two of these partners, Colin Campbell of Carwhin, and John Campbell cashier of the Royal Bank, having acquired the shares of the other members of the company, thus became the only partners; and it appears that the two leases, which would expire in 1801, were, by a deed, dated 6th March 1771, prorogated by the landlord to them equally, their heirs and assignees, for the space of two nineteen years. By an agreement, dated 23d March 1771, on the narrative of the prorogation of the two tacks, and evidently as a part of the same transaction, the two parties, Carwhin and John Campbell, prorogated and prolonged the contract of copartnery for the like term of two nineteen years, ‘to quadrate and agree with the said prorogation.’ Lord Breadalbane, the son of Carwhin, and Mr. John Campbell, the son of the other partner, were, in 1813, the only partners of the company possessing under the prorogated tacks; and the
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interest of each partner in it was merely the share of the profits he was entitled to draw as a partner. On 23d June 1813 Mr. Campbell accordingly granted an assignation of his ‘interest or share in the stock and effects of The Marble and Slate Company of Nether Lorn,’ in favour of Lord Breadalbane, assigning his interest or share, from and after Martinmas 1812, in security of certain sums advanced to Mr. Campbell. Lord Breadalbane did not immediately act on this assignation; but he states, that on 2d June 1818 he gave notice, by a letter of that date, to Mr. Campbell's son, that he was now to avail himself of the assignation; and he desired the money, received in payment of the bills drawn for sales at the quarry, to be paid into the Royal Bank in his name for the quarry, instead of being received by Mr. Campbell as formerly. Mr. Campbell jun. acknowledged the receipt of this letter on the 6th of June. Lord Breadalbane's letter is not produced; and the creditors do not admit that the above was the import of it, though there seems to be strong presumptive evidence of it, both from the terms of the answer of the 6th June, and because immediately afterwards Mr. Campbell did give notice to the manager at the quarry, that the mode of drawing the bills was to be changed; and a new account was also immediately opened with the Royal Bank, in the name of the Earl of Breadalbane, for the Easdale Slate Company; so that, either by the letter of the 2d June, or by some other communication, verbal or written, it is plain that notice was given to the above effect, and that a corresponding change of possession took place, which gave full effect to the assignation 1813. Therefore we hold this to be all that was necessary to secure to one of the partners the share of the stock belonging to the other partner which he had previously assigned to him, being of opinion that the legal form of intimation is not necessary to complete an assignation, whereby one of two partners assigns his share in the company's stock to the other. The notice here given was necessary, only because the assignation had not been operated upon at first, which made it necessary to intimate, that the right under it was for the future to be made available; and, for this purpose, such notice was sufficient. But in this case the transfer is still farther unchallengeable, as the notice was followed up by Lord Page: 262↓
Breadalbane obtaining possession of all bills after that date made payable to the company, as well as the proceeds of such as were then in the circle, as is established by the letter and memorandum of 29th June 1818. The notice of 2d June 1818, and the possession following upon it, were prior to the sixty days preceding Mr. Campbell's bankruptcy, which took place only on 21st August 1818; and therefore we consider Lord Breadalbane's right to Mr. Campbell's interest or share of the stock of the company, subsequent to the above notice, unchallengeable at the instance of the other creditors, who have no title, either by diligence or otherwise, to compete with this assignation.”
On advising this opinion
*, the Court, on the 3d of July 1827, altered the interlocutor appealed from; repelled the
_________________ Footnote _________________ *
Lord Justice Clerk observed, Judgment must of course be pronounced in conformity to the opinion of the consulted judges; but I am not prepared to assent to all the propositions contained in that opinion. I have the greatest repugnance to the transference of the share of a partner kept concealed from the world, the partner being allowed to go on with the management. Suppose the company had been involved in ruin, could this man have been relieved of his liability by what has taken place? In such a case the Court would be obliged to determine whether something more was not necessary to transfer than a simple assignation. Then as to the supposed change of possession, it rests on a very narrow basis. It may have been a very convenient arrangement, but I can see no change of possession, or such a transference as in my opinion the law requires.
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Under this remit the Earl maintained, that as he had an unqualified assignation to Campbell's share, he was entitled to retain it in liquidation, not only of the 5,000 l., but also of all other debts contracted and due to him by Campbell posterior to the date of the assignation. On the other hand, the trustee maintained, that as the assignation was qualified and restricted by the back bond, the assignation could not be extended to any other debt than that in respect of which it had been granted. The Lord Ordinary found, “that the defender (the Earl) has right to retain possession of the share in the Easdale concern libelled, until all the debts due to him by Mr. John Campbell, and contracted after the date of the assignation of the said share, shall be paid;” and assoilzied the Earl from the declaratory conclusions of the libel, and found him entitled to expences. He also issued the subjoined note of his opinion. † The trustee reclaimed, but the Court ‡ on the 18th of June 1829 adhered. §
Russell appealed.
Appellant.—1. The deed of assignation in favour of the respondent being a conveyance of Campbell's right to certain
_________________ Footnote _________________ * 5 Shaw and Dunlop, 891. † “The Lord Ordinary conceives that it is not possible to view this as a case of a right in security, limited by its own nature, and incapable to afford a title of right to more than is sufficient for the payment of the debt secured. In this case the assignation is not limited. It warrants entire possession in the share of the concern, and that simply and absolutely; and accordingly the back bond binds the defender to reconvey and account for the profits. It does not seem to the Lord Ordinary possible, without contradicting the principle established by a series of decisions, to find that the defender is bound to reconvey and account, without notice of the debt afterwards incurred to him by Mr. Campbell.” § 7 Shaw & Dunlop, 767. ‡
Lord Justice Clerk observed, I expected a greater attempt would have been made by Mr. Russell to draw a distinction between this case and those cited by
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2. As the assignation was granted expressly in relief of two obligations specially mentioned in the back bond, the respondent cannot make use of that assignation as a security for the general balance due to him by Campbell. It may be true, that in questions with third parties, or in relation to heritable rights, the qualifications of a back bond may be ineffectual; but this is a question with the assignee and granter of the back bond, and relative to a right of a personal nature. The case, therefore, must be judged of as if the qualifications of the back bond appeared on the face of the assignation, and in such a case it is undoubted that the respondent would not enjoy a more extensive benefit than that which appeared from the terms of the deed itself.
_________________ Footnote _________________
Lord Breadalbane; for otherwise, the principle being laid down in those cases that where the conveyance is out and out, though with a back bond, effect must be given to it, even as to subsequent advances, we cannot alter the interlocutor without going in the face of those decisions, which, notwithstanding the ingenious argument on the part of Mr. Russell, I cannot feel myself warranted to do. A case, it is true, occurred this session, where goods deposited by a party in possession of them were held not subject to retention for future contractions (Stuart & Fletcher, May 19, 1829, 7 S. & D. 622.) That arose, however, from the circumstance, that the depositation was for custody alone, and no other purpose; and I think that case steers clear of those quoted by Lord Breadalbane; and although I felt a difficulty in that case, I am for adhering in the present.
Lord Glenlee .—I rather think the interlocutor right.
Lord Pitmilly .—I also think that this case must be ruled by those already decided. and in particular by the case of Admiral Maitland (Nov. 23, 1827, 6 S. & D. 109.), which has so fixed the matter that it is impossible to get over it. Were it not for it, however, I should have had great doubt, considering that this is not a question with third parties, but with Lord Breadalbane himself, competing with other creditors in the face of his own back bond.
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Respondent.—1. The respondent stands in a double position. He is, with reference to the leases, the landlord, and is also a partner in the stock of the company. The leases form part of that stock, and the question relates mainly to the transfer of Campbell's share of the stock. But in either view the right of the respondent was complete prior to the sixty days preceding the bankruptcy. The delivery of the assignation was in either case sufficient. In relation to the transaction as one between landlord and tenant, it was a direct yielding up of the possession by the tenant to the landlord, and it would have been absurd for the respondent to have gone through the ceremony of intimating the assignation to himself. Again, with reference to the share of the stock, the delivery also operated a complete transfer; for as the respondent and Campbell were the only partners, and they could not fail to be aware of the deeds to which they themselves were parties, any farther intimation, either to the one or to the other, would have been idle. Neither was there any necessity for intimation to the overseer, who was merely the servant of the respondent and Campbell; and he could have done nothing more than have made them aware of what they already knew perfectly, that the share had been transferred. But in fact there was actual possession by the respondent, independent of the mere delivery, more than sixty days prior to the bankruptcy.
2. It has been settled by a series of decisions, and especially by the case of Maitland, that an ex facie absolute disposition or assignation, although qualified and restricted by a back bond, entitles the disponee or assignee to hold possession, not only in security of the sums originally advanced, but also of those subsequently contracted. This rests upon the plain principle, that the bankrupt, or any other person in his right, cannot insist on being reinvested till he shall do justice by repaying those advances which have been made in reliance on the security thus created.
Lord Chancellor.—My Lords, this case, if it were to be made the ground of laying down a general rule of law, or any general doctrine touching the right of making assignments, would rise into one of much more importance than now belongs to it. The noble
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_________________ Footnote _________________
* Lord Gifford.
† 1 Wilson and Shaw, 621.
‡ 5 Shaw and Dunlop, 891.
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The House of Lords ordered and adjudged, That the interlocutor complained of be affirmed.
Appellant's Authorities.—(1.)—3 Ersk. 5, 5, 6; Syme's Trustee, May 23, 1806 (No. 13, Appendix, Tack); 1 Bell, 67; 2 Ersk. 6, 25; 3 Stair, 2, 6; Kelk. 45; 2 Bell, 11; Douglas, June 6, 1794 (2802); Yeoman, Feb. 2, 1812; Brock, Nov. 29, 1822, (2 S. & D. 52, and 3 W. & S. 75), and March 5, 1830, (8 S. & D. 647; Watson, Nov. 19, 1750 (850.)
Respondent's Authorities.—(1.)—3 Stair, 1, 9; 3 Ersk. 5, 4; 2 Bankton, 193.—(2)—3 Ersk. 4, 20; Brough's Creditors, Nov. 26, 1793 (2585); Dougall, June 11, 1794 (Bell's Cases, 41); Robb's Creditors, June 7, 1808 (No. 5, Appendix, Compensation); Maitland, Nov. 23, 1827 (6 S. & D. 109); 1 Bell, 5.
Solicitors: Spottiswoode and Robertson— J. Chalmer,—Solicitors.