Scottish Court of Session Decisions

Subject_1 BANKRUPT.
Subject_2 DIVISION II.

Alienation after Diligence.
Subject_3 SECT. VII.

Effect of this Reduction.

Cunningham and Others
v.
Hamilton

1682. March.
Case No. No 156.

A common debtor could not prefer one creditor to another, who had charged with horning; but it was found, that the right of the creditor who had used diligence, did not accresce to other creditors who had used none.

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John Cunningham and Others, the creditors of Robert Hamilton, merchant in Edinburgh, having pursued a reduction of a disposition granted to Hamilton his sister, of a tenement and shop in Edinburgh, and of his haill moveables, upon the act of Parliament 1621, as being granted in favours of a conjunct and confident person, in defraud of lawful creditors:—Answered, That the disposition was granted to the defender for an onerous cause, which she instantly instructed, partly by her contract of marriage, whereby her brother was obliged to pay her a certain sum of money of tocher, and partly by bonds of borrowed money, equivalent to the value of the house and moveables disponed.—Replied, That albeit the disposition be granted for onerous causes, it must be presumed to be in default of the creditors, being granted in favours of the sister omnium bonorum; and the disposition of the tenement was kept private and latent, no infeftment being taken thereupon for a year and a half thereafter, and was retenta possessione, the brother having still retained the possession of the house, and kept the shop and sold the goods, and used merchandise as formerly; and the creditors being defrauded ex eventu by the debtor's granting of a disposition of his haill estate, it must be presumed that there has been dolus propositus; and whatever might be pretended, that the sum in the contract of marriage should be sustained as an onerous cause pro tanto, yet the other bonds ought not to be sustained, because they being granted by a brother to a sister, it must be presumed that they had been granted of purpose to be made use of as a part of the cause for which the disposition was granted, so that unless the ground of the debt were otherwise instructed than by these bonds, they ought not to be sustained as a part of the onerous pause of the disposition; and albeit the defender should instruct sufficient grounds of debt, equivalent to the value of the houses and moveables, yet in this case where there is such presumption of fraud, the pursuers, as being lawful creditors, many of whose debts were prior to the disposition; and the common debtor being registrate to the horn, at the instance of some of the creditors, which did make him a bankrupt; their diligence ought to accresce to the other creditors who had done no diligence, so as to give them likewise the benefit of the act of Parliament; they ought at least to be allowed to come in pari passu with the defender, as was decided No 1. p. 879, and No 44. p. 914, where the Lords found that a debtor could not prefer his brother-in-law by granting of a disposition of his estate if he was particeps fraudis, but that he behoved to come in pari passu with the other creditors, albeit they had not done diligence; and the 18th December 1673, the Creditors of Tarpersie against the Laird, No 29. p. 900. where a disposition being granted by a nephew to his uncle, of all his estate, albeit for equivalent sums, seeing thereby the disponer became bankrupt, and he having preferred some creditors to others, and he being fugitive and latent in the Abbey, the Lords found, that the other creditors should have access to the estate, according to their sums, and should come in pari passu, as if the disposition had been made to them all.—Duplied, That albeit the disposition was granted to the sister, yet seeing she instructed an equivalent cause onerous, it ought to be sustained, especially seeing there was no diligence done at the instance of many of the creditors, before the granting of the disposition; and they not taking sasine upon disposition till a year and a half thereafter, is no presumption of fraud, seeing it is ordinary for the creditors to have such rights for payment and security of their debts, and no suffer the debtor to continue in the possession, and not to make use of the rights for a considerable time thereafter, until they find other creditors doing diligence for affecting the lands: And the defender is not obliged to instruct the onerous cause any other way but by the debtor's bonds; and bonds bearing borrowed money are nor reducible upon the act of Parliament 1621, against bankrupts; for the bond itself does sufficiently instruct the borrowing of the money as the onerous cause, as was decided 22d January 1630*, and Monteith against Anderson, No 133. p. 1044.: And it is clear by the common law, and the current of decisions relating to the act of Parliament 1621, That a disposition, granted by a debtor, in favour of a lawful creditor, for payment of his debt, cannot be reduced at the instance of other personal creditors, albeit their debts be prior, if they have done no diligence against the common debtor before the disposition, even albeit the disposition were omnium bonorum and in meditatione fugæ, as was decided 27th November 1629†, and No 25. p. 897. But now, especially in this case, the debtor did continue to keep the shop, and traffic and merchandise, after the granting the disposition, and sibi imputet, that they did not diligence timeously against the common debtor, before the granting of the disposition, cum jura a vigilantibus non dormientibus subveniant. And the decisions adduced by the pursuer do not meet this case; because, in the decision in the year 1629, the acquirer of the right was particeps fraudis; and the decision in the year 1673, the common debtor was fugitive and latent, when the granted the right.

The Lords found that the common debtor could not prefer one creditor to another after diligence done against him by horning, in prejudice of those creditors

* The case alluded to is Hop-Pringle against Ker, Durie, p. 484. voce Proof.

† The case alluded to is Paterson against Edward, Durie, p. 471. voce Fraud.

at whose instance the horning, or other diligence, was used; and therefore reduced the disposition as being simulate; ad bunc effectum, to bring in all the creditors pari passu together, that had used horning or other diligence against the debtor, before the granting of the disposition: But found that the diligence used by these creditors did not accresce to the other creditors that had done no diligence, so as to give them likewise the benefit of the act of Parliament, and to bring them in pari passu with those creditors at whose instance diligence was used, and others in whose favours the disposition was granted, seeing he was not latent nor fugitive, but continued to keep shop and use merchandise, after the granting of the disposition.

Sir Patrick Home, MS. v. 1. No 248. *** President Falconer reports the same case:

In an action of reduction, pursued at the instance of Robert Hamilton, merchant, his creditors, for reducing a disposition granted by him, in favours of his sister and brother-in-law, of his house and shop, upon this reason, that the same was simulate, seeing it was made retenta possessione, he having continued in the possession of the house and shop by the space of two years; and having sold and disposed of the goods as formerly: The Lords found, in respect that the sasine upon the tenement was not taken for a year and a half after the date of the disposition, and that the common debtor continued in possession of the house, shop, and goods, as formerly, and kept an open shop; and the same being all the estate he had till he broke, they reduced the disposition as being simulate, ad hunc effectum, to bring in all the creditors pari passu, according to their diligence. But the Lords did not incline to sustain the reason of reduction following, viz. That by the act of Parliament 1621, he was bankrupt, and at the horn, and so could not dispone to this defender, albeit a creditor, to prefer him to other creditors, the disposition being omnium bonorum, seeing that the horning was not used at the instance of the pursuer, and the common debtor used trading and merchandizing, and kept a public shop long after granting the disposition, and that the defender did offer to condescend upon and to prove the onerous cause, by producing and instructing by bond, that he was creditor ab ante to the common debtor. See Presumption.

Fol. Dic. v. 1. p. 79. Pres. Falconer, No 17. p. 9.