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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> M'Kenzie v Gordon [1838] CS 16_311b (16 January 1838) URL: http://www.bailii.org/scot/cases/ScotCS/1838/016SS0311b.html Cite as: [1838] CS 16_311b |
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Page: 311↓
Subject_Right in Security — Confusio — Trust — Litigiosity. —
1. The proprietor of an estate which was burdened with real securities in favour of A and others, granted a security in favour of B, who was infeft; the proprietor then granted a private voluntary conveyance of the estate, ex facie absolute, to a party as his trustee and agent, for the more convenient payment of his debts; the trustee paid the securities held by A and others, and took a conveyance to them ex facie absolute, in his own favour; after holding them, in some instances for about six months, he
conveyed them to parties making new loans to the proprietor, on the proprietor's heritable bond, along with which these were conveyed as auxiliary securities; for the most part, the securities of A and others were retired by the trustee with the money of the new lenders, and, in all instances, the new lenders stipulated, when making the loan, that the securities of A and others should be conveyed to them by the trustee, as auxiliary to the proprietor's heritable bond; in a ranking and sale of the estate there was a shortcoming of the price:—Held, that the securities of A and others did not become extinguished confusione, by being vested in the trustee, hut were kept up, and effectually conveyed to the new lenders, so as to be preferable, in competition with the real right of B.—2. A party held, as a principal security, a heritable bond and disposition in security by a proprietor for £25,000; he also held several smaller heritable bonds, and heritable bonds of annuity, as auxiliary securities; the principal security was posterior in date to the real right of B, and the auxiliary securities were prior in date to it; the party drew interest on the bond for £25,000, for several years after a ranking and sale of the estate was in dependence; there was a shortcoming on the price, and the party then be-took himself to his auxiliary securities:—Held that he was not bound to impute to them any of the interest which he had drawn on his bond for £25,000, and was entitled to rank for the whole annuities, and whole interest, accruing on the auxiliary securities in the mean-time, without abatement, as well as for the principal sums therein.—3. The creditor, in a heritable bond for £25,000, was infeft in certain minor heritable bonds and annuities, as auxiliary securities, to which he acquired right in 1819; in 1823 a new lender paid him the sum of £25,000, and obtained a conveyance of the heritable bond and of the auxiliary securities, with the annuities and interests accruing thereon, from and after 1823; afterwards a ranking and sale of the estate took place, and the original creditor executed a supplementary conveyance to the new lender, embracing the annuities and interest accruing on the auxiliary securities between 1810 and 1823, on the narrative that this was in implement of the original agreement at the date when the new lender advanced his money:—Held that the supplementary conveyance was effectual in competition with a heritable creditor whose right was posterior in date to the auxiliary securities.—4. The holder of a heritable security disponed it in security of a loan; he afterwards paid the loan, taking a discharge and renunciation:—Held that the discharge freed his original right of the incumbrance which he had created over it, and that he could effectually dispone it anew, without having obtained any retrocession.
In 1804, Alexander Hume or M'Leod, proprietor of the estate of Harris, granted a bond and disposition in security over it for £3000, afterwards reduced to £2000, in favour of John Stewart, residing at Dalmeny, who was duly infeft. In 1807, Hume granted to Edward Howard a heritable bond of an annuity of £1000 per annum, during the survivorship of certain lives, which were not extinct when the judgment, after-mentioned, was pronounced, Howard was duly infeft. In 1808, Hume granted a heritable bond of annuity for £285, to Mrs Wallace or Cunningham, who was thereon infeft. In 1810, Hume granted a bond and disposition in security for £1500, to William Dallas, W.S., as trustee of Patrick Bowie of Keithock, who was duly infeft. Hume died in 1811, leaving a settlement by which the estate of Harris was disponed to his eldest son Alexander Norman M'Leod, under burden of an annuity of £300, in favour of Donald Hume M'Leod, his youngest son, besides other provisions in favour of the other younger children, all which were declared real burdens. Under this disposition, M'Leod was infeft in the
estate in 1812, and, having granted to Donald Hume M'Leod and his other brothers and sisters a heritable bond of corroboration of their provisions, they were infeft under that heritable bond in 1812. M'Leod then executed a disposition of the estate of Harris to Dallas, which was ex facie absolute, though truly in trust for the purpose of paying off debts. This was a private voluntary trust. 1
In 1813 an arrangement was made, by which a sum of £10,000 was borrowed on the part of M'Leod from Thomas Newte, formerly of Llandaff, for the purpose of being applied, to the extent of £7500, in redeeming the annuity to Howard. In carrying through this arrangement, M'Leod, on 14th January and 5th February, 1813, granted to Newte, with consent of Dallas, a heritable bond of annuity for £850, over the estate of Harris, to subsist during the joint lives of Newte and certain other parties. In reference to this transaction, Howard, on 1.3th February, 1813, granted a disposition and assignation, ex facie absolute, in favour of Dallas, his heirs and assignees, narrating, that “now seeing that William Dallas, W.S., has made payment to me of the foresaid sum of £7500, being the sum stipulated in the foresaid indenture to be paid for the repurchase of the said annuity of £1000, whereof I hereby acknowledge the receipt, renouncing all objections to the contrary; therefore I have sold and disponed, likeas I hereby sell, alienate, and dispone, to and in favour of the said William Dallas, his heirs and assignees, heritably, but redeemably always, and under reversion,” the bond of annuity and the lands and heritable security. In farther security of the bond of annuity granted to Newte by M'Leod, Dallas, in February, 1813, disponed and assigned to Newte a part of the original annuity in Howard's bond, to the extent of £850, which was declared to be payable “so long as the said annuity, payable to the said Thomas Newte and his foresaids, in terms of the foresaid bond by the said Alexander Norman M'Leod, shall remain unredeemed.” This disposition was not produced, but it appeared from the sasine, to have proceeded on the narrative that it was stipulated when Newte agreed to advance the £10,000, that he should receive this collateral security besides M'Leod's heritable bond of annuity. On 10th April, 1813, Dallas was infeft under the conveyance of Howard's annuity to him; and, on the same day, Newte was infeft both under the heritable bond of annuity for £850, granted to him by M'Leod with consent of Dallas, and also under the conveyance to him by Dallas of £850, of Howard's annuity, as a collateral security.
On 21st October, 1813, the £2000 due to Stewart under his heritable bond was paid, and Stewart executed a disposition and assignation, ex facie, absolute, to Dallas his heirs and assignees, acknowledging the receipt of the £2000 from Dallas. Dallas took no infeftment under that
_________________ Footnote _________________
1 This trust-deed was not produced; but it was founded on as being of the above tenor.
conveyance. On 23d and 26th November, 1813, M'Leod having borrowed a sum of £3000 from Colonel Deas, granted, with consent of Dallas, a heritable bond of annuity to Colonel Deas, whereby M'Leod became bound to pay to Deas an annuity of £385, during the life of Mrs Deas; and while the annuity was unredeemed, Dallas bound himself as cautioner for the payment of this annuity, so long as he remained the trustee and agent of M'Leod; and M'Leod and Dallas disponed the estate of Harris in security of the annuity. Dallas also disponed and assigned to Colonel Deas, in farther security of the annuity, the balance of Howard's heritable annuity of £1000, not conveyed to Newte, being £150; and Stewart's heritable bond for £2000. As Dallas was not infeft under Stewart's conveyance to him, he assigned the unexecuted precept to Colonel Deas. M'Leod, at the same time, executed a corroboration of the bond by Hume, his father, to Stewart, and of the bond of annuity to Howard. The conveyance by Dallas and M'Leod, bore, that these collateral securities were disponed “for and in real security to the said Alexander Deas and his foresaids, for the said annuity of £385 yearly, and each year during the natural life of the said Mrs Catherine Low or Deas, and while the said annuity remains unredeemed.” The precept of sasine contained a clause of redemption declaring that, on payment of £3000, “the foresaid annuity shall be held to be duly and lawfully redeemed, and this bond and disposition in security, and infeftment to follow hereupon, shall henceforth become void and of no effect, any thing herein to the contrary notwithstanding, and the said Alexander Deas and his foresaids shall be obliged to execute, at the expense of me the said Alexander Norman M'Leod, all deeds that may be necessary for renouncing and discharging the several securities hereby created.” Colonel Deas was infeft on 3d March, 1814.
In 1817, William Inglis, W.S., became commissioner and trustee for M'Leod, in place of Dallas, who denuded of the trust, in his favour. On November 3, 1817, M'Leod effected, through the agency of Inglis, a loan of £25,000 from the late Francis Grant of Kilgraston, and it was the intention of parties, when the loan was agreed to, that M'Leod should not only grant his own bond for the amount, with a disposition of the estate of Harris in security, but that he should also cause to be conveyed to Grant, as collateral securities, the bond of annuity originally granted to Howard; the bond and disposition in security originally granted to Stewart; and the two other securities already mentioned as having been granted, one to Dallas for Patrick (afterwards Alexander) Bowie, and one to Mrs Cunningham. In regard to the details respecting these two last securities, there was no variation in the circumstances which raised any question of principle which was not involved in the conveyance of the first two.
On Nov. 3, 1817, M'Leod accordingly granted a heritable bond for £25,000, over the lands of Harris, in favour of Grant, under which Grant
On 1st January, 1818, Newte granted a discharge and renunciation, in which his wife was a concurring party, in respect of an interest which she had acquired from Newte. In reference to the bond of annuity for £850, granted directly by M'Leod to Newte, this deed set forth that “we do, by these presents, not only exonerate, acquit, and simpliciter discharge the said A. N. M'Leod, and his heirs, executors, and successors, of the foresaid annuity”—“and of the said heritable bond of annuity and sasine thereon, themselves:”—“but also we, with mutual advice and consent, in so far as we are respectively interested as aforesaid, do hereby grant, confess, and declare, the foresaid annuity of £850 sterling, to be duly and lawfully redeemed from us and each of us, and the heirs, successors, and representatives of me the said Thomas Newte, and the foresaid lands and estate of Harris and others before described, out of which the same was upliftable, and conveyed in security thereof, to be loosed and disburdened of the same, and of the infeftment above-mentioned, in favour of me the said Thomas Newte; and we do, accordingly, renounce and for ever release the lands and estate of Harris and others before described, together with all right, title, and interest, which we, or either of us, have, or can claim, or pretend thereto, or to any part or portion thereof, in virtue of the said heritable bond of annuity, and infeftment thereon, to and in favour of the said Alexander Norman M'Leod and his foresaids, to be by them enjoyed and possessed, freed and disburdened of the said heritable bond of annuity and infeftment thereon, in all time coming, the same being now and for ever extinguished.” The deed then proceeded, in regard to the collateral security conveyed by Dallas to Newte, “And farther, we have renounced and discharged, as we do hereby, with mutual advice and consent as aforesaid, and so far as we are respectively interested as aforesaid, renounce and discharge the real and additional security created by the said disposition and conveyance in security by the said William Dallas, in favour of me the said Thomas Newte, in so far as the same is conveyed to me, for my further security of the payment of the said annuity, stipulated by the said heritable bond of annuity, the foresaid annual rent or annuity of £850 sterling, being a portion of the foresaid original annual rent or annuity of £1000, and
In similar terms the trustees of Colonel Deas, now deceased, on receiving payment of the £3000, being redemption money of his annuity, executed a discharge and renunciation of the heritable annuity granted in his favour by M'Leod, and the relative infeftment: and also of the conveyance by Dallas of £150, being part of Howard's original annuity of £1000; and of the disposition and assignation by Dallas, of Stewart's heritable bond, so far as these two latter rights were conveyed to Colonel Deas in farther security of M'Leod's bond of annuity. Dallas then, on 1st August, and 15th September, 1818, with consent of M'Leod, executed a disposition and assignation to William Inglis, W.S., of Howard's heritable annuity, and Stewart's heritable bond. The deed set forth that he (Dallas) “some time ago acted as trustee for Alexander Norman M'Leod, Esq. of Harris, and in that capacity acquired right, in manner underwritten, to the heritable securities, and lands and others after specified, and seeing that the said trust is now at an end, and that I have resolved, in compliance with the wish of the said Alexander Norman M'Leod, to convey and make over the said securities standing in my person in favour of William Inglis, writer to the signet; Therefore I, the said William Dallas, with consent of the said Alexander Norman M'Leod, who, in token thereof, has subscribed these presents, have alienated, disponed, and conveyed, as I by these presents alienate, dispone, and convey, to and in favour of the said William Inglis, and his heirs, successors, assignees,” &c.
Dallas also having received payment of Bowie's bond for £1500, as already mentioned, disponed and assigned it to Inglis; and Mrs Cunningham, on being paid the redemption money of her annuity as above mentioned, also disponed and assigned it to Inglis. At the date when Dallas denuded of the trust, he was indebted to M'Leod, in the sum of £126.
Francis Grant of Kilgraston having died, some delay occurred before his trustees made up a title to the bond for £25,000. After they had done so, Inglis, on March 30, 1819, executed a disposition with concurrence of M'Leod, which narrated the loan of £25,000 by Grant; the principal security therefor granted by bond and disposition by M'Leod in Nov. 1817; and “that in the treaty for the foresaid loan, it was stipulated and agreed, that the sum lent, should, so far as necessary, be applied in procuring conveyances of the sums due by the several heritable bonds and securities herein after disponed, affecting the foresaid lands and others, and that the
Pleaded by W. M'Kenzie, D. II. M'Leod's Trustee—
1. (1.) Each of the four heritable securities was merely accessory to an obligation, in which Alexander Norman M'Leod became the full and proper debtor by representing his father. If he had paid any of these debts, and taken a conveyance to himself, the effect would necessarily have been to extinguish the debt, confusione, and to evacuate the accessory security, so that neither the old debt or security could be again revived. Because he was the sole debtor, and he had not two distinct characters in him, such as an heir of entail possesses, when he pays a debt affecting the entailed estate. So soon, therefore, as he paid his own debt, the debt was at an end, and the conveyance to himself might strengthen, but certainly could not prevent, the operation of the principle of confusio.
The claimants were creditors holding real rights, and relying on the records. If debts, prior to theirs, were paid by the debtor, and so extinguished, whether for a longer or shorter period, they were entitled to maintain that the debtor, on afterwards making a new loan, or otherwise, should never revive the extinct debt and security to their prejudice.
In this question, Dallas was to be viewed as identified with his constituent M'Leod. He was the mere agent and trustee of M'Leod, under a private trust which had been voluntarily granted by M'Leod, and might be terminated quandocunque. At denuding of the trust, Dallas was indebted to M'Leod in £126; and throughout the trust he made no advances from his individual funds, the debts of M'Leod, so far as paid by him, being paid out of new loans made to M'Leod through his agency. Dallas was thus the mere hand of M'Leod, possessing no rights or character distinct from his; and his act must be viewed, to all legal effects, as the act of M'Leod himself.
Keeping these points in view, and taking, in the first place, the annuity of £385 granted to Colonel Deas in November 1813, it would appear that the two collateral securities conveyed to him were then already extinguished. The first of these was a portion of Howard's annuity, amounting to £150. But that annuity had been redeemed from Howard in February preceding, out of the money borrowed from Newte. And Howard had granted a conveyance, ex facie absolute, to Dallas, who was thereon infeft, and had held the conveyance ever since, and who had in him no right or character which could prevent him from being identified with M'Leod. And as Dallas was invested with a right to the estate of Harris, which was ex facie absolute; and the conveyance of the securities to him was, in like manner, ex facie absolute, there was nothing either in form or principle to exclude confusio. For above six months, therefore, the portion of the annuity so conveyed to Colonel Deas had been an extinct right, as much as if it had been directly paid
For the same reason, the conveyance of Stewart's heritable bond to Colonel Deas was ineffectual. It had been paid up on 21st October, and conveyed to Dallas. The annuity to Colonel Deas was granted on 23d November. During the intermediate period, that heritable bond had come to an end by being paid out of M'Leod's funds, and conveyed to an individual, identified with M'Leod. And the same principle also applied to the conveyance of £850 of Howard's annuity to Newte. Even supposing it to have been the understanding of parties when the loan of £10,000 from Newte was contracted in February 1813, that this portion of Howard's annuity should be conveyed to him as a collateral security, still the mode which had been adopted was inept, as it extinguished the whole annuity before it was conveyed to Newte. It was not conveyed directly from Howard to Newte, but from Howard to Dallas, who took infeftment in it, and then conveyed £850 of it to Newte. But so soon as the full right came into the person of Dallas, the obligation became extinguished, confusione, and the security fell, beyond the power of revival.
On similar grounds, the other two collateral securities of Bowie's bond, and Mrs Cunningham's annuity, became extinct in the person of Inglis, as identified with M'Leod. And as none of these collateral securities were effectually conveyed to Grant's trustees, the right of Gordon's trustees, derived from them, was inept.
(2.) But if Howard's annuity and Stewart's bond were effectually kept up in the person of Dallas, and conveyed to Newte and Deas, still, as Dallas was completely divested by their infeftments, and as they never granted a retrocession to him, but merely executed a discharge and renunciation in 1817, Dallas was not in titulo to convey these securities to Inglis. His conveyance was therefore inept, and, on this separate ground, these securities had never been effectually conveyed to Gordon's trustees. This was especially apparent, as regarded Stewart's heritable bond, because Dallas was never infeft under the conveyance to him from Stewart, and he assigned Stewart's unexecuted precept to Deas. As Deas never retrocessed Dallas, no effectual mode had been taken for enabling Dallas, or his disponee Inglis, to convey the real right of Stewart's heritable bond to Gordon's trustees.
(3.) The heritable bond for £25,000 and disposition in security was granted by M'Leod on November 3, 1817. The conveyance of the collateral securities by Inglis was not executed till March 1819. There was no sufficient evidence to show that this last conveyance was part of the original agreement with Grant, when the loan of £25,000 was agreed to: and unless it were so, Grant had not lent his money on the faith of
2. But even if the collateral securities were effectually conveyed, to Gordon's trustees, still they could only claim the interest and annuities accruing under them since 1823, in terms of their original conveyance of that date from Grant's trustees. The supplementary conveyance of annuities and interest since 1819, the date when the right of Grant's trustees began, which was executed during the dependence of the ranking and sale, ought not to be effectual, both, as it was affected by the plea of litigiosity, and as it was not made at the time when Gordon's trustees advanced their money, and it must therefore be presumed that their money was not advanced on the faith of it. Besides, Grant's trustees were divested by the conveyance to Gordon's trustees, as they then received full payment of £25,000, and they had no right to the collateral securities, except so long as that sum was unpaid.
3. Independently of this, the interest drawn by Gordon's trustees on the heritable bond for £25,000, at least since the process of ranking and sale was raised, ought now to be imputed, ante omnia, in satisfaction of the collateral securities. That bond was posterior to the real right of the younger children. It was only the sums due under the collateral securities which were anterior to them: and if Gordon's trustees betook themselves to these collateral securities, they must impute to them the interests drawn under the postponed security: otherwise, the right of the younger children would not only be postponed to the prior collateral securities, but to the subsequent heritable right, in so far as interest had been paid upon it.
4. It would appear, on due inquiry into the titles of Harris, that the collateral securities were so expressed as to affect only a part of the estate: quoad ultra, they could not be preferred to the claimants on the price.
Pleaded by Gordon's Trustees—
1. (1.) It was the intention of parties, when the prior securities held by Howard, and Stewart, were paid, that they should be kept up as a fund of credit to M'Leod, and as an additional security to be given to parties from whom he might borrow money. This was a fair and legitimate purpose: and it was effectually executed by the interposition of Dallas as a trustee. Though appointed under a private voluntary trust, that trust was executed for the extrication of M'Leod's affairs, and paying his debts. And in every transaction entered into, for this purpose, though Dallas was the agent and trustee of M'Leod, there were other rights than those of M'Leod alone involved, so as to separate Dallas from being, legally, in a position of identity with M'Leod. There were the rights of the parties with whom new loans were contracted, on the understanding that the old securities were to be conveyed to them, through the instrumentality of Dallas; besides this, Dallas himself contracted various
In regard to the conveyance of £850 of Howard's annuity to Newte, which was done unico contextu with Newte's advance of £10,000, and receiving a heritable bond of annuity from M'Leod, it was clear that Howard's annuity did not become extinct by being merely conveyed by Howard to Dallas, and by Dallas to Newte, the whole being parts of one transaction. And although the balance of £150 of Howard's annuity was not conveyed by Dallas to Colonel Deas for several months afterwards, and Stewart's heritable bond had also been held by Dallas for a month before conveying it to Colonel Deas, these debts were all the while subsisting, with their accessory securities in the person of Dallas, and were effectually conveyed to Colonel Deas.
For the same reasons the other two collateral securities, Bowie's bond and Mrs Cunningham's annuity, were not extinguished in the person of Inglis, who succeeded Dallas as M'Leod's trustee and agent; and were effectually conveyed by Inglis to Grant's trustees, and by them to Gordon's trustees.
(2.) The conveyance by Dallas to Newte and Deas, being in security only, and as auxiliary to the principal securities granted by them, the effect of the discharge and renunciation granted by Newte and Deas, while it extinguished absolutely the principal security granted by M'Leod, was expressly limited, by its terms, to renounce the collateral security granted by Dallas “in so far as the same is conveyed to me for my farther security;” and it declared the collateral security, to be freed and discharged of M'Leod's annuity to which it was “merely auxiliary.” By the force of this deed, the original right of Dallas in these collateral securities, under the conveyance from Howard and Stewart, was cleared of the incumbrance created over it by his having conveyed them to Newte and Deas in security of M'Leod's bonds of annuity. He was therefore entitled to dispone these heritable securities of Howard and Stewart to Inglis, without obtaining any retrocession, precisely as if he had never conveyed them as auxiliary securities to Newte and Deas.
(3.) The conveyance of the collateral securities by Inglis, in March, 1819, expressly narrated that it was in implement of the original agreement,
2. In regard to the interest and annuities accruing between 1819 and 1823, as the conveyance by Grant's trustees in 1823, omitted these by mere oversight, and contrary to the intention of parties, it was competent for them, and even obligatory on them, to grant the supplementary conveyance of these interests and annuities, which, being truly part of the original transaction between Gordon's trustees and Grant's trustees, possessed the same validity as if it had been executed from the first.
3. Gordon's trustees were under no obligation to impute any part of the interest received by them on the bond for £25,000, against the collateral securities. It was only after any failure occurred in paying the principal or interest on that bond, that it was necessary to recur to the auxiliary securities; and in the mean-time, the whole interests and annuities accruing under these were necessarily accumulating, just as in the case of any heritable security, of which the annual proceeds were not uplifted.
The whole estate of Harris was affected by each of the collateral securities as would appear on examining the titles, if farther enquiry was necessary.
The Lord Ordinary reported the cases to the Court.
Perhaps there may be some more difficulty with regard to the effect of Newte's discharge. I rather think it would have been more regular, that, when Newte was paid off, at least it would have been more in accordance with usual practice, if Newte had granted an assignment to Dallas, instead of a discharge. At the same time, it appears to me, upon general principles, that the proper effect of that discharge was to disburden Howard's security then standing in Dallas's person. According to our system of conveyancing, a person who has an infeftment in security has an heritable estate in land to that extent, and it is to be treated in every respect as any other title of that description. The discharge to Dallas of the collateral security was not a discharge to M'Leod. It merely restored the security to the same situation in which it was before the transaction with Newte. It put an end, as Mr Anderson expresses it, to Newte's riding interest on the annuity bond which had been previously granted to Howard.
What I have said with regard to this security applies, a fortiori, to all the others.
With regard to the question as to interest, I think, on the well-known and established principle that the creditor is entitled to impute indefinite payments to the extinction of the debt which is worst secured, that Gordon's trustees might allow the interest of the collateral security which was best secured to accumulate towards its extinction.
Dean of Faculty, for D. H. M'Leod's Trustee, submitted that there was a peculiarity in so far as regarded the £2000 in Stewart's bond, as Dallas had never been infeft under the conveyance from Stewart, and was therefore absolutely divested by his conveyance to Deas who took infeftment under Stewart's unexecuted precept.
The Court pronounced this interlocutor:—“Repel the objections stated to the interest, and claim of preference for Gordon of Milrig's trustees, and rank and prefer the said trustees in terms of their Claim, and decern: and remit to the Lord Ordinary in the ranking to proceed farther as shall be just.”
Solicitors: W. Mackenzie, W. S— M'Kenzie and Innes, W. S. Agents.