Scottish Court of Session Decisions

On 8th May 1906 Elsie Mary Byrne, executrix-dative of the deceased Margaret Brown Byrne or Bennett, widow of William Bennett, wine and spirit merchant, Govan, raised an action against Robert Sutherland and others, executors-nominate of the said William Bennett, in which she sought declarator that she, as executrix of Mrs Bennett, was entitled to payment of one—half of the net amount of the moveable or personal estate of William Bennett, to which Mrs Bennett had been entitled jure relictce upon his death. The net value of the moveable estate was about £50,000.

The defenders admitted that as William Bennett had died without children, Mrs Bennett became entitled to one-half of her husband's moveable estate as jus relictce, and that as Mrs Bennett had died without receiving payment, the right thereto had passed to the pursuer; but they denied that a certain sum of £3000 which had been deposited by Mr Bennett with Messrs Thomas and James Bernard, Limited, fell within the fund on which was to be calculated Mrs Bennett's jus relictce.

Messrs Bernard's deed of acknowledgment, referred to as No. 12 of process, on the back of which were four receipts for interest “to date,” the last being dated 8th May 1902, was:—“9th Nov. 1898.—Mr William Bennett, 113 Langlands Road, Glasgow. — Dear Sir,—With reference to yours of 7th inst. to our Mr Brownhill, we hereby acknowledge that you have deposited with us three thousand pounds stg. (£3000), which we, at your request, are to hold as a loan from you. We propose to pay int. on this half-yearly, which we presume will be agreeable to you.—We are, Yours faithfully,—for Thomas & James Bernard Limited, J. J. Balleny.”

The pursuer pleaded, inter alia—“(3) The said sum of £3000 held on deposit by the said Thomas & James Bernard Limited, being part of the moveable estate of the deceased William Bennett, the pursuer is entitled to have the same included in the jus relictce fund.”

On 22nd November 1906 the Lord Ordinary ( Dundas) pronounced the following interlocutor:—“Repels the third plea-in-law for the pursuer, and appoints the cause to be enrolled for further procedure: Reserves the question of expenses, and, on the motion of the pursuer, grants leave to reclaim.”

Opinion.—“This action is raised by the executrix-dative and sole next-of-kin of the deceased Mrs Bennett against the executors-nominate of that lady's husband, William Bennett, who predeceased her. The only question raised for decision is whether or not a sum of £3000 which was deposited by Mr Bennett during his lifetime with Messrs Thomas & James Bernard, Limited, to be held by them as a loan from him, and which had not been repaid at his death, falls within the fund available for payment

Page: 487↓

of his widow's jus relictce. It is admitted that Mrs Bennett is entitled to one-half of her husband's moveable estate jure relictce, and that the pursuer is now in right thereof. The document upon the terms of which the question depends is thus expressed—… [ quotes, supra]…. Four receipts, dated 12th November 1900, 9th May and 11th November 1901, and 8th May 1902, respectively, for interest ‘to date,’ are endorsed upon the back of the document, as to the accuracy and authenticity of which no question is raised. The point which thus arises must in my opinion be solved by determining whether or not the fund in question is heritable according to the common law as it stood prior to the passing of the Act 1641, cap. 57, which, though it fell by the recissory Act 1661, cap. 15, was substantially re-enacted by the Act 1661, cap. 32. The common law, as it then stood, though altered as regards succession by these Acts, still remains the same in a question with the widow. I have come to be of opinion that this £3000 was, and is, at common law heritable and not moveable for the purposes of the matter here in dispute. I apprehend that under the old common law a personal obligation for payment of money with interest was moveable until the occurrence either of the stipulated date for repayment of the principal or of the first term of payment of the interest thereon. After the arrival of either of these dates such an obligation became heritable for all purposes, for the reason that money bearing interest was regarded as quasi feudum or feudum pecunice, and the genius of our law was to extend the operation of feudal principles as far as possible. If the term of repayment of the principal was distant or uncertain, then the obligation became heritable when the first term of payment of interest upon it had passed. The doctrine which I have thus summarised will, I think, be found to be established by reference to Stair, iii,4, 34; Ersk. Inst, ii, ii, 9, 10; 2 Bell's Comm. (7th ed.), p. 7; M. Bell Conv. (3rd ed.) pp. 251, 253, and the cases there cited, to which I may add the recent decision in Dawson's Trustees, 1896, 23 R. 1006. This state of the common law was felt to bear hardly upon the just interests of ‘the bairns and next-of-kin of the deceased’; and the Scots Acts above mentioned were passed in order to remedy these hardships. The Act 1661, cap. 32, ‘concerning heritable and moveable bonds,’ ordains that ‘all contracts and obligations for sums of money payable to parties at any time’ after the date of the Act 1641, cap. 57, ‘containing clauses for payment of annual rent and profit, are and shall be holden and interpret to be moveable bonds, except in these cases following’ (with which we are not here concerned): ‘Declaring always that all such bonds, quoad fiscum, shall remain in the same condition as they were before the said sixteenth of November One thousand six hundred and fourty-one, not to fall under the compass of single escheat, nor shall any part thereof pertain to the relict, jure relictce, where the bonds are made to the husband, nor to the husband, jure mariti, where the bonds are made to the wife, unless the relict or husband have other-wayes right and interest thereto….’ The pursuer's counsel maintained, and it was not seriously disputed, that the document No. 12 of process is not a ‘bond’ in the ordinary meaning and acceptation of that word. But the Act 1661, cap. 32, uses the words ‘contracts and obligations for sums of money … containing clauses for payment of annual rent and profit,’ in the same sense as the word ‘bond’; and I see no reason to doubt that by the common law, as it stood before the Acts, contracts and obligations bearing interest, as well as bonds, were regarded as heritable for all purposes. The real question appears to me to be whether or not this document No. 12 of process falls within the scope of the words which I have just quoted. In my opinion this question must be answered in the affirmative. No. 12 of process is plainly an acknowledgment of a loan — a statement that the granters are indebted in the sum of £3000 to the grantee; and the law infers accordingly an obligation upon the part of the granters to repay that sum. It seems to me, therefore, that the document is, at all events, an obligation for a sum of money; for I see no reason to distinguish in this question between an obligation which the law infers and one which is expressed in the document of debt ( Thiem's Trustees, 1899, 1 F. 764). It must also, in my judgment, be held that No. 12 of process is an obligation containing a clause for payment of annual rent and profit. The granters ‘propose to pay interest… half—yearly,’ and interest was in fact paid, as recorded upon the back of the paper itself. It does not appear to me to be material that no rate of interest is expressly stipulated. In the absence of such stipulation, the rate of 5 per cent. per annum would probably be presumed; but apart from this, interest was, as I have said, actually paid at some rate—whether 5 per cent. or not I do not know. I am of opinion that under these conditions the obligation contained in No. 12 of process was and is heritable in a question of jus relictce. It was argued for the pursuer that a decision in this sense would import a similar result in the case of a sum of money contained in an ordinary deposit-receipt or in an I O U. I do not think that this would necessarily be so. An ordinary deposit-receipt contains no clause for payment of annual rent at all. The deposited sum simply lies at call. It bears interest, no doubt, but no interest is payable until the principal sum is paid. As regards I O U's, they do not, so far as I am aware, usually stipulate expressly for payment of interest, though I observe that this was so in the I O U in Thiem's Trustees, sup. cit. In the present case, however, I think that we find a personal debt or obligation for money which is expressly said to bear interest; that at common law it became heritable for all purposes when the term for payment of the first half-year's interest arrived without repayment of the

Page: 488↓

principal; and that in this question of jus relictœ it still retains that character. I shall therefore repel the third plea-in-law for the pursuer, and appoint the cause to be enrolled for further procedure.”

The pursuer reclaimed, and argued—The Lord Ordinary, while his general statement of the law was correct, had erred in his application of it in this case. The sum in question here was not heritable quoad jus relictce. That question turned on the common law as it existed prior to the Act 1641, cap. 57, the statutes not touching it. But while the statutes did not apply, it was true, as Lord M'Laren said in Dawson's Trustees v. Dawson, July 9, 1896, 23 R. 1006, at p. 1010, 33 S.L.R. 749, that the Act 1661, cap. 32, which practically re-enacted 1641, cap. 57, was the best evidence as to the rule of the common law prior to that date. Taking that evidence we found that it was the presence of two things, time not entering into the question in this case, which together made a loan heritable in character—(1) There must be a contract or obligation; (2) the document must contain a stipulation for annual rent. Both were absent here, and consequently the sum in question remained moveable. (1) Contracts and obligations referred respectively to the bilateral and unilateral documents. The document here was not in itself a contract. With reference to its being an obligation, there might be documents that inferred debt but were not in themselves obligations, for they expressed no obligation to repay— Paterson v. Paterson, November 30, 1897, 25 R. 144 ( per Lord Kyllachy at p. 172), 35 S.L.R. 150; Thiem's Trustees v. Collie, March 14, 1899, 1 F. 764 ( per Lord Trayner at p. 775 and Lord Moncreiff at p. 779), 36 S. L.R. 557. There was a distinction between documents that expressed an obligation and those from which it could be implied. In Downie v. Downie's Trustees, July 14, 1866, 4 Macph. 1067, 2 S.L.R. 204, there was what was here wanting—an express obligation to repay money in the document itself. (2) There was here no clause of annualrent in the sense of a fixed sum coming in annually. It was necessary to have a clause expressly stipulating for payment of annualrent. In Dawson v. Dawson's Trustees ( sup. cit.) the document specified that interest was to be at the rate of 4 per cent. There was there a clear clause of annualrent. Cunningham v. Boswell, May 29, 1868, 6 Macph. 890, 5 S.L.R. 559, had no application to the present case. The reclaimer also referred to Ross v. Graham, November 14, 1816, F.C.; Gordon, M. 5505; and Gray, M. 3629.

Argued for respondents—The Lord Ordinary was right. The document here was a contract or obligation. Provided it amounted to an obligation, it was unnecessary the words should actually be used. In Thiem's case ( sup. cit.) the document did not contain an obligation to repay, being simply an I O U, but the Court held it was an obligation. An obligation which the law inferred was as good as an express obligation. Cunningham v. Boswell ( sup. cit.) also showed that a document in order to be an obligation need not express the obligation to repay. Neither need the document be a formal bond. Erskine, in the passage in the Institutes (ii, ii, 9, 10) referred to by the Lord Ordinary, was not treating of a bond as a technical instrument of a particular kind, but was using the word in a popular sense. No Scots conveyancer would call the documents in Downie v. Downie's Trustees ( sup. cit.) nor in Dawson's Trustees v. Dawson ( sup. cit.) bonds. Here there was a written record of a contract of loan, a statement of an agreement, and no implication was necessary. The important question was—Was this a debt of the kind which the common law of Scotland looked on as a feudum pecuniœ? The words “deposited” and “hold as a loan” were important. There was an element of permanence, as the parties had contracted that the money should lie out at interest, and there was a clause contracting for payment thereof about which there was no ambiguity whatever. Where there was a contract to pay interest and no stipulation for a lower rate, it would be presumed to be 5 per cent.—See Smith v. Barlas, January 15, 1857, 19 D. 267.

At advising—