Scottish Court of Session Decisions

Subject_1 DEBTOR AND CREDITOR.
Subject_2 SECT II.

A preferable creditor can do no voluntary deed to prefer one secondary creditor to another; and if he take payment out of one subject, he is bound to assign to postponed creditors.

James Mann, late Bailie in Dundee,
v.
Alexander Reid, Bailie there

Date: 19 December 1705
Case No. No 23.

An assignation by a bankrupt to his creditor being reduced on the act 1696, at the instance of another creditor, the assignee craved assignation from the pursuer of the reduction, that he might operate his relief out of the common debtor's funds. The Lords ordained the pursuer to assign, but with this quality, that the pursuer should be preferred quoad, his debt, and the assignee should not compete with him for it.

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Alexander Reid having gotten from Andrew Wales merchant in Dundee a disposition to, and delivery of some goods in security of a debt; James Mann, another creditor to Alexander Wales, arrested in Alexender Reid's hand, and having obtained reduction of the disposition as made after Wales was under horning and caption, and within 60 days of his flying and absconding, he insisted in a furthcoming against Alexander Reid.

Alleged for the defender; That he could not be obliged to make furthcoming the goods disponed or value thereof to the pursuer, unless he would assign his debt and diligence pro tanto, as is ordinary in competition of creditors.

Replied for the pursuer; That he was only obliged to discharge, and not to assign; payment being required out of the common debtor's effects, which being made, extinguishes the debt, so as it cannot be assigned to fortify another creditor's debt against which there may be lawful objections. Nor is there here any competition of rights, the defender's disposition being reduced and declared null as a fraudulent deed. 2do, The beneficium cedendarum actionum can neither take place where the person craving it is not prejudiced by a discharge of the diligence to be assigned, nor where the other party would suffer prejudice by the assignment. Now the pursuer's discharging his debt is no loss to the defender, since thereby the deed and diligence in his favours may revive; and the pursuer would be greatly hurt by conveying his debt and diligence to the defender, since he gets not complete payment. Whereas beneficium cedendarum actionum sine dispendio creditoris futurum est, l. 38. ff. de evictionibus; and a creditor is not bound to assign his right to a cautioner making payment prius quam omne debitum exsolvatur, l. 2. C. de fidejussoribus. Therefore the pursuer cannot be obliged to assign a part of his diligence to compete with himself. 3tio, Who knows but the defender might accommodate a third party with the diligence assigned, and he a fourth, and so on, which would breed confusion.

Duplied for the defender: It is true if the debtor himself were pursued he behoved to hold himself content with a discharge; but the pursuer must transmit to a creditor making payment, since he gets his money rather out of the defender's effects than out of the common debtor's; for, in the civil law, “Hy pothecarius posterior priori hypothecario solvens, ipso jure surrogatur in ejus locum, et privilegium.” And with us the pursuer of a reduction ex capite inhibitionis receiving payment from the defender, is bound to assign with this quality that the conveyance should not be made use of against his other rights, Bruce contra Mitchel, No 19. p. 3365. As creditors must assign to cautioners distressed upon payment made by them; a wadsetter must convey to a singular successor having right to a reversion, Stair, Instit. lib. 2. tit. 10. § 13. And a second appriser, by redeeming a first, comes ipso facto in his right, Gordon contra Watson, No 4. p. 318. 2do, The pursuer can pretend no prejudice, since the defender is content that the assignation be burdened with the reservation of what more is due to the pursuer, and that it be not made use of against him.

The Lords found Bailie Mann the pursuer obliged to assign, with reservation and preference of what debt was yet then resting to himself.

Fol. Dic. v. 1. p. 223. Forbes p. 55. *** Fountainhall reports the same case:

Both Reid and Mann being creditors to Andrew Wall, (mentioned No 113. p. 1006), Bailie Reid offered to pay what he had confessed himself to be debtor by his oath in the furthcoming, but craved an assignation from James Mann to his cumulative security by adjudication, in so far as he should pay, that so he may recover his relief out of the common debtor's effects pro tanto. Answered for Mann, I cannot assign you to my adjudication, because that were to my own prejudice, seeing by all I recover from you I am not fully paid of my sum, but still want L. 300 of it, besides penalties and accumulations, which he extends no farther than to re-imburse his true expenses; and no man can be forced to assign cum proprio dispendio. Replied, The assigning is founded both on natural equity and common law, the jus cedendarum actionum being never denied, and les loix civiles dans leur ordre naturelle, speaking of creditors competing on hypothecs, says, ‘Posterior hypothecarius solvens hypothecario priori, ipso jure surrogatur in ejus locum et privilegium.’ And in a reduction ex capite inhibitionis, the pursuer was decerned to assign to the defender who paid him with this quality and provision, that the assignation should not be made use of against the cedent's other debts and rights, Bruce contra Mitchell, No 19. p. 3365.; 18th July 1676, Gordon contra Watson, No 4. p. 318. And Bailie Reid was content that the assignation he was craving should be clogged with that reservation, that it should never be made use of against the cedent, so that he, by virtue of that assignation, coming in pari passu with the other creditors, and drawing his share, he was willing that James Mann should, out of his share, be refunded of what was yet resting him, so as Reid might get what remained, which comes under the rule vinco vincentem. The Lords found the defence relevant, and ordained Mann to assign; but with this express burden and quality, that Mr Mann should be preferred quoad his debt, and Reid the assignee should not compete with him for the same.

Fountainhall, v. 2. p. 301.