Scottish Court of Session Decisions

Subject_1 BANKRUPT.
Subject_2 DIVISION V.

Decisions upon the clause of the Act of 1696, declaring Heritable Bonds, &c. to be held as granted of the dates of the Sasines taken upon them.

Patrick Grant
v.
Alexander Duncan

Date: 29 January 1717
Case No. No 259.

An heritable bond was granted for ready money paid some time before bankruptcy, but upon which sasine was not taken till within the 60 days. The Lords found the bond was to be considered as of the date of the sasine, and therefore null as to the point of bankruptcy, but without prejudice to the personal obligation.

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Patrick Grant, being a creditor to Alexander Hamilton, did raise a declarator of bankrupt against the said Alexander, and Alexander Duncan, who had obtained an infeftment of annualrent in the bankrupt's lands, within 60 days before he fled; and after probation, the qualifications of the act of Parliament were found proven.

It was alleged for Alexander Duncan: The act of Parliament did not concern his case; because the ground of his infeftment is not a bond granted in payment or satisfaction of any preceding debt, but is an heritable bond granted for money bona fide lent and paid down by the defender's father, when the common debtor was in sufficient credit, though some time after he broke suddenly.

It was answered for the pursuer: The fact is as follows. The defender's heritable bond is upon the 21st of June 1709; the pursuer finding nothing on record against the common debtor, became creditor in the sum of L. 422 the first of August: thereafter, and infeftment followed upon the defender's debt the 13th of October; Hamilton broke in the month of November thereafter; and the pursuer did prosecute diligence upon his debt without delay: and, from that, 1mo, alleges, that the defender is in the case of the act of Parliament, in as far as his infeftment is taken within a month of the common debtor's flying: 2do, The infeftment is for further security of the personal obligement to pay, and so is in the precise words of the act, which provides, that all voluntary deeds by dyvors, at, or after their becoming bankrupt, or within the space of 60 days before, in favour of any of their creditors, for satisfaction or further security in preference to other creditors, shall be void and null: 3tio, His case is in the meaning and reason of the law, which was to prevent the frauds of sinking debtors, that it should not be in their power to favour a creditor in meditatione fugæ; and that creditors keeping up their precepts of sasine, whereby others finding no real diligence might be induced to lend, should be reckoned to have contracted with their debtors only at the dates of their sasines; and if the granting of original bonds would elude the act, there would be no difficulty to get friends to advance the money, and get new securities, or creditors might retire their former securities, and take new original bonds. And albeit the act does specially provide against that practice, yet co-creditors would not know the fact of retiring former debts, nor have any mean of probation, but the parties oath, which proves oft-times dangerous; besides such original debts might be assigned to third parties ignorant of the facts, and thereby the act eluded.

It was replied: The act was not intended to be a snare to creditors laying down their money bona fide, who can never be presumed to deal fraudulently; but was intended against creditors transacting former debts for new securities, or accepting of corroborations; and the defender is neither in the words nor meaning of the act. The words of the act provide against payment or further security of creditors, that is to be understood anterior creditors; for an original bond is not said to be granted to a creditor, but he who lends the money becomes creditor by the bond. 2do, Though the sasine be taken within 60 days, in that case the act only provides that the bond shall be reckoned of the same date with the sasine; but still it is an original bond for money truly paid bona fide. 3tio, Neither is it to be regarded, that the precept of sasine is for further security of the debt, because the bond containing a personal obligement and precept of sasine, is a transation for security of the money advanced; whereas a right for further security, in the meaning of the act, is a corroborative right of a former debt. 4to, The inconveniences insisted on are but imaginary; for this act provides more amply against the frauds of bankrupts, than the law of any other nation: and though it may be difficult to prove the fact of receiving bonds in satisfaction of former debts, in such a case non deficit jus, sed probatio; and the Lords, in several former cases, have found, as the defender now pleads, that such as acquire bona fide are secure, No 192. p. 1120. Campbell of Glenderowal against Graham of Gorthie, in the case of a bill of exchange, where the act was only found to take place, if the same was for security, and not for money received; and lately, in the case of the Creditors of Orbiston, where the Lords sustained a disposition, in so far as it was not granted in satisfaction or security of former debts, voce Right in Security.

It was duplied: The present case differs greatly from those formerly determined; for a bill of exchange may safely be negotiated and purchased bona fide; and a disposition in like manner. But, in this case, there is a bond containing a personal obligement for payment of the money, and a precept of sasine for further security; and no sasine being taken, creditors intervened. The personal obligement is not quarrelled nor quarrellable as in the former cases, upon which the defender might have done all diligence; but the effect of the act is only against the sasine in preference to other creditors.

‘The Lords reduced the sasine.’

Dalrymple, No 168. p. 232. *** Dalrymple mentions the same case again of this date:

1717. December 12.—Patrick Grant pursues a declarator of bankrupt against Alexander Hamilton, calling Alexander Duncan, who had obtained infeftment upon an heritable bond on the bankrupt's lands, within 60 days before he fled.

This cause being debated the 29th January 1717, the Lords did reduce Alexander Duncan's infeftment; he gave in a reclaiming bill in due time after the interlocutor, which having lyen over till this day, the same, with the answer, was advised; and the reasoning upon the bill and answers was to the effect following:

For the petitioner, it was alleged, That he was not at all in the case of the 5th act, Parliament 1696, which annuls all deeds done by bankrupts in favour of their creditors, after they are become bankrupt, or within 60 days before; because, admitting Hamilton the debtor was bankrupt, in the terms of the act of Parliament, and that his infeftment was within 60 days before he fled; yet his bond was not granted in payment, or further security of any former debt, but was granted upon real advancing of the money; which was bona fide lent before his debtor fled, and when he was looked upon to be sufficiently solvent.

It was answered, The act of Parliament does annul all deeds done by a bankrupt, after, at, or within 60 days before he does become bankrupt; the precise words are:

“Declares all and whatsoever voluntary dispositions, assignations, or other deeds directly or indirectly, by the foresaid bankrupt, in favours of any of his creditors, either for his satisfaction or further security in preference to other creditors, to be void and null.”

So it is the defender's bond, and infeftment upon it, are granted to him, as a creditor, in preference to other creditors; and therefore void and null.

It was replied, The foresaid clause of the act relates only to deeds of bankrupts, in favour of such as were creditors anterior to these deeds; which that law annuls, in as far as it mentions deeds done for satisfaction of creditors, that is to say, such as were formerly creditors, who obtain deeds or gratifications, for their payment and satisfaction; and the other members of deeds thereby annulled, are such as are made for further security to creditors, that is, anterior creditors; whereas the defender became only a creditor by the deed quarrelled, which Was obtained upon real payment of money at the time; and if the law were not so interpreted, it would prove a snare to many; for who can possibly know that the person with whom he transacts, may not prove bankrupt within 60 days; in which case, he should lose his debt; and the only clause in the act that concerns the defender's case, is a posterior clause, providing, That all rights, where upon infeftment may follow, granted by bankrupts, shall only be reckoned (as to the case of bankrupt), to be of the date of the sasine taken thereupon; and the defender's bond was indeed much more than 60 days before the granter fled; but the sasine was within the 60 days; and therefore the defender yields, that his bond shall be reckoned as if it had been of the date of the sasine; but then his debtor was a standing man to whom he might have lawfully, and bona fide lent his money; and the occasion of that clause was, that in former cases of bankrupt, infeftments were taken upon bonds of an old date; whereby the bankrupt's estate in a great measure was exhausted by debts, which had appeared in no record; and therefore, it was very well provided, that such latent debts should be reckoned of the date of the sasine; which sasine, being taken after a bankrupt was fled, will, by the common law, be null and ineffectual, when the bonds and warrant of them were constructed of the same date; but if sasine were taken within 60 days, when the debtor was standing out, and when it was lawful to have contracted with him, the law provides nothing in prejudice of such sasines further than that the warrants are reckoned of the same debt.

It was duplied, That the whole question turns on this single point, Whether the said act annulling deeds of bankrupts, does only relate to such deeds as are done in favour of anterior creditors; and the pursuer did contend that the design of the act was to annul all deeds of bankrupts, either after their becoming bankrupt, or within 60 days before. And the first and second clause are connected together by the first clause; all the voluntary deeds of bankrupts there mentioned are declared void and null; but then, because voluntary deeds, whereupon infeftment might follow, might happen to be of an old date, which yet would be sufficient warrant for taking infeftment; therefore that law does provide, that all deeds, whereupon infeftment might follow, should, as to the point of bankrupt, be reckoned of the date of the infeftment, to this effect, that, if the infeftment was taken after the bankrupt was fled, or within 60 days before, the said infeftment might not be supported by the anterior warrants; but the same might fall in consequence with the sasine. In and by the whole tenor of that act, the bankruptcy is drawn back 60 days before the concurring qualification thereby required; and that law presumes that the bankrupt was for 60 days in meditatione fugæ. And, as to any hazard of loss to creditors, or others who might contract bona fide in these 60 days, that inconveniency is well balanced by a greater advantage to creditors, in as far as otherwise the whole act might be eluded by bankrupts granting new original bonds within 60 days; and retiring the former securities, of which there could be no document or vestige of evidence to other creditors, to instruct the retiring of former securities.

It was also argued: That the precept of sasine is a further security for the debt, and that there is nothing in the former part of the act that does clearly make appear, that the design of it is only with relation to deeds done in favour of anterior creditors.

‘The Lords founds, That the bond in this declarator of bankrupt was to be reckoned as of the date of the sasine, and that the sasine being within 60 days of the debtor's becoming bankrupt, was null in competition with other creditors.’*

Fol. Dic. v. 1. p. 86. Dalrymple, No 178. p. 244.

* It appears from No 260. that this interlocutor likewise contained these words, ‘Without prejudice to the personal obligement in the bond.’