Scottish Court of Session Decisions

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^* “As this case must obviously go to the Inner-House, and as inhibitions have been used, and retention of liquid debts have been maintained, on the dependence, the Lord Ordinary has thought It better to present it for final decision, with the least possible delay or expense to the parties. They are entitled, however, to his opinion upon the question J and he shall now give it accordingly, as plainly and as clearly as be can.

“Upon the main question of security, he is of opinion, that the defences should be sustained; but not on the grounds most pressed, and apparently relied on, by the defenders, viz. that the pursuer must be held to have actually received, by anticipation, the deceasing partner's share of all future profits on the current leases, and is therefore justly liable to a subsidiary and contingent claim for the rents. The Lord Ordinary thinks, that the facts of the case are exclusive of this argument; and he is clear that there are no statements on the record under which it can now be competently raised by the defenders; but he also apprehends it to be manifestly fallacious, and inconsistent with the cardinal and necessary admissions of the defenders themselves. If the pursuer had really been paid the full estimated amount of all the profits his author would have derived from the leases, if he had survived till their termination, It seems plain that he ought to be found liable for his full proportion of the future rents, not only without security for relief, but without right to any relief, except for what he might be called on to pay beyond that proportion. There is no escaping from this consequence of the defenders' proposition, in the broad terms in which they have here stated it. And when they admit that they must themselves pay all the future rents, and will be (and in fact are), bound to grant the pursuer a total relief, whenever he is actually called on for any part of them, they palpably admit the fallacy of that allegation upon which so much of their case is, rather imprudently, rested.

“The true question is much narrower. They admit (or ought to admit) that they are liable to relieve the pursuer of all future rents, but deny that they are bound to find security to him for their regular payment. Holding them clearly liable, as future and contingent (or even present and absolute) debtors for relief, the question is, Are they also debtors for a present security, that this relief shall be forthcoming and effectual? The Lord Ordinary humbly conceives that they are not; and that upon the broad ground, that, by the law of Scotland generally, no debtor for a future obligation is bound to find present security, unless it be expressly stipulated, or in circumstances that necessarily imply such a stipulation.

“The defenders have argued the case mainly on the ground of the pursuer being substantially but a cautioner for the future rents, for which they are themselves primarily liable; and the Lord Ordinary does not mean to say, that there is not a great deal of truth and force in this view of the question. But he is disposed to put it on the simpler and broader ground which he has now indicated. Admitting to the fullest extent the pursuer's right to be relieved, whenever he is distressed, upon what ground does he justify his claim for a present security for such future relief? The claim itself arises from the terms of a written contract; but that is confessedly silent as to any such security. The late Mr Hogarth bound himself, and his representatives (along with the defenders), for all the rents to become due during the currency of the leases; and the pursuer, having chosen to represent him, is indisputably liable in this obligation. Then he stipulated, in the contract of copartnery, that his representatives should take the value of his share, as at the balance preceding his death, and grant an absolute discharge of all farther claims on the company. Taking these two together, it seems plain that the pursuer, after taking the share, must continue bound subsidiarie for the rents; and that he has no claim, till this subsiduary obligation is enforced, against the surviving partners for relief. If it was intended that, on taking the share, he should alto get security for his contingent relief, why was not this stipulated? or on what principle or analogy is it now said to be implied? It is so far from being generally true, that persons entitled to a contingent benefit de futuro, are also entitled to present security, that the general rule is clearly the reverse, even where the future benefit is not contingent, but certain. Where there is a full admission of solvency, as at present, a purchaser, bound to pay his price at a future day, is not bound to find security in the interim, unless by express stipulation; nor is a tenant, for postponed rents; nor a debtor in a bond or bill payable at a distant date, either for interest or principal. In all these cases, there is a clear vested right in the creditor, and a fair and honest interest, that it should not be defeated. But all this will not support a claim for present security, which is a separate and additional right, not stipulated for by the parties, and by no means implied in the ordinary case of a contingent or future obligation. Where it is contingent as well as future (which is the case here), the rule is still more unquestionable. The ordinary case of a sublease is almost identical with the present Suppose a farm subset at the original rent, with an obligation on the subtenant to pay directly to the landlord. The principal tenant has no longer any interest, or possible benefit from the lease; yet he is still bound to the landlord, and must pay him, if the subtenant does not. But was it ever heard of, that, without stipulation, be could compel the subtenant to find present security for his relief from this contingent liability; more especially if his solvency and credit were unquestioned, and he had never been a day in arrear? If it is admitted that he could not, the Lord Ordinary is unable to understand on what ground the present claim can be justified.

“The neglect of this distinction seems to the Lord Ordinary to be the leading fallacy in the argument of the pursuer. Ho appears, throughout his case, to consider the existence of a right to be relieved from payment of future rents, as identical with a right to demand present security from the parties bound to relieve him;—and, when they admit their obligation to free him from any future demands on the part of their landlord, he thinks it follows, of course, that they should be ordained instantly to impledge £20,000 or £100,000, for his protection. Nothing, however, can be more distinct than an obligation to relieve a party from a future and contingent demand, if it should be made, and an obligation to provide and set apart a present fund for his security. The latter is manifestly a separate and distinct obligation; and, wherever the contingency is at all remote, a far heavier and more grievous obligation than the former. On what ground, then, can it be implied, from the mere admission of the former? And here, even the former is but an implication, from the terms of the lease and the contract. But suppose they had been more explicit, and had expressly bound the defenders to free and relieve the pursuer from all future rents, would not this have been sufficiently implemented by their granting him a formal obligation so to free and relieve him with a provision, if necessary, that within three days after he notified any demand upon him by the landlords, for a past due rent, they should pay or consign the amount, with a clause of registration for execution on six days' charge, &c.? Now, the Lord Ordinary understands that the defenders have tendered such an obligation; and he is humbly of opinion, that nothing more can be required of them.

“The pursuer seems also to forget that his claim for relief (or security) does not arise, in this case, from any casual or unforeseen occurrences, to which law and equity must apply the necessary remedies, at discretion; but from an event provided for by the deliberate contract of parties, who ought to have adjusted their rights in an explicit manner, and are not entitled to supply any alleged deficiency in their own stipulations, by constructive and additional obligations. The pursuer argues throughout, as if he had been excluded from a share of the future profits by the act of the defenders, or by some accidental disqualification to continue a partner, and complains that he, whom they have thrust out of their company, should be in any way accountable for their rents. But he forgets that all this arises from the deliberate act and contract of the party whom he has chosen to represent. The case would have been exactly the same, if the late Mr Hogarth himself, being bound, by his own act, as a joint tenant under the leases, had agreed, by the contract of copartnery, to quit the concern in the year 1832, on the same terms now imposed on his representatives. His consequent exclusion from the company, and his continued liability to the landlords, would then have been the necessary result of his own deliberate act and agreement; and if he had not stipulated for security against the possible consequences, he would have had himself only to blame.

“It is not very easy to know what the pursuer means, when he says, that a right to such security, though not expressed, is implied in the nature of the agreement. Nothing, it is apprehended, can ever be held to be implied, but what it is certain that the parties, if it had been suggested to them, must have agreed to express. It is in this way that the substantial obligation to relieve the pursuer from future rents, if he is ever distressed for them, la implied, in the provision for excluding him from all that future possession, for the profits of which the rents are the equivalent. No persons of common honesty, insisting on such a provision, could refuse to grant such relief. But is it possible to say this of the pursuer's demand for present security against that contingent hazard? It has been shown that, according to no analogy could such a demand have been justified; and will the pursuer seriously allege, that if it had been proposed to the defenders, that, on the death of any one partner, the rest should not be allowed to go on with their business till they had set aside £20,000 (or rather £100,000, for to that extent the claim might be carried if legal), as a security to his representatives, they would certainly have agreed to such a stipulation?

“The pursuer founds a great deal on the cases of Wright and Inglis; but the Lord Ordinary thinks they afford no shadow of support to the claim he is here maintaining. There was nothing decided in either of these cases, but the right of a retiring partner to be free from subsequent responsibilities. There was no question, and could be no decision, as to his right to obtain security against such demands; and the facts out of which they arose, rather show that there was no practice or understanding in favour of such a right. In the last case, no doubt, some of the judges appear to have stated that the partner, at his retirement, might have forced the company to settle the debts then due and exigible; and the Lord Ordinary fully concurs in that opinion, in which, as he understands, the present defenders have also distinctly expressed their acquiescence. But the ground on which the opinion is rested, shows at once how inapplicable it is to a case like the present. The ground is, distinctly, that the retiring partner there left in the hands of the company funds, which he would otherwise have been entitled to carry away, sufficient to discharge his share of the debts then acclaimable. He took out his free share of the stock as at the preceding balance, but estimated (as was admitted) after deduction of the debts then exigible from the company; and, having thus left his share of those debts with the other partners, to answer the claims of the creditors, he was, of course, entitled to insist that those partners should in like manner advance their shares, and, by extinguishing the debts, relieve him of his pro indiviso responsibility. But there is plainly nothing parallel to this in the situation of the parties to this action. It is not pretended that the whole future rents were considered as present debts, and taken into calculation when the late Mr Hogarth's share was valued over and paid up to the pursuer, and that be then left in the hands of the defenders some L,30,000 or L.33,000, which he would have been otherwise entitled to take out, as his contribution towards payment of those rents. There is no such averment upon the record; the thing is in itself altogether absurd and inconceivable, and is expressly contradicted by the pursuer's own statement of what took place at the settlement. The future rents were not debts then actually due or exigible from the company; and the company certainly had not L.100,000 of stock otherwise divisible, set apart for their payment. The funds from which they were to be paid were to arise from the possession of the successive years for which they were to become due; and both the future rents, and the future profits, were left entirely out of view, in estimating the existing stock of the company, and the present interests of its surviving and deceased members.

“The Lord Ordinary has already said, that though he is of opinion that the case of the defenders is better rested on the general grounds which have now been explained, he does not substantially dissent from their assimilation of the rights of the pursuer to those of a cautioner; understanding that view to be introduced for the purpose of defining the cases and conditions (of insolvency, for example, ruined credit, or new and imminent perils) on which a person in that situation might be entitled to insist for a security, to which, in ordinary circumstances, he would not be entitled. Generally speaking, he concurs with the views of the defenders under this aspect of the case; and he has only to add, that he is clearly of opinion that nothing relevant is stated on the record to justify such a demand for security, on the supposition that it could not have been maintained, independent of these specialties.

“Upon the second branch of the case, the Lord Ordinary is of opinion, 1st, that the pursuer is not entitled to retain the legacies due to the defenders, till the expiry or discharge of the leases, and merely in security of his possible liability under these leases. But, 2d, that he is entitled, before paying them, to have security for their repayment, in whole, or in part, in the event of the claim of the landlord's (or rather creditors of the late Mr Hogarth) being established against him, to such an extent, as to exhaust the whole residuary succession, and make it necessary to apply the whole, or part of these, and the other legacies bequeathed by him, in satisfaction of such claims.”