Scottish Court of Session Decisions

Subject_1 INDEMNITY.

Mr James Colvil Advocate
v.
Alexander Irving of Drum

Date: 26 January 1709
Case No. No 6.

Found in conformity with M'Micken against Kennedy, No 4. p. 6824.

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In an action at the instance of Mr James Colvil against the Laird of Drum, for payment of bygone annuities contained in a bond granted by the defender's predecessor to the pursuer's author by progress, in the which bond the debtor acknowledged the receipt of L. 1000 Scots, obliged himself, his heirs or assignees to pay to the creditor, his heirs or assignees heritably the sum of L. 80 money foresaid yearly, at two terms of the year by equal portions, with L. 13 of penalty for each term's failzie; with this provision, that the debtor might free himself and estate of the said burden, by payment of the L. 1000 and the arrears of the said annuity resting at the time; but no clause, whereby the creditor might demand payment of the said L. 1000 or charge for it.

Alleged for the defender; He ought to be assoilzied from the sums pursued for, because the bond is usurious, seeing L. 80 of annuity is thereby payable for L. 1000 of stock, which is 8 per cent. for ever.

Answered for the pursuer; Here is no usury, because no mutuum, but only an annuity or rent of L. 80 bought for 1000 Scots of stock, which was sunk, and could not be required back again by the creditor; and such an annuity was found not to be usurious in the case of Dame Christian Stuart, Lady Kettingstoun against Sir Alexander Home in anno 1676, See Usury, yea annuities at 8, 10, or 12 per cent. are allowed by law, and warrantably bought. 2do, Where the creditor undergoes any loss or hazard, law hinders not the taking more than the ordinary interest, as is in the case of a proper wadset; and the pursuer not only runs the hazard of the debtor's insolvency, and the raising of annualrents higher than 8 per cent. but also loses his principal sum. 3tio, Esto the bond was usurious, the penalty of usury is taken off by the Sovereign's indemnity.

Replied for the defender; 1mo, If this were allowed under the notion of a sale, the laws for preventing of usury would be eluded; all covetous lenders would take this method with necessitous borrowers. It imports nothing that the creditor could not exact his principal sum; for usury is not founded in the creditor's having a faculty to require the principal, but in taking more annualrent for the use of money than is allowed by law; and it is usury in an improper wadset, to take more than the ordinary annualrent, though requisition be suspended for many years. Besides, albeit the creditor cannot directly charge for the principal sum; yet he hath directly insured to himself the payment of it, by having put it in the power of the debtor to redeem upon payment, which the exorbitant yearly usury will oblige him to do how soon he is able. And though liferent annuities above the legal interest might be allowed, where the stock is sunk, because of the hazard depending upon the creditor's life, perpetual annuities of that kind are justly reprobated. 2do, It is only periculum juris that excludes usury, where the creditor has no person legally obliged for any loss he may sustain, as in proper wadsets and tacks that may fall under the value of the annualrent; but where the debtor stands obliged, any accidental risk by his turning insolvent will not excuse the taking more than the ordinary annualrent.

The Lords seemed to be clear that the bond was usurious; but found the penalty of usury taken off by the indemnity. See Usury.

Fol. Dic. v. 1. p. 461. Forbes, p. 312.