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.

Competition Margaret Chalmers, with the other Creditors of Riccarton

Date: 19 January 1726
Case No. No 260.

Found in opposition to No 259. supra, that the act of 1696 does not at all reach nova debita, securities for which are valid, although the sasine be taken within the 60 days.

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Upon the 10th May 1700, Robert Craig of Riccarton granted bond for 3600 merks, to Jean Innes, relict of Robert Chalmers, in liferent, and to Margaret Chalmers, her daughter, in fee; and of the same date, for security and payment thereof, disponed to them an heritable bond for the sum of 5000 merks, granted to him by Gordon of Troquhain: Upon which bond, the disponees took infeftment the 12th June 1704, within sixty days of Riccarton's bankruptcy.

Against this disposition it was objected, by the other creditors of Riccarton, That it was null upon the act 5th Parl. 1696, declaring “all voluntary dispositions, assignations, &c. granted by a bankrupt within 60 days of his bankruptcy, in favours of his creditor, for his satisfaction or further security, in preference of other creditors, to be void and null.” Under which clause, it was pleaded, the disposition in controversy must be comprehended, because sasine was taken upon it within that space; and by the immediately following clause of the act, “all dispositions, &c. as to this case of bankruptcy, are only reckoned to be of the date of the sasine lawfully taken thereon.”

Answered for Margaret Chalmers, Let it be supposed, that her transaction with Riccarton had been actually made within sixty days of his bankruptcy; nay, further, that she had lent her money, and taken the security, even after actual bankruptcy; the transaction falls yet to be sustained, because the first mentioned clause annuls not dispositions, &c. where money is instantly told down, but only where granted “in security or satisfaction of anterior debts, in prejudice of other creditors.” And the difference lies here, that by new contractions, the creditors suffer nothing, because their debtor gets an equivalent in money for the obligation he subjects himself to, or the right he gives away; whereas, when one insolvent applies any of his funds to the payment or satisfaction of a creditor, he detracts so much from his other creditors, to whom he was equally bound, and thereby so far virtually counteracts his engagements; so that applications of this fort are truly invalid, through defect of power in the granter. And accordingly to this it has all along been determined, particularly No 192. p. 1120. Graham of Gorthie contra Campbell, where it was found, “That the indorsation of a bill, if for money presently advanced, fell not within this clause of the statute.” Also the Creditors of Orbiston contra Hamilton of Dalziel, where the Lords found “the qualifications alleged on the act 1696, not relevant to reduce a disposition granted by Orbiston to Dalziel, except in so far as the same was made use of, in payment or security of debts anterior to the disposition,” voce Right in Security.

Replied for the creditors, If the words of the statute favour this distinction, the spirit and design is entirely against it. The clause declaring “dispositions, with respect to bankruptcy, to be no better than if granted of the date of the sasine,” if it has any meaning, must be designed to force creditors to take infeftment, that the circumstances of debtors be thereby open, and people know with whom they contract: And truly that creditor cannot be considered as altogether innocent of fraud, who looks on, and fees his debtor contracting a great bulk of personal debt, and enticing innocent people to their ruin; easy in the mean time, because he can take infeftment at any moment, and thereby cut his fellow-creditors out of that subject, upon the faith of which they trusted their money. If this be the design of the clause, there is no room for distinguishing new contractions, from securities granted for old ones; for interest reipublicæ that such also be made public. And truly this distinction has no reasonable foundation, unless where the deeds are executed after actual insolvency; in which circumstances, indeed, for the reasons mentioned above, there is good ground for it: But let it be supposed, while a debtor is yet entire, two heritable bonds granted, the one a new debt, the other a corroboration of a former personal debt; for what imaginable reason should it be, when the debtor many years afterwards becomes bankrupt, and both infeftments fall within the sixty days, that the one is sustained, and the other of no effect? It is evident the other creditors suffer no more by the one than the other; the one was no more negligent than the other, and their claims were equally onerous. And thus, in the case betwixt Duncan and Grant of Bonhard, No 259. p. 1228. the question falling out anent an heritable bond granted for ready money, long before the bankruptcy, the Lords found, “That the bond was to be considered as of the date of the sasine; and found that the sasine being taken within the sixty days, is void and null as to the point of bankrupt, without prejudice to the personal obligement in the bond.”

Margaret Chalmers duplied, If the design of the clause was, to oblige creditors immediately to take infeftment, it fell to be expressed in words like the following, “That all infeftments taken within sixty days of the bankruptcy should be null, where there was any mora upon the creditor's part in taking infeftment;” whereas the words are of a quite different import; the infeftment is not made per se null, the disposition or other warrant of the infeftment is only declared to be no better than of the date of the infeftment taken upon it: Supposing then that Margaret Chalmers's disposition had been granted within the sixty days, as a novum debitum, it falls still to be sustained by the other clause, of the act, with the infeftment taken thereon.

“The Lords found the bond and assignation being granted at the same time, does not fall under the act of Parliament 1696.”

Fol. Dic. v. 1. p. 86. Rem. Dec. v. 1. No 69. p. 136.