Scottish Court of Session Decisions

On 29th November, 1834, James Lang, proprietor of certain heritable subjects in the town of Dumbarton, borrowed the sum of £8000 from the defenders, Mrs Dunlop's trustees, for which he of that date granted a bond and disposition in security over these subjects. By this bond Lang became bound to repay the money to the trustees “at the term of Martinmas in the year 1835,” with penalty in case of failure, “and the due and legal interest of the said principal sum from the date hereof to the foresaid term of payment, and half-yearly, termly and proportionally thereafter, during the not-payment, at two terms in the year, Whitsunday and Martinmas, by equal portions, beginning the first term's payment of the said interest, at the term of Whitsunday next 1835, for the interest due preceding that date,” and so forth half-yearly. It was declared “that the said subjects, with the pertinents before disponed, are, and shall be redeemable by me and my foresaids, from the said trustees and their foresaids, at the term of Martinmas, in the year 1835, being the term of payment before written, or at any term of Whitsunday or Martinmas thereafter, I, the said James Lang, or my foresaids, shall please, upon premonition of six months, to be made by me or my foresaids, to the said trustees or their foresaids.” On this disposition Lang was duly infeft.

Of equal date with the bond a back-letter was granted by the trustees to Lang, declaring “that although by the bond, you are taken bound to pay the legal interest on the loan, yet it is understood, that the interest to be paid at present, is only to be four per cent, and to remain at that rate, until the interest to be paid by the banks in Greenock, shall be raised to three-and-a-half per cent, at least; and it is also understood, that the loan is not to be called up for the space of five years from this date, being the date of the bond, unless the security subjects shall, prior to the expiry of that period, be considered by the trustees of Mrs Dunlop to have depreciated in value, or any circumstance shall have occurred affecting your personal responsibility,” &c.

Lang having become insolvent, his estates were sequestrated on 16th April, 1835, the pursuer, Munro, being afterwards elected trustee. On the 28th April, Mrs Dunlop's trustees executed a summons of poinding of the ground, which was opposed by Munro, but was ultimately allowed to proceed.

Some time after the raising of this process, Munro made arrangements for paying off the sum in the bond by means of a loan from the Greenock bank, whose cashier was to be assigned into the bond. After some correspondence as to the rate of interest, the transaction was arranged on the footing that Munro should pay down the principal sum, and four per cent interest up to Martinmas, 1835; and in regard to the interest betwixt that date and Whitsunday, 1836, which was the matter in dispute, that he should pay four per cent interest in the mean-time, but under protest that he held the demand for this rate not legal, and reserving his right of repetition. The money was paid to Mrs Dunlop's trustees accordingly, under protest, on the 2d September, 1835.

Thereafter Munro raised action against the trustees, concluding for repetition of the sum of £81, 10s. 8d., as the difference betwixt two and four per cent interest for the period of six months, from Martinmas, 1835, to Whitsunday, 1836.

In defence against the action it was pleaded, that Munro, when proposing to pay up the sum in the bond, was bound to have given the six months' premonition therein stipulated; and that the premonition was equally applicable to the term of Martinmas, 1835, as to any subsequent term of Whitsunday or Martinmas; that the summons of poinding the ground being the only legal method of completing the trustees' security over the moveables upon the property, did not dispense with or supersede the necessity of the premonition stipulated in the bond; consequently that the interest payable betwixt the terms in question ought to be bank interest, and not at the rate of four per cent.

It was answered by Munro, 1. That according to the just and true construction of the bond in question, the premonition of six months before payment did not apply to the term of payment stipulated in the bond, but to the indefinite period afterwards, during which the creditors might allow the money to remain in the debtor's hands. 2. That at any rate, after the steps of diligence against the debtor's estate, begun by the creditors in April, 1835, and afterwards insisted in, the debtor, and those in his room, became legally entitled to relieve his estates by paying up the bond instanter, and were entitled, a fortiori, to do so more than six months afterwards, at Martinmas, 1835. ¹

The Lord Ordinary “sustained the defences,” and assoilzied the defenders with expenses, adding the subjoined note. ^*

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^* Executors of Duke of Queensberry v. Tait, January 27, 1829 (ante, VII., 321.)

¹ “The Lord Ordinary has no doubt that the premonition stipulated in the bond (especially considering the terms of the back-letter), was equally requisite to warrant a tender of payment at the first term at which it could have been made, as at any other. The inconvenience and probable loss that might arise from the want of it, are obviously as great then as at any subsequent term, and the manner in which the stipulation is introduced, gives no support to the notion that it was not intended to apply to that first possible term, as well as to the rest. The natural reading of the clause connects it equally with the whole.

“There is a little more ground for hesitation as to the effect of the defenders' proceeding with this process of poinding the ground. If the object of that action had obviously been to enforce actual payment of the principal and interest of the debt, there can be no doubt that the pursuer would have been entitled to quash it, by at once tendering such payment, without any premonition. But the defenders say they had no view but to extend their security over the moveables on the lands, and that they had no other possible way of doing this but by this proceeding; and they refer, not only to the tenor of the back-letter, but to the after-correspondence of the parties, to show that they wished the investment to be permanent, and had no desire for actual payment, but the contrary, if the security was extended. The Lord Ordinary is satisfied, on the whole, that the fact was so, and only doubts whether they ought not to have made some formal intimation to the pursuer, when they raised the poinding of the ground, that their only object was to extend the security, and that they had no view to enforce payment of the money by means of it. It is pretty apparent, however, that the pursuer must have been aware of this; and as the action of poinding was raised considerably more than six months before Martinmas, 1835, he might have given the stipulated premonition if he had really thought that the object of that proceeding bad been to enforce payment. He rather chose, however, to dispute its legality, in the the hope of bringing the moveables on the land under the sequestration; and having in this way prevented the defenders from getting the decree, he saw fit to compromise the matter by an agreement, of which the payment of the £81 now pursued for was a part, and which of course now lays the onus probandi on him, as the pursuer of this process of repetition. The Lord Ordinary does not think he has made out his case; and that the defenders are therefore entitled to absolvitor.”

Munro reclaimed.