Colin Douglas
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Colin Douglas, who died unmarried, was the son of James Douglas, 13th
of Mains, and brother to
Margaret, Duchess of Douglas of whom he was a
beneficiary.
N°CXLIV. December 12. 1794.
The TRUSTEE
on the sequestrated Estate of Walter Monteath,
AGAINST
COLIN DOUGLAS and Others.
Bankrupt.—Act 1696. o. 5.—An
heritable bond of relief granted by the principal debtor, and
bona fide accepted by cautioners in a bond of corroboration of
an old debt, does not fall under the act 1696, if both bonds be
executed unico contextu, although infeftment be not taken on the
bond of relief till within 60 days of the principal debtor's
bankruptcy.
Waiter Monteath was nearly related to the late
Duchess of Douglas, who at different times lent him above L.
r2,000.
For the greater part of this sum, she got heritable
security over his estate of Kepp, the value of which, however,,
was not equal to the sums she had lent upon it.
The Duchess
died in 1774, leaving a settlement, vesting her whole funds in
trustees, who were directed, after paying her Grace's debts and
legacies, to employ the residue of her fortune in the purchase
of lands, to be entailed in favour of her nephew Archibald
Douglas, and certain other substitutes. It was further declared,
That the trustees should hold the lands in their own names, till
the heir for the time should arrive at the age of 22, and that
aster that event, they should not be obliged to denude, till
required by him.
In 1782, the Duchess's nephew had arrived at
the age of 19, and the trustees having consulted counsel, how
far they were bound to purchase lands with the trust-funds, they
were advised to do so.
The trustees having accordingly set
about recovering the trust-, funds, they applied to Mr Monteath
for payment of what he owed, and threatened him with diligence.
He, on the other hand, repeatedly begged delays, until a peace
with America, where the greater part of his funds were locked
up, and at the fame time proposed to fell to the trustees his
estate of Kepp on reasonable terms.
At a meeting of the
trustees in July 1783, Mr Monteath offered to find security to
pay the debt at Martinmas 1784, in. so far as it exceeded the
value of his estate, upon the trustees consenting to supersede
personal diligence against him till that term.
This proposal
having been agreed to, Thomas Monteath his brother and partner,
granted the trustees one bond of corroboration for L. 1250, and
Colin, Robert and Campbell Douglases, his brothers-in-law, " for
the;r further security," granted them another for the like sum.
This last bond was signed by Colin and Campbell Douglas, 9th
March 1784, and by Robert at London on the 20th of that month.
On the 26th March, Walter Monteath granted his brothers-inlaw an
heritable bond of relief over' his dwelling-house in Glasgow,
the value of which was from L. 600 to L. 700 Sterling. This bond
referred to the bond of corroboration, which it was declared had
been granted on the faith of it.
On the 5th February 1785, Mr
Monteath sold his estate for L. 972,3, 17 s. to the trustees,
who were infest on the 24th March thereafter.
Infeftment was
taken on the bond of relief, 17th October 1785, and the seisin
afterwards recorded.
On the 7th December 1785, Mr Monteath
was rendered bankrupt in terms of the act 1696. His estate was
afterwards sequestrated, and the trustees for his creditors
founding on that statute, brought a reduction of the heritable
bond of relief granted by him to the Messrs Douglases, the
seisin on it not having been taken till within 60 days of his
bankruptcy ', and Pleaded: ijl, The bond of relief was not a
security for a novum debitum. The defenders had a personal claim
for relief independent of it against Mr Monteath from the 20th
March, the last date of the bond of corroboration, whereas, it
was not signed till the 26th, fb that it was granted in security
of a debt which had subsisted for at least six days. Besides, in
questions on the act 1696, it is not the date of the bond, but
of the seisin, which is regarded, so that in fact, the right now
under reduction was granted in security of a debt which had
existed nearly eighteen months. If persons so nearly related to
Mr Monteath as the defenders, had taken immediate infeftment on
the house in which he lived, it would have excited the
suspicions of his creditors, he would instantly have been made
bankrupt, and would thus have been prevented from prosecuting
trade, and contracting further debts to their prejudice.
Expediency, therefore, requires that the statute should reach
this cafe. See also Dict. vol. i. p. 86. Dalrymple, p. 232. and
244. 29th January, and 12th December 1717, Grant against Duncan;
19th January 1726, Charmers against the Creditors of Riccartoun.
But, idly, The bond of relief was indirectly a security to she
Duchess's trustees for the old debt due to them, and so comes
under the very words of the statute. If it had not been for this
debt, it never would have been necessary, and although it was
directly granted to the defenders, the trustees alone were
benefited by it. If securities like the present were supported,
a person on the eve of bankruptcy, who wished to give a
preference to a favourite creditor, would find no difficulty in
getting some person to be cautioner for him, as he could be
secured from loss by taking an heritable security in relief, and
thus the object of the act 1696, would be ^entirely frustrated.
Answered: 1st, It may be true, that a claim of relief arose to
the defenders on signing the bond of corroboration, but as it
contained no obligation of relief, a separate bond became
necessary for that purpose, because otherwise, the defenders,
upon paying the debt, could not have rendered their claim
effectual without a process at law. Both bonds, however, were
executed, unico contextu; the bond of corroboration was signed
by Robert Douglas at London on the 20th March, and supposing it
to have been sent off next day, it could not, according to the
arrangement of the posts at that time, have reached Glasgow till
the 26th, the date of the bond of relief; it is impossible
therefore to consider the bond of relief, otherwise than as a
security instantly given for a novum debitum.
The attempt
made by the pursuer to split the bond into two parts, and to
hold the infeftment afterwards taken on it as a security for the
debt contracted by the personal obligation, is a refinement
which has no foundation in the statute, and has been long ago
exploded; Kilk. voce Bankrupt, 29th January 1751, Johnston
against Burnet and Home.
idly, If there had been any thing
fraudulent in the transaction; if the security had been granted
to the defenders in trust for the Duchess's trustees, or as
third parties interposed, in order to elude the statute, as in
the cafe, 9th March 1781, Robertson against Blackie, it would
then have been justly liable to reduction. But all parties in
this case, were in optima fide. The trustees made a demand on Mr
Monteath, from a fense of duty, that they might be enabled to
lay out the money on land agreeably to the terms of the trust,
and to the opinion of counsel, and when security was offered for
it, they accepted it, not so much from any apprehension of Mr
Monieatb/s circumstances, as that they "might be 1be secure of
the money being paid at certain terms, so as to leave
•sufficient time for realizing it before the trust expired.
The motives of the defenders were equally pure. Their view was
to serve Air Monteath, net the trustees; and although they
stipulated a security over the house, it is clear they had no
suspicion of his failure, as it is scarce worth half the sum
they engaged for. The heritable bond did not afford even an
indirect security to the trustees. Its obligation was merely
contingent. If the defenders had failed, without paying any part
of the debt, the house would have remained unburdened to Mr
Monteath and iiis creditors. Neither could the trustees have
prevented the defenders from renouncing this security at any
time. Were it therefore in these circumstances to be reduced, no
man coul3. 'with safety be -cautioner for another.
The Lord
Ordinary reported the cause on informations.
. The Court, by
a great majority, found, That " the heritable se** curity in
question fell under the act 1696.1'
When the cause however
came again before the Court, on a reclaiming petition and
answers, in which the circumstances attending the transaction
were more fully brought out, it being thought to involve a new
and important point, a hearing in presence was ordered.
When
it was afterwards advised, the Court were much divided in their
sentiments.
A majority were for sustaining the security.
The bond of relief, (it was observed), certainly does not come
within the letter of the statute, being a novum debitum, quoad
the cautioners, and in determining whether cases of this fort
fall under its spirit, each must depend in a great measure on
its own circumstances. In the present case, no evasion of the
statute was intended. At the time the two bonds were granted,
neither the trustees, nor the defenders, nor Mr Monteath's other
creditors, had any suspicion of his approaching bankruptcy. The
trustees accepted a personal bond of corroboration for a similar
sum from his brother and partner. The defenders accepted a
security not more than half sufficient to relieve them; and so
good was Mr Monteath's credit, that his other creditors did not
proceed to diligence against him, although they saw his estate
fold, and infeftment publicly taken on it. If in such
circumstances the bond of relief were reduced, no person could
with safety become cautioner for a merchant, and many cases
might be figured where this would be attended with the greatest
hardship. For instance, bankers are not fond of security on land
at any time, indeed till the present bankrupt-act, it could not
be given for future advances on a cash-account, yet were the
pursuer's doctrine well founded, even merchants possessed of of
land would find it difficult to get their friends to become
personally bound with them, (especially in times of general
distrust, when such aid is most needed), as the validity of the
heritable security which they could give in relief, would depend
on their remaining solvent for 60 days.
On the other hand,
several of the Judges remained of opinion, that the interlocutor
should be adhered to. Nothing, it was observed, would tend so
much to narrow the beneficial operation of the statute, as to
make every cafe of this sort a question of bona or mala fides.
There are certain leading features in every transaction, by
which it is easy to distinguish whether it falls within its
spirit. Although, in this cafe, both the trustees and the
defenders are much above any suspicion of planning a fraud,
still the effect of the transaction was to give a security for
an anterior debt, and although the defenders were not fully
secured by the bond of relief, yet it was the only security
which Mr Monteath had to give.
The Court found " That the
heritable security in question did *" not fall under the act
1696."
A reclaiming petition was refused without answers.
Lord Ordinary Ahercromly. Act- Solicitor-General Blair, Arch.
Campbell, MoodU. Alt. Lord Advocate Dundas, Rolland, Maconochie,
Arcb. Campbell, junior. Clerk, Menzitt. |
See also:
1.
Testament
of Margaret, Duchess of Douglas
2.
The Trustee on
the Estate of Walter Monteath, against Colin Douglas and Others.
3. The Douglas Cause
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