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1840: March 30. 31. GOVERNORS OF THE ROYAL BANK OF
pellants, April 2. 6. SCOTLAND - - - - - - -
1841 : April 6
ADAM CHRISTIE and Others, Creditors
of the late Thomas Allan, Banker Respondents. in Edinburgh - - - - - -
Partnership. A Partnership composed of three persons, A., B. and C., gave a joint
by the Bank on a cash credit; and in that bond, two estates held former Parl
by A. were specially named as part securities for these advances : nership.
A. died. Held, that by his death the partnership was dissolved, Heir.
and the security, so far as his estates were concerned, was no further continued; no arrangement between the surviving partners, or between them and the Bank, for the purpose of settling the
general accounts, being capable of affecting that security. After the death of A. the Bank continued as before its dealings with
the partnership, then constituted by B. and C.; and at a certain period, payments made to the Bank entirely balanced the debt due to it at the time of A.'s death.—Held, that the separate
liability of A.'s estates was thereby discharged. B. the son and heir of A., within one year after his father's death,
gave to the Bank a heritable bond over his father's estates, for securing payment of advances to be made by the Bank.--Held, that this was a bond for his own and not for his father's debts, and was consequently void under the Scotch Act of 1661, as a bond granted by the heir within one year of the ancestor's death.
THIS was an appeal against a decree of the Court of Session, pronounced under the following circumstances.—A banking house in Scotland long carried on business, notwithstanding different changes in the partners interested, under the style of Robert Allan & Son. This firm became bankrupt in 1834, and contests then arose between the creditors of the firm and the creditors of Thomas Allan, the senior partner, as to two certain estates called Campse and Lauriston.
The Appellants, creditors of the firm, insisted that these 1840. estates had become primarily liable to them for advances made by them, on heritable securities, to the SCOTLAND partnership. The Respondents, the private creditors CHRISTIE, of Thomas Allan, contended that these estates belonged to the individual partner Thomas Allan, and were liable, in the first instance, to his creditors. Thomas Allan had become, by the death of his father in 1818, the chief partner in the firm, and he then took into partnership one Alexander Wight. In 1820, an estate called Campse, in the county of Fife, upon which the partnership had had a mortgage, was sold under a sequestration issued against the mortgagor, and was purchased for the sum of 7,000 l., which sum came out of the partnership funds. In the partnership books was the entry, “ Estate of Campse, near Dumfermline;" and under this head was kept, on one side, an account of the price of the estate, and the amount of the annual outlay upon it; and on the other side, an account of the rents and profits received therefrom. At the close of the year 1820, this estate was conveyed by the trustee under the sequestration, to Thomas Allan; and by a deed, to which the members of the firm were partners, it was declared that the purchase was for him alone; and to him was assigned the partnership claim on the estate, in consideration of the sum of 7,000 l., the receipt of which was thereby acknowledged by the firm. In 1824, the estate of Lauriston, in the county of Edinburgh, was bought for the sum of 26,272 l. The negotiations for the purchase of this estate, which had been pending during nearly the whole of 1823, were carried on in T. Allan's own name; and the disposition of the lands, and the charter of infeoffment, were likewise made to him. He was enrolled, in respect of this property, as a freeholder of the county of Edinburgh under this
BANK OF SCOTLAND
infeoffment; and he exchanged with another proprietor of the neighbourhood part of the lands thus purchased. He laid out money in the general improvement of the estate, and made alterations in the house, and entered with his family into the actual occupation of it.
In October 1823, while the negotiations for the purchase of Lauriston were still going on, an account was opened in the partnership books under the head of “ The estate of Lauriston, near Edinburgh.” From entries subsequently made in this account, the purchase-money appeared to have been furnished from the funds of the company, and so was the money expended in the improvements. This account was kept like that of the estate of Campse ; the expenditure for purchase-money and improvements being placed on one side, and the receipts of rent on the other. The two sides of this account were annually balanced. The estate account was debited with the public and parochial taxes, and with the interest due on the purchase-money, and it was credited with the rents received ; but no account was ever kept of the rent that would have been derived from the occupation of the house, had any other person than Mr. T. Allan occupied it, nor was any sum put down to his debit for such rent. In the annual balance-sheets of the partnership, the estate of Lauriston was regularly inserted as if it formed part of the partnership stock.
In August 1831, Robert Allan, jun., eldest son of T. Allan, became a partner in the firm. New articles of partnership were then executed, by one of which it was stipulated that Lauriston should be taken as T. Allan's own speculation, and he was to pay 3 per cent. interest on the money expended upon it. Another of the articles of partnership was, that in the event of the death of any one partner, his heirs should
BANK OF SCOTLAND
not be entitled to examine into the books of the part. nership, but the survivors were to sign and attest a statement of the accounts, which was to be held sufficient.
In 1832, the partnership applied to the Royal Bank for a cash credit of 20,000 l.; the partners giving their joint and several bond as security for what might be thus advanced. By this bond, T. Allan made his estates at Campse and Lauriston liable to secure the advances on the cash credit. T. Allan died in September 1833. At the time of his death, the debt due by the firm to the Bank on the cash credit account amounted to 8,8001. By subsequent operations between the surviving partners and the Bank, the balance was sometimes increased, but there were periods during the continuance of the transactions between the firm and the Bank, when the former owed nothing to the latter. In July 1834, the firm required a further sum of money, and applied to the Bank, and obtained a loan for 22,0001. The partners at this time likewise gave a joint and several bond for the amount : Robert Allan, who had made up his titles as heir of Thomas Allan, deceased, his father, to the estates of Lauriston and Campse, making a disposition of these estates to the Bank, as further security for the sums due, or thus to become due, to the Bank. In August 1834 the firm stopped payment, and this event was followed by a sequestration under the Bankrupt Act, issued on the 2d of September of that year. At the date of the stoppage of payment, the debt due to the Appellants amounted to 42,000l. Proceedings were then instituted in the Court of Session by the separate creditors of T. Allan, first, to have it declared that the debt due to the present Appellants upon the cash credit was
BANK OF SCOTLAND.
paid and extinguished at or before the month of July 1834; and 2dly, to have the disposition granted by Robert Allan, the son and heir of Thomas Allan, over the estates of Lauriston and Campse (both of which the pursuers alleged were the private property of Thomas Allan deceased), in security for a cash credit of 20,0001. and an instant advance of 22,0001. to the new firm, composed of the said Robert Allan and Alexander Wight, set aside as void under the Act of 1661 (a), having been granted by the said Robert Allan, the heir of the said Thomas Allan, within a year and a day of the death of the latter, to the prejudice of the creditors of the said Thomas Allan. The Appellants, who were the defenders in the Court below, denied
(a) The Act proceeds upon the narrative of the Estates of Parliament:-“Taking into consideration that appearand (apparent] heirs, immediately after their predecessor's death, do frequently dispone their estate, in whole or in part, in prejudice of their predecessor's lawful creditors, before their death come to their knowledge, or before they can do lawful diligence against the said appearand heirs, and which dispositions the saids appearand heirs do often make before they be served heirs and infeft; or other wayes by collusion they suffer their predecessor's estates to be comprised or adjudged from them, for payment of their own proper debts, real or simular, without respect to their predecessor's creditors : And his Majesty, considering how just it is that every man's own estate should be first liable to his own debt, before the debts contracted by the appearand heirs ; therefore his Majesty, with consent forsaid, declares that the creditors of the defunct shall be preferred to the creditors of the appearand heir, in time coming, as to the defunct's estate. Provided always. that the defunct's creditors do diligence against the appearand heir, and the real estate belonging to the defunct, within the space of three years after the defunct's death. And because it were most unreasonable that the appearand heir, when he is served and retoured heir and infeft respective, should for the full space of three years be bound up from making rights and alienations of his predecessor's estate: and yet, it being as unreasonable that he should dispone thereupon immediately or shortly after his predecessor's death, in prejudice of his predecessor's creditors, he having year and day to advise whether he will enter heir or not; therefore it is hereby declared, that no right or disposition made by the said appearand heir, in so far as may prejudge his predecessor's creditors shall be valid, unless it be made and granted a full year after the defunct's death."