PART XII.

SECURITIES.

CHAPTER I.

PERSONAL BONDS.

THE bond to pay money is a simple obligation, depending for its efficacy on the possession of the usual requisites of an obligatory deed, as detailed above.* As a bill or promissory note is a more simple and economical method of constituting a personal obligation, the simple moveable bond is seldom resorted to, unless there are specialties and conditions to be engrossed in it, or the money is likely to remain unpaid beyond the six years on the expiry of which bills and notes prescribe. Bonds carry the long prescription of forty years. Moveable bonds, when they had a clause obliging the debtor to pay interest, were formerly heritable. By statute they were made moveable in questions of succession, but they remain in their old position in questions between husband and wife.2+ The bond generally contains a clause imposing a penalty in case of failure to pay or perform in terms of the principal obligation. The usual nominal fixed penalty for the failure of any payment is " a fifth part more." Both the penalty and the primary obligation are exigible, and it was so found where the usual qualification that the penalty is to be payable "over and above performance" had been omitted.3 It is a general rule, however, that every

See p. 154, et seq.-1 B. C. i. 335.-2 1661, c. 32.-+ See above, p. 48.— 3 Beattie v. Lambie, M. 10039.

P

stipulated penalty over and above performance is liable to an equitable reduction by the court to meet the damage actually incurred, though a penalty in the form of an alternative instead of performance is not. A bond will generally contain a clause of "registration for execution,” in virtue of which it may be enforced without litigation. In terms of this clause the bond is registered in the books of a court having jurisdiction to enforce it, and execution against person and property will proceed on an extract from the record.2

The above remarks apply to the simple bond for the payment of money. The personal bond as associated with other obligations is of frequent occurrence, and is considered in connexion with several departments of the law. Cautionary obligations, whether for the payment of money or for faithful performance, are generally accomplished by personal bonds; and a security for a cash credit is probably more common in this form than in that of a real security.* The collateral obligation for payment of a composition contract by a bankrupt belongs to the same class of obligations. + The heritable securities, and the maritime hypothecations of ships and cargoes discussed in the pages immediately following, are also accompanied by personal obligations of the character of a Bond. (See below, p. 354.)

CHAPTER II.

HERITABLE SECURITIES.

SECT. 1.—Wadset and Annualrent Right.

THE Wadset, the earliest method of granting security on land in Scotland, though still legal, is seldom if ever practised. By this deed the borrower and proprietor conveys the land to his creditor, who may infeft himself as in the case of

E. iii. 3, 86. Home v. Hepburn, M. 10033. Semple v. Semple, M. 10033. Cochran v. Montgomery, M. 10041. Bairdener v. Drysdale, M. 10043. P. Lord Meadowbank in Mackenzie v. Craigies, 18th June 1811. - Jur. St. ii. 24, et seq.-* See above, p. 224.-+ See Part XIII. Chap. VI. Sect. 2.

a purchaser, so as to hold either of the person conveying to him or of that person's superior. As the creditor, or Wadsetter, holds the land only in pledge for the money he has lent, there is a clause, to the effect that on the money being repaid at a particular time, the land shall revert to its former possessor, who is thence termed the Reverser. There were, during the earlier part of the period when this deed was in use, considerable difficulties as to its custody, the two parties possessing interests opposed to each other. The evil was remedied by the registration laws, in virtue of which the right of reversion was published on the face of the title. Wadsets are divided into two sorts, Proper and Improper. When the wadsetter enters on possession, and takes in place of interest the yearly fruits with risk of the seasons, it is a Proper Wadset. When he agrees to accept of a fixed yearly sum as interest, and accounts to the reverser for the rents, the Wadset is Improper. An improper wadset may be created out of a proper one, by the wadsetter letting the land in tack to the reverser for a yearly rent, which comes in place of interest.1

Infeftment of Annualrent was another method of creating a security on land, applied to baffle the canonical prohibition of interest. It is said to have originated in the alleged attempt of Robert III. to abolish subinfeudations in Scotland, as had been done in England, when the subvassals came to be in the situation of tenants. A proprietor who wished to raise money is presumed to have sold a portion of the rents to be paid to him by such tenants, putting the lender of the money in his own situation as to these rents. In this view the security was of the same nature as the English rentcharge. Under the practice of subinfeudation, a right of annualrent, or a right to an annual sum, payable from the lands, and secured on them by an infeftment, was taken by the lender as security for his money.2

SECT. 2.-Heritable Bond, and Bond and Disposition.

The lender on such a security as the last mentioned, having no method of compelling the borrower to repay, a deed was invented by which, in the manner of a personal bond, the borrower obliged himself to repay the sum lent, with interest and penalty, in security of which the creditor was

* See above, p. 168.- St. ii. 10. E. ii. 8, 3-30. 2 St. ii. 5. Kames' Hist. Law Tracts, 157, et seq.

R. L. ii. 330, et seq.E. ii. 2, 5; ii. 8, 31-34.

infeft in an annualrent as above. This method being still defective, as it failed to give the creditor a method of recovering his capital from the lands, the heritable bond was invented, containing an obligation on the borrower to infeft the creditor not only in an annualrent of the lands corresponding to the debt, but in the lands themselves, in farther security of the principal sum, interest, and penalty. There is generally a clause of registration for execution as above. In the simple heritable bond some debtors merely oblige themselves personally to repay the money with penalty and interest, and to infeft the creditor in an annualrent on the lands, and on the lands themselves in security. Others insert a dispositive clause, conveying the lands in security; but this is presumed to be unnecessary to the pure heritable bond, and to be a confusion of it with the heritable bond and disposition in security.1

Disposition in Security.-This form of security on land is an improvement on the former, in as far as it affords a more expeditious method of making good the debt, by giving the creditor a power or commission to sell the lands in certain circumstances. The deed contains a disposition of the lands, and a power to sell them. The debtor is protected from advantage being taken of this power, by a clause that there shall be certain forewarnings to him of the intention of the creditor, and advertisements, without which the creditor is precluded from selling, and his attention to which is strictly interpreted. If there is a defect in this portion of the deed, the court will interpose to prevent the property from being surreptitiously disposed of. The creditor is not entitled to sell the land and possess himself of the proceeds; he can merely pay himself, and must account to his debtor, or more generally to the creditors of his debtor, for every farthing. Lest a conveyance in terms of the power should not be held an effectual conveyance of itself, the authority of the court is occasionally interposed; yet there seems little doubt that a conveyance, after all the conditions of the bond and disposition are attended to by the creditor, is perfectly good. The lands may be encumbered by other heritable burdens. In judicial sales, and in sales under the sequestration law, the burden is limited to the amount of the price, but in the case of a sale by such a power, the securities remain as encumbrances on the land in full force. In such

1R. L. ii. 378. Jur. St. i. 307.-2 Brown v. Storie, 11th June 1790. M. 14125. B. on C. T. 90.-* See Part XIII. Chaps. III. and IV.

circumstances the purchaser will generally use his right (under covenanted restriction) of retaining the price till encumbrances are cleared off. (See above, p. 168.)

Securities for Future Advances.-At an early period of the history of heritable securities it became an object with borrowers to grant securities not only for the sums they had borrowed, but for such as they might find it afterwards convenient or necessary to borrow. This was effected by a modification of the wadset, but being considered dangerous to the rights of creditors, it was abolished. A method of security for such supplies was afterwards invented in the precarious deed termed Absolute Disposition with Back-bond. The absolute disposition is a complete conveyance of the lands to the creditor. The back-bond is a personal obligation by the creditor to restore them on payment of his money. After infeftment is taken on the disposition, and recorded, should the back-bond not be recorded in the register of sasines, the creditor may defeat the debtor, by making a conveyance of the lands. An exception was introduced by statute, to the act against securities for future advances, in the case of securities for cash-credit with bankers. These, so far as they are connected with cautionry, have been already considered (p. 224), and it only remains to say, that the transactions may in the same manner be covered by a security on land.3

*

The holder of a bond and disposition in security, if he de sire to have his title secured against other deeds, or against the operation of creditors, must be infeft, and his title is protected by the same operations, and liable to the same objections, as that of a proprietor. There must also, where the original holder's right does not admit of subinfeudation, or where no subfeu is intended, be an entry with the superior, in the same manner as a purchaser enters; and until this is completed, the security is defeasible.++

There will be variations in the transaction according as the granter of the security has his own title made real or not, though it is a complex operation to take a good security from a proprietor uninfeft, and the attempt is seldom considered advisable. When the lands hold burgage, the method of transference applicable to that species of property must be adopted. A minor class of securities applicable solely to burgage property is mentioned below.

R. L. ii. 339. 1696, c. 5.- B. C. i. 672.-3 54 Geo. III. c. 137, § 14.* See above, p. 55.- See Jur. St. i. 311.-+ See p. 172.- See p. 58.