Thomas and Alexander Peters, Merchants in Glasgow, v. Alexander Spiers, Andrew Blackburn, and Others, Trustees for James Dunlop, Merchant in Glasgow — Petition, 5 Dec 1766

December 5. 1766. Unto the 5. 1 7 6 U n t n o h e T L O R The L O R D S of C O U N C I L and S E S S I O N, T H E P E T I T I O N O F D L O S e t f O h CN O. h IR Dt f h O a Black­ burn, and Andrew Syme, Trustees for the Creditors of Jam es Dunlop mer­ chant in Glasgow, Humbly sheweth, T H A T, upon the 17th November 1763, James Dun- lop merchant in Glasgow, whose affairs w ere at that time in some confusion, disponed to and in favour of the petitioners, as trustees for the behoof of all his ju st and lawful creditors, his whole subjects, heritable and movea­ ble, real and personal, with a provis o as follows: “ Providing always, and it is hereby expressly provided and declared, t hat the said trustees, or their quorum, by their acceptance here­ of, are, and shall be obliged to apply the first and readied: of the said subject and estate, that may be recovered by them, for payment and extinction of the bonds granted by me and my co-obligants to the crown, for the duties of tobaccos imported by me at the ports of Greenock or Port- Glasgow, Glasgow, as the said duties become due; which said duties are, and shall, by express condition hereof, be paid by, and deducted by the said trustees, out of the first and rea­ diest of their receipts and intromissions in the premises.” That, amongst the subjects belonging to the said James Dunlop, and conveyed by the above disposition to his trustees, there was a considerable quantity o f tobaccos which had been imported by him from America. And, as the revenue-laws require, that all tobaccos to be exported shall be entered outwards in the name of the original importer; so these to­ baccos were entered for exportation in the name of the said James Dunlop, and two of his agents, William King and William Wallace; and the debenture was made out in their name. That the debenture-duties, upon these tobaccos, amount­ ing to near L. 300 Sterling, which belonged to the trustees, in consequence of the disposition to them, (the tobaccos ha­ ving been thereby conveyed prior to the entry for exportation), were, upon the 25th September 1764, arrested in the hands of Jo siah Corthine, collector of the customs at Port-Glas- gow, at the instance of Mess. Thomas and Alexander Peter merchants in G lasgow, in consequence of an action which they had brought against the said James Dunlop, for redeli­ very or payment of the value of certain hogsheads of tobac­ co, which they alledged belonged to them, but had been un­ warrantably disposed of by him. That the said Mess. Thomas and Alexander Peter having obtained a decreet in their process against Mr Dunlop, they in­ sisted in an action o f forthcoming against: Mr Corthine; which came in course of the roll before the Lord Barjarg Ordinary. In this action the pursuers gave in a condescendence, set- ting forth, “ That Mr Corthine, at the time of the arrest- ments in his. hands, stood debtor to Mr Dunlop in the sum of L. 300 Sterling or thereby, and had subscribed a declaration declaration addressed to Mr Dunlop acknowledging the fact." To this condescendence Mr Corthine gave in an answer the following terms: “ On the 30th of August 1764. James Dunlop" William King, and William Wallace entered outwards, or for export, at the port of Greenock, in the ship Hero, Peter Taylor, for Bourdeaux, 10 1 hogsheads of tobacco; but of that quantity no more was shipped than 89 hogsheads, containing 93,377 libs. for which a deben ture was made out and expede by the said W illiam W a- lace: That the old subsidy upon the above quantity of to­ bacco amounted to L. 291: 1 6 s. Sterling; and, upon the 12th October 1764, the said William Wallace, for himself and company, discharged the debenture: But in regard that an arrestment had been used, on the 29th of Septem­ ber 1764, in the hands of the said Jo siah Corthine, in name of the said Thomas and Alexander Peter, Mr Corthine lodged the above sum of L. 291: 16 s. Sterling in the hands of Alexander Morson, cashier to Mess. J ohn Dun­ lop, Alexander Houston, and Company bankers in Glasgow, upon bill, to bear interest at 4 per cent, till the effect of the arrestment should be determined: That, upon the 31s t January 1765, James Dunlop did deliver up to the said Josiah Corthine, the foresaid debenture discharged by the said William Wallace; and thereupon Mr Corthine gave a declaration, by way of letter, to the purpose before men­ tioned; bearing further, that Mr Morion’s bill for the above sum was in his hands.” Appearance having been made for the trustees, they found­ ed upon the trust-right; and the Lord Ordinary, upon ad- vising a minute of debate, pronounced an interlocutor, upon the 27th of February last, in the following terms: “ Prefers Mess. Alexander Speirs, and the other trustees for the cre­ ditors of James Dunlop, to the pursuers, to the debenture-du- ties in question. and decerns in the said preference; as also a- gainst gainst the defender Jo siah Corthine, and James Dunlop the common debtor, for his interest, for payment accordingly, superseding extract till the 20th day of June next.” The arresters upon this preferred a representation; and an- swers being put in thereto by the trustees, the Lord 0 rdinary was pleased, upon the 1 8th of Ju ly last, to pronounce another interlocutor in the following terms: “ Having advised the foregoing representation with the answers and replies, and former steps of process, finds, That tho’ the debenture be­ ing in the name of James Dunlop, is not inconsistent with the transference of the property in favours of the respond- ents; yet in respect it is not denied, that the conveyance to the respondents was granted after James Dunlop became bankrupt, for the behoof of his creditors, and that the representers are neither parties, nor have acceded to it, they are not thereby debarred from the benefit of their diligence; therefore alters the former interlocutor, and prefers the re- presenters upon their arrestments to the sums arrested, and decerns in the preference; as also against the defender Jo siah Corthine and James Dunlop the common debtor for his interest, for payment accordingly.” Against this interlocutor the petitioners preferred a repre­ sentation; and answers being made thereto for T homas and Alexander Peters, the Lord Ordinary was pleased, upon the 21s t of November last, to pronounce an interlocutor in the following terms: “ Having considered the foregoing represen- tation for Alexander Speirs and others, with answers there­ to for Thomas and Alexander Peters, in respect that the respondents have formerly condescended on certain dili­ gences against James Dunlop, which rendered him bank­ rupt in terms of the act of parliament one thousand six hundred and ninety-six, said to be in the hands of the re­ presenters, which is not denied by them; therefore refuses the desire of the representation, and adheres to the former interlocutor in respect of the answers-” The The petitioners are sorry to be engaged in a laws uit with the pursuers, and are extremely unwilling to carry on a litiga­ tion of this kind. But as the question is not only of some im­ portance to the creditors in general, but may likewise, from the particular circumstances of the case, be of consequence in point of precedent, they hope to be forgiven for submitting the two last interlocutors pronounced by the Lord Ordinary to your Lordships review. The petitioners are sensible, that trust-d ispositions granted by bankrupts, for the behoof of their creditors, have not of late years met with the most favourable reception from the court. They will however be forgiven for observing, that considering matters upon the principles of equity, which plead strongly fo r a pari pasu preference, they are intit led to all the countenance that can be given them consi stently with the settled and established laws of the kingdom. It is extremely hard that creditors, who by residing in the same place with their debtor more easily attain a knowledge of his circum­ stances, should have it in their power to secure themselves, while other creditors, equally onerous, who have not the same access to know his situation, are entirely cut out. This how­ ever must take place, as long as a preference is established by priority of diligence; but altho’ the law has declared, that a prior arrester of the effect s of the common debtor shall be preferable to a posterior arrester of the same effects, the peti­ tioners cannot help thinking that it is pushing matters rather too far, to find that, after a person has denuded himself of his whole effects in favour of certain trustees for the payment of all his just and lawfull debts, a single creditor shall have it in his power, by refusing to accede to such trust-right, to defeat the equitable purpose for which it was granted, and by attach­ ing the effects of his debtor by diligence posterior to the dis- position in favour of the trustees, secure to himself a pre­ ference over all the other creditors, who would probably like­ wise have used diligence, had they not trusted to their re­ covering covering a part of their debtor’ s effects proportioned to the extent of their debts, in conference of the conveyance made by him. It is true indeed, that the atf: 1696 “ declares all and whatso­ ever voluntar dispositions, asignations, or other deeds which shall be found to be made and granted, directly or indirectly, by the foresaid dyvor or bankrupt, either at or after his becoming bankrupt, or in the space of six ty days of before, in favour of any of his creditors, either lor his satisfact ion, or farder security, in preference to other creditors, to be void and null.” But it is humbly thought, that a disposition by a bankrupt to trustees, for the behoof of his whole creditors, without dis- tinction or partiality, does by no means fall within either the words or meaning of this statute, which was only enacted to prevent the debtor from granting improper preferences to one set of creditors in prejudice of the rest. It is therefore sub- mitted to your Lordships, if, notwithstanding some late deci- sions, it would not be more agreeable to the principles both of law and equity, to find, that a trust--deed of this kind cannot be challenged by any creditor who has not attached the sub- jects conveyed by prior diligence, or be in any shape defeated by such creditors attempting to secure these subjects by subse- quent poindings or arrestments. But even supposing it competent to a creditor, who does not chuse to accede to a trust-right of this kind, to attach the subjects thereby conveyed, it is a different question how far he can arrest the price of such subjects, after lying by until the trust-right is carried into execution by a sale for the be­ hoof of the whole creditors. This is a question which has seldom occurred; but in the case of Patrick Souper against the creditors of Alexander Smith, which was determined upon, the 23d January 17 5 6, a judgment was pronounced in favour o f the other creditors against an arrester. In that case A- lexander Smith, a person insolvent, having, at a meeting of his creditors, wrote a letter directed to John Watson, im- powering him to roup and sell the furniture of his house and liquors liquors in his cellars for the behoof of his creditors, Watson accepted of the trust, and rouped part of the goods; but Patrick Souper, a creditor who was not present at the meet­ ing, having arrested in Watson’s hands, a competition arose betwixt him and the other creditors; and the court found, That the goods sold, and the prices thereof received by Watson, belonged proportionally to the creditors according to their debts.” Upon the principles of this decision, it would seem, that however competent it might have been to the pursuers to have arrested the tobaccos themselves, while they remained in the hands of the trustees, an arrestment of the price of these tobaccos, after a sale made by these tru­ stees, could be of no avail; and if that is the case, an arrest ­ ment of the debenture arising upon exportation must be e- qually ineffectual. It cannot be said, that either Mr Corthine, in whose hands the arrestment was used, or the public, was at any time debtor to Mr Dunlop in the debenture-money in question, as that fund arose entirely from the act and deed of the trustees, in entering the tobaccos for exportation. Nor is it of any moment that thefe tobaccos were entered out­ wards in Mr Dunlop’s name; the revenue-laws expressly re­ quire, that all tobaccos to be exported to vacate duties, fhall be entered in nameof the original importer; but in this mat­ ter Mr Dunlop acted only as an agent for the trustees, who employed him in the management of the affairs committed to their care, and gave him a salary upon that account, in virtue of powers given to them by the concert and agreement amongst his creditors, in consequence of which the trust-d is- position was granted. The petitioners beg leave further to maintain, that an ar­ restment in the hands of a collector is not a habile method of attaching the debenture-duties or drawbacks of this kind. The collector is by no means debtor, or personally liable in payment thereof; it is entirely casual, whether or not he has money in his hands to enable him to answer the debenture; and and when he has it not, he certifies the fa c t in which case the money is paid by the receiver-general; it is the crown therefore that is the proper debtor; and considering the mat­ ter in this view, an arrestment in the hands of the collector seems noways sufficient. But even supposing an arrestment in the hands of the col­ lector to be proper, it is certain that he has a right to retain every him payable by him to any person otherwise debtor for duties to the crown. In the present case, James Dunlop owes much more money than the value of the drawback in (question; and it was the intention of the petitioners, that all the drawback in his hands s hould be applied toward the payment of these duties in terms of the proviso in the trust- disposition above recited. It may be indeed true, that tho’ the collector was to be found liable to the arresters for the value of the debenture-duties now due, the crown would suf- fer nothing, because James Dunlop’s cautioners are responsible. But then the petitioners humbly apprehend they are intitled to insi st, that the collector ought to apply the value of this old subsid y toward payment of the crown’s debt; for, as it is thought to be the privilege of the collector, if he inclines, to apply it in that s hape in prejudice of every attachment, so it would be hard if he should have it in his power to distress cautioners, by departing from that privilege in order to favour an arrester, and thereby oblige the cautioners to run a risk they had otherwise no occafion to do. Nor is it of any mo­ ment, that Mr Corthine does not plead for this retention him- fe lf; if it is his duty to apply the debenture-money in que- stion in payment of what is due to the crown, it undoubtedly ought to be so applied, and it would be wrong in him to part with the retention competent to the crown, from an in­ clination to favour a particular creditor. The petitioners will only trouble your Lordships with one other plea, which, in their humble apprehension, will of it- self be sufficient to cut down the objection made by the pur­ suers suers to the trust-right upon the statute 1696, viz. that any diligence done against Mr Dunlop to render him bankrupt in the sense of that statute, proceeded at the inst ance of those creditors only who acceded to that trust-right. In order to the better understanding of this plea, your Lord- ships will be informed, that soon after the discovery of the fraud that had been committed at Port G lasgow in the weighing of certain tobaccos belonging to Mr Dunlop, an agreement was entered into by the most of his creditors; by which, upon the narrative, that it would be for the interest of all concerned to join in mutual concert, they resolved to follow joint-mea- sures, and to communicate to the whole the benefit of any le­ gal diligence that had been done, or should be done by any o f them; and, with that view, appointed the petitioners to be their trustees, to whom they conveyed their several debts and claims, to the end that they might use all effectual means of recovering payment thereof, by accepting one or more dis- positions from Mr Dunlop, and collecting, levying, felling, and disposing of his whole subjects, heritable and moveable, at home and abroad, with power to the said trustees to ap­ point Mr Dunlop himself, or any other person, as their factor. This deed, by which the trustees were further authorised to carry on all necessary actions, and, if necessary, to prosecute all diligence against Mr Dunlop and his subjects, and to set asid e all preferences granted by him, was subscribed by a great number of the creditors, and particularly by Walter Mon- teith and C o, and John Ingram and C o, upon the 16th of November 1 763; and, upon the very next day, Mr Dunlop granted a full and ample disposition of his whole effects to the same persons, as trustees for the behoof of his creditors. At this time it came to be known, that, som e weeks prior to this transaction, Mr Dunlop had endeavoured to estab lish preferences in favour of some of his creditors who were nearly connected with him; and, in order to found an action for setting these preferences aside, the trustees did, upon the 2 1 st of of November, take out a caption against him in the name of the said Walter Monteith and company; and, upon the after­ noon that day, an execution was returned by the messenger who was employed to execute it, bearing, That he had made strict search for Mr Dunlop, but could not find him. Ano­ ther execution of search was returned betwixt eight and nine of the morning of the 22d, and a third between the hours of nine and eleven of the 25th of the same month, using all which time he still absconded, all upon the same diligence. Diligence of the same kind was likewise used in the name of John Ingram and Company; but neither the pursuers, nor any of the other outstanding creditors, took any steps for rendering Mr Dunlop a notour bankrupt in terms of the act 1696, within sixty days after the date of the trust-right above mentioned. It is in consequence of these diligences used by the peti tioners, as trustees for the acceding creditors, in order to found an action for setting aside the partial deeds of preference which had been executed by Mr Dunlop, in favour of a few- particular favourite creditors, that the pursuers of the present forthcoming object to the trust right, as falling within the statute 1696; but the petitioners humbly apprehend, that they cannot be allowed to avail themselves of such diligence, in or­ der to deprive the acceding creditors of the jus quaesitum there- by established in them. It would be extremely hard, if the diligence which one had used in the view of securing himself, coul d be laid hold of by a person who had used no such dili­ gence, in order to estab lish a preference against him; but, it would be still harder, if a diligence that was used with the sole purpose of bringing in the whole creditors pari passu, and with the view of defeating certain fraudulent deeds that had been granted in favour o f particular creditors with whom the common debtor was more nearly connected, should have the effect to create a preference to a creditor who took no step to secure himself for a long time thereafter; yet this must be the effect effect of the Lord Ordinary’s interlocutors complained of, by which the pursuers are preferred to the debenture-money in question, which, had it not been for the diligence used by the petitioners themselves, with a view to the common good of the whole creditors, would have been indisputably vested in them, and incapable of being affected by arrestment at the instance of any outstanding creditor. The petitioners think it unnecessary to trouble your Lord- ships with any further observations upon a point that seems to them so strongly founded in the principles of reason, equity; and just ic e; and will therefore conclude in the hopes that you will have no difficulty of finding, that the diligence used by the pursuers cannot have the effect to establish a preference in them upon the debenture-money in question, which they arrested in the hands of Mr Corthine. May it therefore pleas e your Lordships, to alter the Lord Or­ dinary’s interlocutors complained of and to prefer the peti­ tioners to the sums arrested, and to decern in the preference, and against the defender Jos iah Cor thine, and James Dunlop the common debtor for\ his interest, for payment accor­ dingly. According to Justice, &c. A L E X. W I G H T.