Alexander Speirs, Andrew Blackburn, and Andrew Syme, Trustees for the Creditors of James Dunlop v. Thomas and Alexander Peters — Answers, 27 Dec 1766

December 27. 1766. A N S W E R S F O R •. Thomas and Alexander P eters Merchants in Glasgow, in Company, for themselves, and as agents for Walter Peter and Company Merchants in Vir- ginia; TO The PETITION o f Alexander Speirs, Andrew Black­ burn, and Andrew Syme, Trustees for the Credi­ tors of James Dunlop. IN July 1763, the ship Betsy arrived at Greenock from Virginia, having on board sixteen hogsheads tobacco, that were consigned to the respondents Thomas and Alexander Peters of Glasgow, by the said Walter Peter and company of Virginia; and the re­ spondents understanding that James Dunlop, late merchant in Glasgow, on whose account chiefly this ship was load­ ed, had gone down to Greenock in order to enter his to­ baccos, did write him a letter, desiring him to enter their sixteen hogsheads along with his own, (a favour common­ ly done by one merchant to another); and which Mr Dunlop having accordingly done, the entry-duties were repaid to him by the respondents, conform to his receipt in process. As As the respondents could neither obtain delivery of their tobaccos from Mr Dunlop, nor any satisfactory ac­ count where they were, or how disposed of, they at length brought an action against him in this Court, concluding for delivery of the said sixteen hogsheads, or othew ise that he should be decerned to make payment of the sum of L. 2so Sterling, as the value thereof, with damages and expences of process; and, upon the dependance, the res­ pondents did use an arrestment in the hands of J osiah Cor- thine collector of the customs at Port-Glasgow, upon the 25th of September 1764, and which was afterwards repeat­ ed 1 3th February 1765. Thereafter, the respondents having obtained and extract­ ed a decreet against James Dunlop, a process of forth- coming was brought, at their instance, against Mr Cor- thine: And it appearing from the answers given in by him to a condescendence for the pursuers, both recited in the petition, that, at the time of the arrestment. he was possessed of L.291, 16 s. Sterling, as debenture-duties up­ on a parcel of tobacco belonging to their debtor James Dunlop, the respondents insisted for a decreet of forth­ coming against Mr Corthine, who made no opposition thereto: But appearance being made in behalf of the now petitioners, in the character of trustees for the creditors of James Dunlop, a competition ensued: In which the Lord Barjarg Ordinary, after some intermediate steps recited in the petition, did, of this date, pronounce the interlocutor now complained of, finding, “ That though the debenture being in the name of James Dunlop, is not inconsistent with the transference of the property in favours of the peti­ tioners; yet, in respect it is not denied, that the conveyance to the petitioners was granted after James Dunlop became bankrupt, and that the respondents are neither parties, nor have acceded to it, they are not thereby debarred from the benefit of their diligence; and therefore preferring the respondents respondents, upon their arrestments, to the sums arrested.’ And to which his Lordship, of this date, adhered, upon: advising representation and answers; in respect that the respondents had formerly condescended on certain diligen­ ces against James Dunlop, which rendered him bankrupt in terms of the act of parliament 1696, as in the hands of the petitioners, which was not by them denied. The respondents had also, in the course of the process, executed and repeated a reduction of the trust-d isposition, founded on by their competitors, upon the act 1696. As the trustees have preferred a petition, which is ordain­ ed to be answered, the respondents shall proceed to consi- der the several particulars therein urged, and are hopeful to satisfy your Lordships, that the judgment of the Lord Ordinary in their favours falls to be affirmed. The petitioners set out with the common topics in fa­ vour of trust-rights, which parties are always disposed to adopt, when they coincide with their purpose. They next observe, that although the law has declared, that a prior arrester of the effects of a common debtor shall be prefer­ able to a posterior arrester of the same effects, yet that it is pushing matters too far to find, that after a person has de­ nuded himself of his whole effects in favour of trustees, for the payment of all his ju st and lawful 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. They then proceed to argue, that a dis- position by a bankrupt to trustees, for the behoof of his whole creditors, does not fall within either the words or meaning of the statute 1696: And conclude that, upon the princi­ ples both of law and equity, a trust-deed of this kind ought to be sustained against the challenge of any creditor, who had not, by prior diligence, attached the subjects con- veyed, or any attempt of his to secure these subjects by subsequent poindings and arrestments. The The respondents think it unnecessary to enter upon a mi­ nute discussion of the petitioners Speculations in favour of trust-rights, because they observe, that the same argu­ ments have been all along used in every question of this sort; one of which, to be hereafter mentioned, was recent­ ly under the consideration of the Court, and will be fresh in your Lordships remembrance. Experience has Shown, and your Lordships. upon the most mature deliberation, have been convinced, that trust-dispositions do not answer the purpose: Nor, indeed, is it equitable or ju st, that a creditor should, without his own act or consent, be de­ prived of the aid of law to operate his payment, and be made dependent upon the activity or fidelity of another in the management of his debtor’s affairs, which would also Subject him to all the consequences of his ignorance or indolence. And whatever the legislature might think fit to do in regard to the introducing of pari passu preferences in such cases, yet, till that is done, your Lordships will pass judgment agreeable to the laws of the land, accord­ ing as they stand at present. The respondents will, in the next place, take the liberty to say, that neither the petitioners, nor any other of Dun­ lop’s creditors, are equally onerous with them. The re­ spondents became creditors, not by their own consent, but in consequence of Dunlop’s tortious act and deed. They have been most unjustly dealt with by that gentleman, who got their tobaccos into his possession, not in the way of sale, or upon any title whatever, but in consequence of his undertaking to enter the same for their behoof; and when he found himself giving way, he ought honestly to have delivered them up, in place of immixing them with his own stock made over to these trustees. Such a Surren­ der, therefore, was most unfair quoad, the respondents to­ baccos, and could never transfer the property thereof to the trustees. And the respondents cannot help thinking, that that these trustees showed a culpable partiality in giving up to a near connection of one of their own number, viz. Mr Hugh Blackburn, certain tobaccos of his, that were upon the same footing with the respondents tobaccos, without doing them the same ju stice. Every consideration of equi­ ty, therefore, the respondents must humbly think, lies en­ tirely with them. As to the question in law, Whether the trust-right, founded on by the petitioners, can be obtruded in the present competition, in order to deprive the respondents of the benefit of their diligence by arrestment, which the Lord Ordinary has found it cannot; the respondents conceive it would be altogether improper to use argument upon a point so well established in practice as this, that no disposition by a bankrupt debtor can disable credi­ tors from doing diligence. The rule was established in the well-known case of Snee and company, contra the trustees of Michael Anderson, 12th July 1734; and this very point was lately under the deliberation of the Court, and received a most solemn determination in the case of Elisabeth Mudie, relict of Doctor Smith in Montrose, and the trustees for the creditors of Robert Strachan mer­ chant there, decided anno 1764. In that case, the Lord Ordinary gave a judgment which, in substance, found sufficient evidence that Strachan, the common debtor, was reduced to the state of a notour bankrupt, in terms of the act of parliament 1696, within 60 days from the date of the disposition made by him, to the defenders, of his estate, and therefore reduced that disposition, so far as concerns the pursuer; and found her intitled, in virtue of her arrestment, to recover from the arrestees such sum as she would have right to, if no such disposition had been made; and found her likewise inti­ tled, in virtue of her arrestments in the defenders (the trustees) hands, to any effects of the common debtor they are are possessed of, and the prices of such of his goods sold as they have received; except in so far as the trustees are in condition to show, that they, or the other creditors, are intitled to controvert the pursuer’s preference, upon grounds in law, independent of the disposition reduced. The trustees reclaimed upon the same grounds that are now pleaded by the petitioners; but the Lord Ordinary's interlocutor was affirmed, and adhered to. And, upon this occasion, the Court had the general point, as to trust- dispositions, again under consideration, which, the respon- dents are informed, was clearly held to be against them. And although, in a later case, between M 'Kill and the trustees of M‘Lurg, in July 1766, the trustees were preferred to an arresting creditor who had not acceded, yet if the re- spondents are not mistaken, the judgment went upon this special ground, that M‘Lurg was not in the terms of either the statute 1621 or 1696. As to the petitioners argument, founded upon the de- cision in the case of Souper against the creditors of Smith, it appears, in the f irst place, that neither was Smith in the case of the statute 1696, nor Souper himself intitled to the benefit of the act 1621. And, 2dly. It is clear from the decision above mentioned, in the case of Strachans trustees, that arrestments in the hands of his debtors were sustained, notwithstanding the trustees had in that case carried the trust into execution; and even arrestments in the trustees own hands were found effectual to carry any effects of the common debtor that they were possessed of, and the prices of such goods sold as they had received. So also in the case of Snee, though the trustees for the creditors of Anderson had actually sold and disposed 0f the greatest part of his effects, yet Snee having used ar­ restments in the hands of his trustees, was thereupon preferred for payment of his whole debt. And indeed there is no shadow of reason why it ought to make a variation, variation, as to a creditor not acceding, whether the trus- tees are possessed of the subjects themselves, or of the prices and proceeds thereof; or, if these happen to be in the hands of third parties, when it becomes necessary for him to use the diligence of the law, in order to operate payment of his debt. The arrestments, in the case now before your Lordships, were not used in the hands of the trustees, but of Mr Corthine: And this leads to consider the objection made thereto, that it was not a habile method of affecting the debenture-duties in question. And your Lordships will observe, that the objection stands upon this foot, that Mr Corthine never was debtor to Mr Dunlop in the de­ benture-money in question, that fund having arose from the disposal of the tobaccos by the trustees, and enter­ ing the same for exportation; from which it is inferred, that the arrestment in Mr Corthine’s hands was inept, and cannot avail the respondents in a question with the petitioners, in whose favours Mr Dunlop had ab ante con­ veyed these tobaccos. But as the respondents hope to have shown, that they cannot be prejudiced in their diligence by Mr Dunlop’s disposition to the petitioners, which is clearly reducible; so matters fall to be considered as to the present question, in the same light as i f no such conveyance had been grant­ ed; and consequently these debenture-duties were, and still are, to be held as in bonis of Dunlop, and affectable by the legal diligence of his creditors. It is further contended by the petitioners, That an arrest ­ ment, in the hands of a collector, is not a habile method of attaching the debenture-duties, or draw-backs of this kind: That the collector is not debtor, or personally liable in payment thereof: That it is altogether casual whether or not he has money in his hands to enable him to answer the debenture; and when he has it not, he certifies the fact, fact, in which cas it is paid by the receiver-general: That it is the crown therefore that is the proper debtor; and, in this view of the matter, an arrestment in the hands of the collector is not sufficient. To this it is answered, That the admistrators and trea- surers of a corporation are not personally liable; and yet arrestments used in their hands are valid: That, at the time of using the respondents first arrestment, there was confessedly a fund in the hands of the collector (and, in all their practice, the respondents never knew it to be o- therwise at Port-Glasgow) for paying these debenture- duties, which the collector was bound to apply and make good; and, so long as these debenture-duties remained outstanding, they were the proper subject of an arrestment, which could only be in the hands of the collector as hold­ er thereof: Otherwise, supposin g a merchant to have the bulk of his funds vested in debentures, the respondents cannot see how his creditors could attach them, except by arresting in the collector’s hands; for it is believed, that an arrestment in the hands of the officers of state, for the purpose of attaching debenture-duties, is altogether a no­ velty. Further, your Lordships will observe, from Mr Cor- thine’s answers to the condescendence, engrossed in the petition, p. 3. that the debenture was delivered up to him discharged, upon the 3 1 st of January 1765, which would intitle him to take credit for the contents in his ac- compts; after which period, certainly, it cannot be said, that either the crown remained debtor, or Mr Corthine qua collecto r: But the declaration which he then gave, constituted him debtor tanquam quilibet and in his private capacity, for the equivalent sum payable to Dunlop, which the respondents second arrestment therefore, in his hands, upon the 13th February 1765, did legally and habilely at­ tach. The The petitioners are further pleased to contend. That, sup- posing an arrestment in the hands of the collector to be proper, yet they are intitled to insi st, that as James Dun­ lop owes much more money to the Crown than the value of the drawback in question, the collector ought to apply the same towards payment of the Crown’s debt, although Mr Corthine does not plead for this retention himself. It has been already observed, that the money in question is not owing by Mr Corthine upon the footing of deben­ ture-duties. That gentleman, it is believed, knew his duty extremely well; and has not the most distant connec­ tion with the respondents, or any motive to favour them. But, in fac t there is no ground for such a plea. It is cer­ tain, that all the Crown-debt has been long ago paid off out of Dunlop’s subjects, nor will the cautioners have oc- casion to pay one shilling. At the same time, as these cautioners came under their engagements for Dunlop vo­ luntarily, and took their chance, they are by no means in pari cas u with the respondents, who cannot help observing, that the clause in the trust-right respecting them, which is recited in the petition, seems to favour a good deal of partiality and intention to give a preference to one set of creditors; and also that this plea of retention is, by no means bona fide, made on the part of the petitioners, but set up merely with a view to disappoint the respondents of indemnification for their tobaccos, that were most unjustly sunk into the universita s of the bankrupt’s subjects. This circumstance does materially difference the respondents case from that of common creditors becoming so by their own consent; and to whom this trust-right may possibly be an eligible measure. But the respondents, who, in no shape, contracted with Mr Dunlop further than in trusting him with the entry and cellaring of their tobaccos, can by no means digest their coming in upon the fame footing, when, in justice and equity, their property ought to have been separated from the bankrupt’s subjects, and delivered up to them, and when the respondents were never so much as asked ask ed to concur in those measures, or even to be present at any of the meetings which are said to have been held by Dunlop's creditors and trustees. It only remains to take notice of another objection, stated in the close of the petition; namely, That the dili­ gence whereby Dunlop was rendered bankrupt, being used at the instance of the petitioners, as trustees for the acceding creditors, for a particular purpose, cannot avail the respondents, who used no such diligence, nor took any step to secure themselves for a long time thereafter. It is answered, That as Dunlop was rendered bankrupt, within sixty days after the date of the disposition quarrelled, the respondents, in terms of the statute 1696, are intitled to insist in a reduction thereof, even though they have done no diligence themselves. Indeed, the respondents could never imagine, that it would be necessary to use di­ ligence for procuring delivery of their property, whereof Mr Dunlop was no more than custodier for their behoof, though they were, at length, reduced to the necessity of taking that step. And now they do, with great submis- sion, apprehend, that it is sufficient to found them in their plea or challenge, upon the statute 1696, that Mr Dun­ lop, at whose hands they have sustained this wrong, was rendered bankrupt in terms of that statute, which was in­ tended to fix the characters of a notour bankrupt, and also a period within which he is disabled from granting deeds, to the prejudice of any of his creditors; and that it can make no material odds by whose diligence the character and period of bankruptcy have been fixed, whether by one set of creditors or another. Upon the whole, it is humbly hoped, that your Lord- ships will see no ju st ground to vary the Lord Ordinary’s judgment in favours of the respondents, and will therefore adhere. In respect whereof, &c. W I L L. W A L L A C E,