John M'Tavish - John Campbel - Wilson v. James Scott and Others, (M'Kenzie's Trustees,) - Denman, Att.-Gen - James Campbell [1830] UKHL 4_WS_410

UKHL
John M'Tavish - John Campbel - Wilson v. James Scott and Others, (M'Kenzie's Trustees,) - Denman, Att.-Gen - James Campbell
[1830] UKHL 4_WS_410
Circumstances in which it was held, (reversing the judgment of the Court of Session,) that cautioners for a tenant, who had stipulated that the landlord should exercise his right of hypothec before calling on them to fulfil their obligation, were discharged.M'Kenzie of Dundonell, who held a lease of the farm and house of Seabank, near Inverness, agreed to sublet them to Mrs Fraser, from May 1818 to May 1822, at the yearly rent of L.135, payable at Martinmas yearly, on condition of caution being found for the rent. The appellant M'Tavish, writer in Inverness, and two other parties, thereupon granted an obligation to “guarantee the rent of one hundred and thirty-five pounds, offered by Mrs Jean Fraser, for Seabank, in manner stated in her missive, the principal tacksman Dundonell (M'Kenzie) being bound to exercise his right of hypothec before calling on us to fulfil this obligation.” *Possession was taken; but the rent not being paid at Martinmas 1819, M'Kenzie applied for, and obtained on the 30th November,

Footnote

* Mrs Fraser's husband, Captain Fraser, was alive, but he was insolvent, and in consequence all right on his part to the lease was excluded.

Page: 411 ↓

Nothing farther was done till 3d February, 1820, when M'Kenzie's agent wrote to M'Tavish in these terms:—
“As one of the sureties to Dundonell for the said back rent due by Captain and Mrs Fraser, I beg leave to inform you, that sequestration has been executed against them; and as this step has not produced payment, I have to request you will, on receipt, settle the rent due at Martinmas last, being L.135, exclusive of interest and expenses. If you and the other cautioners desire it, my constituent will give an assignation to his right of hypothec.”
To this M'Tavish answered,—“In reply to yours of yesterday's date, addressed to me as one of the sureties to Dundonell for the Seabank rent, I beg to say, that I do not consider myself bound as such. Some time in May 1818, an offer was made by Mrs Fraser for Seabank, and Messrs Frasers and I did consent to guarantee the payment of the rent, on condition of that offer being accepted. It was not accepted of by Dundonell, but a new bargain was some time thereafter made by Mrs Fraser, to which the intended sureties were not parties; * besides there was a stipulation in our letter, which, if the transaction had been entered into in terms of it, would protect the cautioners from any demand for payment of rent until the principal debtor was discussed. For these and other reasons, which I may explain to you verbally, I do not consider myself, in any manner of way, connected with the payment of the rent referred to in your letter, and Mr William Fraser, who is in town, is of the same opinion, in so far as he may be interested.”Although a warrant of sale might have been got on 6th December 1819, M'Kenzie did not apply for it till 26th August 1820, when it was granted. A sale took place on 16th September, but in consequence (as was alleged, of the absence of bidders,) only a small part of the effects was sold; and after deducting taxes and expenses, the whole sum realized was about L.25. A renewed warrant of sale was craved on the 5th October, but being resisted by Captain Fraser, it was not obtained till 21st March 1821; and on the 10th April following, the officer reported that no part of the sequestrated effects were to be found. The produce of the partial sale was L.81. In the meanwhile, Captain Fraser had been imprisoned for debt—a circumstance known to M'Kenzie.

Footnote

* This plea was afterwards abandoned.

Page: 412 ↓

With reference to the rent due at Martinmas 1820, M'Kenzie, on the 4th of October, obtained a warrant to cut down, and secure the crop of 1820—and on the 7th of the same month, he got a warrant of sequestration, in virtue of which, a large quantity of oats and barley, besides turnips and potatoes, some farm stock, and household-furniture, were sequestrated. Thereafter, on 21st January 1821, he applied for and obtained warrant to sell—in virtue of which he sold, on the 13th March, effects; but the expenses exceeded the proceeds, part of the effects having been (as was alleged) carried off. The next year's rent, due at Martinmas 1821, was also not paid, and M'Kenzie did not apply for warrant to sequestrate till January 1822, when it was granted, but he did not execute it till the 11th of February; nor did he apply for and get warrant to sell till the 11th of May. It was ordered to be executed on the 28th, but the officer reported, no effects—these having been (as was alleged) abstracted.During these proceedings, M'Kenzie, founding on the act of sederunt 14th December 1756, and alleging that Mrs Fraser was more than one year's rent in arrear, raised an action of irritancy and removing, in which he obtained decree; and Mrs Fraser was ejected on 9th March 1822. To this action the cautioners were not called as parties.M'Kenzie thereupon entered to the farm; and, by a transaction with his landlord, ceded possession in the course of the same year.He then brought an action before the Court of Session against M'Tavish and the other cautioners, for payment of the balance of the rents due at Martinmas 1819, 1820, 1821, and 1822. The cautioners pleaded in defence, that M'Kenzie, by his own conduct, had discharged them, seeing that he had not duly exercised his right of hypothec.The Lord Ordinary found, that “by the letters of guarantee the pursuer was bound to use his right of hypothec before calling on the defenders to fulfil their obligation; that the defenders are entitled to insist upon the pursuer's having bona fide exercised this hypothec for their security; and that they will be entitled to be relieved from any part of the rent for which the pursuer had not used the ordinary means of securing and rendering it effectual under the hypothecation,”—and appointed the cause to be enrolled, that these principles might be carried into effect. This interlocutor was acquiesced in by all parties. Thereafter, his Lordship, “In respect that the pursuer failed for the first three years to exercise his right

Page: 413 ↓

M'Tavish appealed. †

Appellant .—The right of hypothec imports not merely a general lien, but also the capability of being converted into a real pledge, or a specific security, by warrant of sequestration, and being rendered productive by sale. It was on the express condition that M'Kenzie should make this right effectual, that the cautioners agreed to be liable, if it proved unavailing; but instead of doing so, he neglected the execution of it in the usual manner. It is not sufficient to say, that he obtained and executed warrants of sequestration, or even warrants of sale. It was his duty to have done so with due diligence; whereas, by his dilatory proceedings, he, according to his own statement, permitted the effects to be carried off. Besides, he allowed the cautioners to remain ignorant of the responsibility which, according to his views of their liability, they were each year incurring. Had they been informed of the real state of matters, they could have insisted on his duly exercising his right of hypothec; or by assignation to his proceeding under that right, they could have secured themselves by measures against the tenant. Even if they were liable for the three first years, it is clear they cannot be for the fourth, because the tenant was removed from the possession by M'Kenzie himself.

Respondents .—The argument of the appellant rests upon a

Footnote

* 5 Shaw and Dunlop, p. 597.† In the meanwhile M'Kenzie conveyed his estate to Scott and others, as trustees for creditors, and after the appeal died.

Page: 414 ↓

Lord Chancellor —My Lords, though I confess, after attending to the arguments of the learned counsel for the respondents, who have placed the case on the only grounds on which it can be rested, my mind does not entertain any considerable doubt with respect to the judgment I ought to recommend to your Lordships to give upon this appeal; yet, as that judgment, in the only way in which the subject now presents itself to my mind, would be reversing the judgment of the Court below, I think I shall best discharge my duty by adopting the course I have followed since I have had the honour of sitting in this House—namely, delaying to offer that advice to your Lordships, until I shall have had an opportunity of deliberately looking again into the whole of the case for the respondents, and the reasons for the judgment. The right of hypothec is nearly a convertible term for a right of pledge. It is, in its nature, a species of pledge. By it, in fact, the party obtains a title to the possession of the matter to which it attaches. In the mercantile law, we talk of hypothecation; and in the civil law also. It is an expression used in all foreign laws. A ship, being hypothecated for certain engagements which have been contracted, wherever it goes, carries that hypothec about with it, and may be followed, and the remedy made effectual in the hands of any person who has got possession, provided it is not obtained in a way to defeat that original title. But the hypothec of the landlord in Scotland appears to be of a nature exceedingly strong and very peculiar, arising from the former state of that country, and from the fact of the landlords having made the laws, and not the tenants, and still less the traders, who,

Page: 415 ↓

Page: 416 ↓

Lord Chancellor .—My Lords, with respect to the case of Mactavish v. Scott , I may preface the very few observations with which I propose now to trouble your Lordships—having stated my opinion upon it already,—with saying, that having had an opportunity of looking again into the pleadings, it is quite impossible that the judgment can stand, even if, as far as regards three of the years, it were right in substance. Your Lordships will recollect, that it was an action against a surety by a landlord, for the non-payment of rent by his tenant. Four years are in arrear. Whatever

Page: 417 ↓

“We, the undersigned, do hereby guarantee the rent offered by Mrs Jean Fraser,”

of so and so, ‘the principal tacksman,’ Dundonell, being bound to exercise his right ‘of hypothec, before calling upon us to fulfil this obligation.’ Now, what did the principal tacksman do? Did he exercise his right of hypothec or not? That is the whole question, buried in a mass of papers of twenty folios on one side, and eleven folios on the other, which might very well have been stated in two folios on each side. There was no one disputed fact which any lawyer in Westminster Hall would not have stated in half a folio—which any Court of Westminster Hall would have said it required more to state—and which any Court in Westminster Hall would not at once have decided against the decision which has been pronounced in this case. My Lords, I say not this invidiously towards the Court below, and those most learned and accomplished judges who compose it; for where the question which has arisen is one of Scotch law, founded on the peculiarities of that system of jurisprudence wherein it differs from our own, I have always been, and ever shall be, found the last person to recommend to your Lordships lightly to deal with the authority of that Court. I lately recommended to your Lordships—in affirming a judgment complained of—to act contrary to the reason of the case—contrary to all the analogy of English law proceedings, because I found it a case of Scotch pleading, and Scotch practice; and although one Judge differed from his brethren, after having held the same opinion which they retained, I did not feel it to be proper to propose to your Lordships to set aside the decision of the majority; * and the same with regard to the question as to the effect of the omission of the bailie's name in an instrument of sasine. † But, my Lords, this is not a question peculiar to Scotland—it is a question of the construction of a guarantee, and is precisely the same question in Scotland as it would have been in the Court of King's Bench, or the Court of Common Pleas. The question is simply this—Whether the landlord was bound to exercise his right of hypothec, before he called upon the surety? I apprehend, my Lords, that the landlord has only a right to enforce against the surety payment of the balance—that he must get, by all means in his power, as much as he can, himself, under his right of hypothec, which is a large right in Scotland—a much larger right than is possessed by a landlord in England; for he can follow goods when sold to bona fide purchasers for a full price. With this large right which he possesses, it is his duty to enforce his own remedy, before calling on the cautioner, the surety; and he can only call upon the surety to pay the balance. I will venture to say, that if your Lordships were to take any ten lawyers accustomed to the legal construction of instruments, and ask them to construe this instrument,

Footnote

* Cogan v. Lyon , ante, p. 391.† Morton v. Hunters and Others , ante, p. 379.

Page: 418 ↓

Page: 419 ↓

The House of Lords accordingly ordered and adjudged that the interlocutors complained of be reversed.Counsel: Respondents' Authorities. —M'Millan, Jan. 21, 1729. M'Queen, June 11, 1811, (F. C.) 3 Ersk. Inst. 3. 66. 2. 6. 62.Solicitors: J. M'Queen— Moncreiff, Webster, and Thomson—Solicitors.