Robert Balfour . - Attorney General Campbell - A. Wood v. Archibald Lyle and Ebenezer Bow, (Trustees on his sequestrated estate,) - Lord Advocate Murra - Kaye [1835] UKHL 2_SM_1

UKHL
Robert Balfour . - Attorney General Campbell - A. Wood v. Archibald Lyle and Ebenezer Bow, (Trustees on his sequestrated estate,) - Lord Advocate Murra - Kaye
[1835] UKHL 2_SM_1 · 1835-06-12
An heir of entail granted a lease at a rent of 70 l .; the tenant subset for a rent of 180 l ., and sold and assigned 100 l . of the surplus subrent; the assignation was intimated; but the assignee allowed the principal tenant to draw the subrent and took payment from him of the surplus rent; and the lands were afterwards disentailed and sold.—Held, in a question with the purchaser (affirming the judgment of the Court of Session), that he was not liable to pay the surplus rent.

Subject_ Appeal —

An appeal against interlocutors ordering issues and remitting them for trial to a jury held incompetent.William Cunninghame Cunninghame Graham, the heir in possession of the entailed estate of Gartmore, let in December 1814 the farm of Drum, forming part of

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On the 12th of January 1815 Mr. Dunlop granted to George Graham, the tenant who had been previously in possession of the lands, a sublease excluding assignees and subtenants, at the rent of 180 l . for nineteen years from the date of his own entry. In this way a surplus rent of about 110 l . belonged to Mr. Dunlop.On the 29th of May of the same year Mr. Dunlop executed a deed in favour of Thomas Balfour, merchant in Stirling, proceeding on the narrative of the lease and sublease, and that Balfour had granted him his bill for 700 l . sterling, payable at three months after date,—which bill he accepted as the agreed price and value of 100 l . sterling of surplus rent, due to him by George Graham, in terms of the sublease. He therefore constituted Balfour his assignee to the said sublease, and that to the extent of 100 l . sterling of yearly surplus rent, with power to him to uplift the said sum of 100 l . yearly during the currency of the said sublease, and that at the two usual terms in the year Martinmas and Whitsunday, by equal portions. The deed contained a clause of absolute warrandice.This right was, on the 19th of December 1816, transferred by Thomas Balfour, in consideration of the payment of 650 l ., to the appellant, Robert Balfour, master in the royal navy.No intimation of the asignation was at this time made to George Graham, and the full amount of the subrent was drawn by Mr. Dunlop, Mr. Balfour drew

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On the 3d of March 1820 Mr. Balfour, by notarial instrument, intimated to George Graham that he had now, in virtue of the assignation and transfer in his favour, the only title to the 100 l . sterling of surplus rent, payable after the term of Martinmas then last, and during the currency of the said tack; and that Graham must accordingly in future make payment of the rent to him or to his factor, and that if he should do on the contrary, that he would be liable for the same to Balfour, and in all costs.Notwithstanding this intimation the subrents were paid to Mr. Dunlop as formerly, and Mr. Balfour continued to receive payment of the surplus rent from him in precisely the same manner he had previously done.In the meanwhile Mr. Graham of Gartmore being desirous to disentail the lands of Drum, and to substitute in their place the lands of Garchell (which belonged to him in fee simple) in the entail, entered into an arrangement with Mr. Dunlop and two other friends, under which he conveyed to each of them a portion of the lands of Garchell not exceeding thirty acres; and these gentlemen agreed to execute contracts of excambion of these portions for corresponding portions of the lands of Drum in virtue of the statute 10 Geo. 3. cap. 51. To carry this into effect separate petitions were presented in September 1820 to the sheriff of the county, praying for authority to make an excambion of the lands. Warrant was granted accordingly, and contracts of excambion were executed in December of the

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The lands of Drum which were thus disentailed were then sold to the respondent Archibald Lyle, and on the 23d of July 1822 he obtained a renunciation from George Graham by a document in these terms:—bound to me, and particularly any claim I may have for payment of the expense of making the summer fallow of said farm during the present year; and in the event of the said Archibald Lyle and me differing in opinion on these matters it is hereby agreed, that all matters in dispute shall be referred to men mutually chosen, whose joint opinion, or the opinion of any oversman to be chosen by them, shall be binding upon us.”
“I, George Graham, tenant in Drum of Arnmanuel, considering that it has been agreed upon betwixt me and Archibald Lyle, now proprietor of the said lands of Drum, that he is to accept of a renunciation of my present tack of said lands on the terms underwritten, therefore I have renounced and upgiven, as I do hereby renounce and upgive, for myself and my heirs, &c., all right or title I have or can pretend to the said lands by tack, missive, or otherwise; and that from and after the term of Martinmas first as to the arable lands, and Whitsunday thereafter as to the houses, yards, and grass; and I oblige myself to remove from the premises at the above terms respectively without any warning or process of removing, under the pain of ejection, &c. It being expressly understood that I am to make payment to the said Archibald Lyle of the rent for the current crop and year, with all arrears of rent, and to pay and perform the whole other prestations incumbent on me by the tack of said lands; and reserving to me all claim competent against the landlord or granter of said tack, for whom it is hereby declared that the said Archibald Lyle shall be liable and

Footnote

1 M'Kechnie v. Graham , 1 S. & D., p. 114 (new edition); p. 116 (old edition).

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Mr. Lyle thereupon entered into possession of the lands, which he held personally till 1824, when he let them to another tenant. He did not take infeftment till February 1827.Mr. Balfour was no party to any of these transactions, nor did Mr. Dunlop make him aware of them. On the contrary, Mr. Dunlop continued to accept bills as formerly till Whitsunday 1826, drawn upon him by Mr. Balfour “for value received in surplus rents of the lands of Drum.” Mr. Dunlop soon after that became publicly bankrupt.In the month of April 1827 Mr. Balfour raised an action of declarator before the Court of Session against Mr. Lyle, in which, after referring to the lease, sublease, and assignation of the surplus rent, and the payment of that rent by Mr. Dunlop in virtue of his obligation of warrandice, he set forth, “That some time previous to the term of Martinmas last, the said George Dunlop having stopped payment, and declared himself insolvent, gave notice to the pursuer that he was no longer to look to him, the said George Dunlop, for payment of the said surplus rents: That thereupon the pursuer, having made inquiry, found, to his surprise, that Archibald Lyle, now of Drum, had, by a contract of excambion or otherwise,

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In defence Mr. Lyle alleged, that the deed in favour of Mr. Balfour was altogether latent; that although he had made intimation of it to George Graham in March 1820, yet he had never acted on that intimation; that he had allowed the full amount of the rent to be paid by George Graham to Mr. Dunlop, who was known to be the law agent and factor of Mr. Graham of Gartmore; and that Mr. Lyle, a singular successor, was entirely ignorant of the existence of any sublease, being under the belief that George Graham was the principal tenant. He therefore pleaded that the holder of an assignation of a surplus rent, even although formally intimated to the subtenant, could not compete with an onerous purchaser of the lands; and at all events he could not do so where he had not acted on the assignation and intimation, but had drawn

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Lord Medwyn, on the 16th of December 1828, pronounced this interlocutor:—

would have ascertained that Graham was only a subtenant. The matter, indeed, ought to have been distinctly explained to him at the time. Again, when he accepted the renunciation of the subtack from George Graham, on seeing that he was not principal tenant, he should have been led to communicate with Mr. Dunlop, the principal tenant, which must have produced an explanation, which would probably have put matters on their proper footing, although it seems impossible to defeat the assignation, which was validly completed, because the defender, through neglect of his own interest, was deceived into the belief that he was safe to transact with the subtenant. Expenses have not been given, because the pursuer, by not levying the annuity directly from the subtenant, but consenting to receive it from Graham's agent (which he could not refuse, perhaps, as he was guarantee for it), contributed to continue the defender in his ignorance of the true state of his rights. The citation in the process is due intimation that henceforward the assignee is to claim the annuity from the subject charged with it in terms of the intimated assignation.”“Finds that Mr. George Dunlop, being Gartmore's tenant in the lands of Drum, granted a subtack of these lands, and assigned the surplus tack duty to the extent of 100 l . yearly, during the currency of the subtack, to the cedent of the pursuer, which assignation was duly intimated to the subtenant: Finds that the defender acquired the lands of Drum, and was allowed to draw the full subtack duty directly from the subtenant, the annuity being regularly paid to the pursuer by Mr. Dunlop, who was also bound in personal warrandice: Finds that the subtenant having professed his inability to continue to pay the subrent, renounced his sublease, which was accepted by the defender, without any communication with Mr. Dunlop, the principal tenant: Finds, under these circumstances, that the right of the pursuer, being validly constituted, cannot be defeated by this transaction between the defender and the subtenant. Therefore finds that the defender is liable, as coming in place of his subtenant, to pay to the pursuer the sum of 100 l . half-yearly during the years which would have been the currency of the sublease if not renounced, commencing with the half-yearly annuity due at Whitsunday 1827, the first payment subsequent to citation in this process; and that he is bound to grant an assignation to that extent out of the rent payable by the tenant: Finds no expenses due, and decerns.”—“Note: The defender ought to have inquired as to the leases on this property at the time of his purchase, and he

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Against this interlocutor Mr. Lyle reclaimed, and when the case was advised on the 7th November 1830 the Court allowed Mr. Lyle “to put in an additional plea in law on the right of the principal tenant, Mr. Dunlop, to grant a subtack of the lands of Drum to George Graham,” and both parties to put in such farther additional pleas in law as might be competent under the closed record, and to lodge cases on the whole cause.Mr. Lyle did not put in a plea to the above effect,

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When the case again came to be advised on the 5th of July 1831 the judges were equally divided in opinion, but ultimately concurred in granting warrant for diligence to recover writings with a view to ascertain whether Mr. Lyle was in the knowledge as alleged by Mr. Balfour, and they appointed additional cases to be lodged.At the next advising, on the 26th January 1832, a division of opinion still prevailed on the bench, both as to the legal effect of the assignation and intimation, and as to the result of the evidence which had been recovered. To have the matter of fact settled their lordships appointed Mr. Balfour “to give in the draft of an issue or issues with a view to a trial by jury.” He accordingly lodged an issue in these terms:—
“Whether, at or prior to the date of the said agreement or dispositions, the defender knew, or had cause of knowledge, of the existence of the said subtack, and of the assignation or translation of the surplus rent, to the extent foresaid, in favour of the pursuer?”

The Court however, on 28th February 1832, appointed

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“Whether or not Archibald Lyle, defender, when he accepted a renunciation by George Graham of the lease of the lands of Drum, knew the fact of the transference and assignation of 100 l ., due under the subtack of these lands to Robert Balfour, pursuer?”
The case came on for trial on the 23d of July 1832 before Lords Mackenzie and Medwyn and a jury, when the jury returned a verdict by which they found it “not proven that Archibald Lyle, the defender, when he accepted a renunciation by George Graham of the lease of the lands of Drum, knew the fact of the transference and assignation of 100 l ., due under the subtack of these lands to Robert Balfour, pursuer.” 1Mr. Balfour presented a bill of exceptions; but the Court, on the 21st of June 1833, disallowed the bill 2 , and thereafter on the 5th of July they in respect of the verdict assoilzied Lyle and also Mr. Bow, who in the meantime had as trustee on his sequestrated estate been sisted as a party.

Mr. Balfour appealed. 3

Appellant .—By the verdict of the jury the appellant is precluded from stating any plea founded on the

Footnote

1 10 S., D., & B., p. 853.

Footnote

2 11 S., D., & B., p. 906.

Footnote

3 Mr. Lyle and Mr. Bow also cross-appealed, in so far as they were not found entitled to full expenses.Mr. Balfour in his petition of appeal included the interlocutor of the 26th of January 1832, by which the Court appointed him to lodge an issue with a view to a trial by jury; and the one of 28th of February 1832, by which they sent the issue to trial; the appeal was objected to as incompetent, in so far as related to these interlocutors; and the committee on appeals sustained the objection, and ordered these interlocutors to be struck out.

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This is not the case of a competition between two parties deriving right from one and the same author to one and the same subject. If the appellant had been founding on an assignation by Mr. Graham of Gartmore of the principal rent, and maintaining that the intimation of that assignation to Mr. Dunlop, the principal tenant, was preferable to the disposition granted by Gartmore, with the relative infeftment, in favour of Mr. Lyle, there would be a proper question of competition. The appellant would be founding on one species of right derived from Gartmore, and Mr. Lyle would be founding on another to one and the same subject—the rent. In that case the authority of Mr. Erskine 1 and of Mr. Bell 2 , referred to by the respondents, might be applicable. So, if the appellant were founding on an assignation from Mr. Dunlop of his lease and intimation to the landlord, and the respondent had been trustee on Mr. Dunlop's estate, and thus his judicial assignee, a proper competition would arise, and the case of Cabbell v. Brock , founded on by the respondents, might have some bearing, as it was there held that actual possession was necessary. But in the present case the

Footnote

1 3 Erskine, 5. 5.

Footnote

2 1 Bell, p. 757.

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Accordingly, it appears from all the authorities that a sale of a surplus rent, or a loan raised on the security of it, is completed by an assignation from the principal tenant, and an intimation to the subtenant.

The rule is thus laid down by Mr. Bell 1 :—

“Where the original tenant has granted a sublease, and afterwards assigns his right as principal tenant, the assignment is truly of a surplus rent only, and uplifting the rents, or intimation to the subtenant, completes the real right.”
Again he says, “The assignation of a lease, where there is a sublease, is well completed by intimation to the subtenant, because it is truly only an assignation of rents, and the subtenant is the debtor. But there seem to be no termini habiles for intimation to the landlord to the effect of transferring a lease; and the argument, that otherways there are no means of borrowing money on the security of a lease, is fit only for the legislature.”

Footnote

1 1 Bell, p. 67.

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Lord Stair 1 , in treating of the extent and effect of assignations, says, that “the same extends to all personal rights, whether heritable or moveable, as to bonds, liferents, tacks, reversions, maills, and duties, annual rents,” &c.; and in a preceding passage he says,—“The assignation itself is not a complete valid right till it be formally intimated to the debtor, which, though at first (it is like) hath been only used to put the debtor in malâ fide to pay to the cedent or any other assignee, yet now it is a solemnity requisite to assignations.” He then proceeds to inquire what is a proper intimation, and what circumstances are equivalent to and will supersede the necessity of a formal assignation:—
“Assignations (says his Lordship), to annual prestations, as to maills and duties, teinds or annual rents, or assignations to rights requiring possession to complete them, as tacks, are perfected by use of payment or possession, and need no other intimation.”
He does not here say that any intimation does not complete the right, but that where no intimation has been given this solemnity will be dispensed with where there are equivalents, such as payment or possession.Lord Kilkerran 2 , in reporting the case of Wallace v. Campbell , 16th November 1750, lays down the doctrine in these terms:—

it must, as other assignations, be completed by intimation to the tenant.”

“In a case where the assignee cannot obtain the actual possession, the civil possession, by uplifting the rents, comes in its place; or if such assignee should be considered only as an assignee to the maills and duties during the currency of the tack,

Footnote

1 3 Stair, 6, 8.

Footnote

2 Kilkerran, p. 143.

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This is confirmed by Mr. Robert Bell on Leases 1 , who says, that “it is settled that when the assignation is made by a principal tenant who has previously subset his farm, the assignation must be completed by intimation to the subtenants.”These writers are supported by various decided cases; in particular by that of Halkerston v. Falconer 2 , Webster v. Donaldson 3 , Syme's Trustee v. Fiddler . 4In the present case due intimation was made of the assignment; and although the surplus rent came to the appellant through the hands of Mr. Dunlop, that rent was received by him as the appellant's agent, and as directly liable to him in respect of his obligation of warrandice.But, independent of the preceding plea, the sale to Mr. Lyle cannot affect the rights of the appellant. The farm of Drum was strictly entailed, and this entail operated in favour of the appellant to the same effect as an inhibition against selling. But by the sale an adverse party has been brought into collision with the appellant, and the security arising from the entail taken away from him. He ought therefore to have this question decided as if matters stood in the position in which they were prior to the sale.Respondents .—The lease by Mr. Graham of Gartmore to Mr. Dunlop was a mere colourable transaction, with a view to raise money. Mr. Dunlop was his confidential

Footnote

1 1 Bell on Leases, pp. 451. 455.

Footnote

2 18 January 1628, Mor. 765.

Footnote

3 13 July 1780, Mor. 2902.

Footnote

4 23 May 1806, Mor., No. 13, Appendix, Tack.

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Footnote

1 3 Erskine, 5. 5.

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In like manner Mr. Bell 1 lays down the same doctrine:—

“Rents payable by tenants or by subtenants are frequently assigned in security, either by a simple assignation, or by disposition or heritable bond containing assignation to rents. 1. Where the assignation is by personal deed possession must be taken either by intimation or by decree of maills and duties, which proceeds on an action against the tenant founding on the assignation, and concluding for decree adjudging the rents to be paid to the assignee. Erskine denies that such assignations have effect against singular successors, and his doctrine seems to be law. 2. Where the conveyance is by disposition or heritable bond, the sasine is a sufficient completion of the creditor's right to the rents, upon this principle, that the rents are an accessory of the real right in the lands. The same principle leads to this consequence, that personal assignations of rents, although effectual while the feudal right continues in the cedent or common debtor, lose their force when the real right is transferred to another. The purchaser of lands, therefore, or an heritable creditor completing a real right to the lands, carries the rents in competition with assignations, however completed. The only security over rent effectual against sasine in the lands is one which is not confined to the rents themselves, but takes them as an accessory to the feudal right.”
Agreeably to these principles it was decided, in the case of M'Tavish v. M'Lachlan 2 , that in a question with heritable creditors attaching the lands, a tenant could not retain a part of the rents in payment of a debt due to him by his

Footnote

1 1 Bell, p. 757.

Footnote

2 11 Feb. 1748; Mor. 1736.

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But in the present case the intimation was not followed by any thing like possession. On the contrary, the right was kept altogether latent, and so far from the intimation having been acted upon, the appellant never drew any rent directly from George Graham, but allowed him to pay his whole rent to Mr. Dunlop, from whom the appellant received payment. In the case of Cabbell v. Brock 2 it was held that some public act of possession was so essential to warn third parties of the transference of a lease, that although there had been intimation, yet as this was altogether latent, a security attempted to be created in this form was found to be unavailing. But an intimation, when not followed by possession, is equally as latent as any other deed, and may be altogether departed from by contrary acts, as was decided in the case of Garden v. Lindsay . 3Lord Brougham .—This case of Lyle v. Balfour appeared at first to be one of considerable complication, and in its result to an English lawyer the decision which had been come to by the Court below did seem to be repugnant to our principles; nevertheless, on very full discussion of the case, I have come to the opinion that it is in conformity to the principles of Scotch law in respect of property in Scotland, and that the decision therefore must stand. At the same time, when I state

Footnote

1 4 Jan. 1757; Mor. p. 15218.

Footnote

2 3 W. & S., p. 75; 8 S., D., & B., p. 647; 23 Sep. 1831, 5 W. & S., p. 476.

Footnote

3 28 Jan. 1757; 5 Brown's Sup., p. 855.

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The House of Lords ordered and adjudged, That the said original and cross appeals be and are hereby dismissed this House; and that the interlocutors, so far as therein complained of, be and the same are hereby affirmed.Solicitors: John M'Queen — Caldwell and Son, — Solicitors.