Scottish Court of Session Decisions

Subject_1 COMPENSATION - RETENTION.
Subject_2 SECT. IV.

Who entitled to Propone Compensation and Retention.

The Creditors of John Brough
v.
James Jollie

Date: 26 November 1793
Case No. No 41.

A person purchasing a subject for another, in consequence of a commission from him, and, with his consent, taking the rights to it in his own name, is entitled to retain it, in competition with the other creditors of his constituent, till he is relieved of all cautionary obligations which he has undertaken for him.

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In 1786, James Jollie, writer to the signet, in virtue of a verbal mandate from John Brough, purchased for him, at a public auction, an area at the price of L. 2,200. The enactment of roup was, with Brough's consent, made out in Jollie's name, who became personally bound to pay the price, and fulfil the conditions of the sale.

Brough soon after paid the price of the area, and erected a large building on it.

In 1784, Jollie became cautioner for Brough, to the extent of L. 500; and in 1787, for L. 500 more.

Brough having become bankrupt in 1788, Jollie contended, That he was entitled to retain the area, and building erected upon it, till he should be relieved of both these cautionary engagements. His right to do so was disputed by Brough's other creditors, who

Pleaded; As Mr Jollie holds the subject merely as mandatary for Brough, he is bound to restore it free from all incumbrances, except those flowing directly from the commission under which he acted, such as the expense of management. That commission was precise in its terms, and limited in its object; and as it also implied exuberant confidence, retention can be no more pleaded, in consequence of it, than it could against the actio depositi; voce Compensation; voce Bill of Exchange; Stair, b. 1. tit. 18. § 6.; 10th December 1760, Competition of Appin's creditors, No 79. p. 749.

In the case, Harper against Faulds, infra, h. t. it was determined that goods put into the hands of an artisan, in order to be manufactured, cannot be retained by him for any other debt, except the expense of the operation. It would be singular therefore, if, in the contract of mandate, which implies a greater degree of trust than the locatio conductio operarum, the mandatary should be so far entitled to invert the nature of his possession, as to retain the subject he was employed to purchase, till he should be relieved of all the separate obligations in which he was either previously bound, or which he should afterwards come under on his account.

Answered: When a person is disabled by bankruptcy from discharging the obligations he owes to another, he cannot demand performance of what that other owes to him; and the solvent party is entitled to retain, for his security, any effects of the bankrupt he may have got into his possession, especially if he is cautioner for the bankrupt, because he is at all times entitled to insist on being relieved from his obligation, even although he has not been distressed for payment of the debt; Erskine, b. 3. tit. 4. § 20. and 21.; Macdowal, b. 1. tit. 24. § 34.; 18th February 1662, Earl Bedford against Lord Balmerinock, voce Mutual Contract; Voet. de Institor. Act. lib. 14. tit. 3. § 9.; Kames' Principles of Equity, 3d edit. vol. 2. p. 102. Neither does it make any difference whether the cautionary obligation has been undertaken by him before or after his obtaining the subject over which he claims a right of retention; Fountainhall, v. 2. p. 657. 10th July 1711, Irving against Menzies, infra, h. t. June 1710, Martin against the Creditors of Archibald*; 19th June 1744, Murray against Chalmers, No 82. p. 2626.

Besides, from the great length of time during which Brough allowed the property to continue in the defender's name, it is evident that it came into his hands not in consequence of a simple mandate, but that Mr Brough must have intended it to remain with him in trust, for his relief of all obligations in which he might be engaged for him.

Replied: Retention has never been sustained for relief of cautionary obligations, unless on the footing of previous consent between the parties, either direct or implied, of which, in the present case, there is no evidence; 1st July 1709, Strachan against the Town of Aberdeen, No 30. p. 2570.; 24th December 1746, Balfour against Lazini. No 35. p. 2575.

* Examine General List of Names.

The Lord Ordinary reported the cause on informations.

The Court, 5th June 1793, sustained the claim of retention.

On advising a reclaiming petition and answers, it was

Observed on the Bench; Mr Jollie, whether considered as a mandatary or trustee, is not bound to denude till relieved of his cautionay obligations. In the case, Harper against Faulds, the goods were put into the hands of an artificer, merely to perform a certain operation upon them, under an implied obligation to restore them whenever it was finished, upon receiving the price of his labour. It was therefore thought, that he could not be entitled to hold them as a pledge or security for debt in general; but it was admitted, that cautioners, factors, or trustees, stood upon a different footing.

The Court unanimously ‘adhered to the interlocutor reclaimed against, in so far as it sustained the claim of retention maintained for James Jollie, reserving to the parties to be heard how far individual tradesmen, creditors of the said John Brough, had a right to insist against Mr Jollie for payment of work done, or materials furnished by them to the subjects in question, and also reserving to the creditors at large to insist against him for repayment of the original purchase-money of the area, without prejudice to any defences competent to him against these claims.’

Lord Ordinary, Dreghorn. For the Objectors, Solicitor-General Blair, Patison. For Jollie, Dean of Faculty Erskine, Cullen. Clerk, Mitchelson. Fol. Dic. v. 3. p. 143. Fac. Col. No 75. p. 166.