Scottish Court of Session Decisions

This was an action at the instance of William Cochrane Ferrier of Birkenshaw, as an individual and as assignee of Mrs Elizabeth Mary Hancock or Cowan, widow of William Cowan of Kirkton, Boghall, and Linburn, the annuitant after mentioned, against James Henry Cowan of Boghall and Drum crosshall.

The facts of the case and the contentions of the parties appear from the following note by the Lord Ordinary:—“By his trust-disposition and settlement the late William Cowan conveyed his whole estates to trustees and directed them to infeft his widow in an annuity of £200 to be paid to her out of the rents of the estate of Boghall. He also directed his trustees to convey the estate of Boghall to his eldest son, the present defender, under burden of the annuity to his widow, and to convey to his second son John Robert Cowan the estates of Drumcrosshall and Kirkton.

By a codicil Mr Cowan directed his trustees ‘when the time arrives, to convey my estates of Drumcrosshall and Kirkton to John Robert Cowan, my second son, to do so under burden of the annuity of £200 in favour of my wife … and I declare that my estate of Boghall shall be conveyed when the time arrives to James Henry Cowan, my eldest son, entirely free from said annuity.’

The trustees duly carried out the truster's instructions, and conveyed, at the appointed time, Boghall to the defender free of the annuity, and the estates of Drumcrosshall and Kirkton to John Robert Cowan under the real burden of the annuity.

In 1886 the estate of Kirkton was sold by a heritable creditor and purchased by the pursuer. The disposition in the pursuer's favour disponed the lands under the real burden of the annuity to Mrs Cowan.

In 1887 John Robert Cowan disponed the estate of Drumcrosshall to his brother, the defender. There is excepted from the warrandice ‘any right which Mrs Cowan has to receive payment of her annuity, or part thereof, out of the lands of Drumcrosshall.’

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It is stated by the defender that Drum-crosshall was burdened with a bond, pre-ferable to Mrs Cowan's annuity, for £10,000, and also with bonds postponed to her annuity, the total burdens now affecting Drumcrosshall amounting to £16,450. The defender also avers that the rental of that estate does not exceed £500 a-year, and, if that is so, it is obvious that it is burdened to more than its full value. It was further stated—and I did not understand the statement to be controverted—that the consideration which the defender gave to his brother for the disposition of the estate was taking over the personal obligation in the bond for £10,000.

Since the pursuer purchased Kirkton, Mrs Cowan has demanded and received from him payment of her full annuity, and in the present action he seeks to operate relief of the payments which he has made, to the extent of one-half, against the defender as proprietor of Drumcrosshall.

The pursuer avers that Kirkton and Drumcrosshall are practically of the same value, and that therefore, in a question between him and the defender, each estate is liable to contribute one-half of the annuity.

I did not understand the defender seriously to dispute that, as a general rule, when two estates, upon which a debt is secured, came into the hands of separate proprietors, they must pay the debt rateably according to the value of the estates. He contended, however, that the debt of £10,000 having been secured over Drumcrosshall before the widow's annuity was made a burden upon that estate, the interest upon the £10,000 must be deducted from the rental, and only the surplus rental taken into account in comparing the value of the two estates, and allocating the annuity between them.

The answer which the pursuer makes to that view is that, even assuming that the debt of £10,000 is preferable to the annuity, which he does not admit, William Cowan gave directions to his trustees to pay out of his moveable estate the whole heritable debts affecting his lands, before they conveyed his estates to his sons. The direction in the settlement upon which the pursuer founds is to sell certain railway stock and to pay the heritable debts out of the proceeds. In a codicil, however, Mr Cowan directed his trustees only to realise the railway stock in certain events, and declared his wish to be that ‘the existing mortgages shall remain secured on my estates of Boghall, Drumcrosshall, and Kirkton, until all my other debts are paid.’ It is not said that the railway stock as been realised, or that all the other debts of Mr Cowan have been paid, and therefore if it were material to consider whether, in terms of the settlement, the debts with which Drumcrosshall is burdened might not have been paid off, inquiry would be necessary.

It seems to me, however, that the pursuer has no title to found upon the directions in the settlement. Drumcrosshall and Kirkton were both left to John Robert Cowan, and if he chose to allow the heritable debts to remain upon these estates, or either of them, instead of calling upon the trustees to pay them off, it seems to me that he was quite entitled to do so. If the security for the widow's annuity had depended upon the debts being paid, she might perhaps have had right to insist that the directions of the settlement should be carried out, but I do not think that the pursuer has any such right. I think that he must take matters as they stood when the separation of the estates occurred by his purchase of Kirkton, and at that date (assuming the defender's statement to be correct), Drumcrosshall was burdened with a debt of £10,000 preferably to the widow's annuity.

I am therefore of opinion that the defender's contention, that if the bond for £10,000 is preferable to the annuity, it falls to be taken into account in any allocation of the annuity between Drumcrosshall and Kirkton, is sound.

The defender further contends that the pursuer is barred from making any claim of relief against him or the estate of Drumcrosshall, in respect, first, that in the disposition of Kirkton to the pursuer the whole annuity is declared to be a burden upon that property; and secondly, that the upset price at which the pursuer purchased Kirkton was estimated, to his knowledge, upon the footing that the whole annuity was exigible from the estate.

In regard to the first point, the whole annuity was, as matter of fact, a burden upon Kirkton, and the disposition seems to me to do no more than state that fact in order that there might be no dubiety on the point between disponer and disponee.

In regard to the second point, if the defender's statement is correct, that after deducting the preferable debt of £10,000 there is practically no free value or rental of Drumcrosshall to meet the annuity, it was very natural that the bondholders in fixing the reduced upset price of Kirkton should have proceeded upon the assumption that the purchaser would have to pay the whole annuity. I do not think, however, that the way in which the sellers arrived at the upset price, even if known to the pursuer, barred him from enforcing any right of relief which he might find to be open to him.

The defender also argued that no part of the annuity could be demanded against Drumcrosshall, because to do so would prejudice the rights of the postponed creditors on that estate.

The defender states that when the pursuer purchased Kirkton the debts secured upon the two estates were as follows—There was first the bond for £10,000 over Drumcrosshall only, which was prior in date and preferable to the widow's annuity. Then there were bonds, postponed to the annuity, granted over both estates for £3000, £7950, and £1000.

Kirkton was sold by the creditors in right of the bond for £3000, and out of the price that bond was paid and also the bond for £7950 to the extent of £2500.

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The result was that the balance of the latter bond, viz., £5450, and the bond for £1000, remained burdens upon Drumcrosshall alone, postponed to the bond for £10,000.

The defender argued that the pursuer could have no higher right than the widow had, and that she as a catholic creditor was not entitled to prejudice the secondary creditors over Drumcrosshall by demanding payment of any part of her annuity out of that estate, Kirkton being sufficient for the payment of the whole annuity.

The question is one of some nicety, but although it was stated there was little argument upon this point and no citation of authorities, and I do not propose at this stage to express any opinion upon it, because as the defender's statements in regard to the burdens upon the estates are not admitted, the facts must be ascertained.” The Lord Ordinary accordingly on 21st December pronounced this interlocutor, against which he granted leave to reclaim:—“Repels the fourth plea-in-law for the pursuer and the second plea-in-law for the defender: Before further answer, allows to the defender a proof of his statements in the defences in regard to the burdens on the estates of Kirkton and Drumcrosshall, and also as to the value of the latter estate; and to the pursuer a proof of his averments in answer thereto.”

The pleas referred to were (for the pursuer)—“(4) In any case, the truster having directed the said debt to be paid out of his moveable estate, the defender is not entitled to take the debt into account in allocating the annuity; and (for the defender)—“(2) The pursuer having purchased the estate of Kirkton expressly under burden of the payment by him out of the said estate of the whole of the said annuity, he is not entitled to relief against the defender or the estate of Drumcrosshall.”

The pursuer reclaimed—On the first point dealt with by the Lord Ordinary the following authorities were cited—Fisher on Mortgages, p. 660; Ley v. Ley, 1868, L.R., 6 Eq. 174; Rose v. Rose, 1787, 3 Pat. 66.

At advising—