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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> M'donald v. Fann [1913] ScotLR 716 (11 June 1913) URL: http://www.bailii.org/scot/cases/ScotCS/1913/50SLR0716.html Cite as: [1913] ScotLR 716, [1913] SLR 716 |
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Page: 716↓
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Held ( diss.Lord Dundas) that an unrevoked gift of moveables made by a husband to his wife some years before his death formed part of the legitim fund of his children, because the gift was revocable, being a donation inter virum et uxorem.
Mrs Catherine M'Donald or Fann, wife of and residing with John Viotti Fann at 36 Pine Road, Cricklewood, London, pursuer, brought an action against Mrs Margaret Nicolson or M'Donald, residing at Crossroads, Broadford, in Skye, widow and universal legatory of John M'Donald, carpenter, at one time residing at Crossroads aforesaid, and also against David Munro, bank agent, Nairn, and Archibald Macdonald, bank agent, Broadford, foresaid, the executors-nominate of the said John M'Donald, for their interest, defenders. The conclusions of the summons were for an accounting by the defender Mrs M'Donald of the whole moveable estate belonging to the said John M'Donald, received and ingathered by her, whereby the true amount of the legitim due to the pursuer out of such estate might be ascertained for payment of such sum to the pursuer, or, in the event of her failing to account as aforesaid, for payment of £400.
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The pursuer averred, inter alia—“(Cond. 1) The pursuer and her brother John James M'Donald, presently residing in Rhodesia, are the only children of the late John M'Donald. The said John M'Donald was twice married, the pursuer and her brother being children of his first wife. He spent a great part of his life in Natal, where he acquired considerable means. In 1904, when about seventy years old, he fell under the influence of the female defender, whom he married on 15th July 1905. They lived together at Broadford in Skye until 7th January 1910, when the said John M'Donald died. He left a settlement under which he disponed and legated his whole means to the female defender and appointed the defenders David Munro and Archibald M'Donald executors to act under said settlement. The said settlement was recorded in the Sheriff Court Books at Inverness, but the defenders Munro and M'Donald never confirmed or at any time acted as executors under said settlement. There was no estate whatever standing in the name of the deceased at his death except his furniture, which the female defender has taken possession of.… (Cond. 2) During the marriage between the female defender and the said John M'Donald the latter transferred large sums of money to the former by handing the same to her to deposit in bank or elsewhere in her own name, or by depositing the same at his own hand in her name. The following sums were so transferred:—In the latter part of 1905 he handed her £100 or thereby, which she at his desire deposited in bank in her own name; in September 1905, at Broadford, in Skye, he paid her £50, which by his direction she deposited in her own name; in April 1906, also at Broadford, he deposited the contents of a bank draft for £200 in bank in her own name, but afterwards transferred the money to the Clyde Trust; in December 1906 he deposited £700 in bank in her name; on 16th November 1907 he directed his banker to transfer to her name a deposit for £70 then standing in his own name, and the banker did so; in 1908 he again took a bank draft for £200 to bank and deposited the contents in her name. All these deposits still stood in her name at the death of the said John M'Donald in the form in which he had directed them to be made. The defender during the lifetime of the deceased John M'Donald did no act of ownership in regard to said deposits and investments, the same although in her name being really the property of her husband, who collected the revenue and directed the investment thereof. It is believed that he similarly placed in her name other sums of money to the amount of about £200, which she also put in her own name and which remained there at his death.… The revenue accrued during the lifetime of the deceased was at least £200, and legitim is due therefrom. She is also now in possession of all the estate belonging to the deceased at his death.”
The pursuer pleaded, inter alia—“(1)
The pursuer being entitled to legitim out of the funds condescended on, and the same being in possession of the female defender as universal legatory or donee, the latter should be ordained to account therefor as craved. (2) The funds condescended on having been transferred by the deceased with the sole object of defeating his children's claims of legitim, the defender is liable to account for legitim therefrom.”
The defender Mrs M'Donald lodged defences and pleaded, inter alia—“(3) The averments of the pursuer are irrelevant and insufficient to support the conclusions of the action.”
On 4th March 1913 the Lord Ordinary ( Dewar) pronounced this interlocutor—“Sustains the first plea-in-law for the pursuer: Repels the third plea-in-law for the defender: Finds that the pursuer is entitled to legitim out of the funds transferred by her father, the late John M'Donald, to the defender, and that the defender must account to the pursuer therefor: Appoints the cause to be enrolled for further procedure, and grants leave to reclaim.”
Opinion.—“The question in this case is whether a father can defeat his children's to claim legitim by making over his whole property to his wife during the marriage.
The pursuer is a daughter of the late John M'Donald, Broadford, Skye, and she brings this action against Mrs Margaret Nicolson or M'Donald, her stepmother, concluding for £400 in name of legitim. The pursuer's father married the defender on 15th July1905, when he was about seventy years of age, and he died on 7th January 1910. He left a trust-disposition and settlement, but it is admitted that there was no estate standing in his name at the date of his death. It was all made over to the defender during the marriage. She admits that on various dates between May 1905 and November 1907 she received as gifts from her husband sums amounting in all to £1436. The money was sometimes handed over and deposited by her in bank in her own name, and at other times the deceased directed his bankers to transfer the money which stood in his name to the name of the defender. In this way he disposed of all he had and it stood in the defender's name at his death. The pursuer avers that this was done at the defender's instigation to defeat her claim and her brother's claim to legitim; and that although the said funds stood in the defender's name they were truly the property of the deceased, who directed the investment thereof and collected the revenue, and must therefore be regarded as having been held in trust for the deceased, or alternatively were a donation mortis causa. And further, and in any event, if they were, as the defender claims.donations Inter vivos, they still must bear legitim, on the ground that they were a donation inter virum et uxorem, liable to be revoked at any time during the deceased's life; that the gift did not become absolute until his death, when legitim had fully vested in the pursuer.
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I do not think that it is necessary to inquire whether it was truly a trust or donation mortis causa, because I am of opinion that it must bear legitim even if it be, as the defender contends, a donation inter vivos.
The right of legitim belongs to the children independently of the father, but it is settled that the father may so dispose of his property during life as to defeat his children's claim. He may, for example, give away his money, or deliver securities transmissible by delivery or by deed inter vivos, provided the deed of alienation or gift be absolute and irrevocable. But he is not entitled to defeat legitim by any scheme or device having merely the appearance of disposing of his means and estate inter vivos, but in reality not doing so until after his death. Thus if a conveyance, though ex facie absolute and irrevocable, is of such a nature that the disponee has yet power over it legitim is not barred. The test appears to be whether the donor has absolutely and irrevocably divested himself of his estate. If he has, the claim for legitim will be defeated, but not otherwise— Craigie v. Craigie, Hume 288; Black v. Black, Hume 290; Buchanan v. Buchanan, March 7, 1876, 3 R. 556, 13 S.L.R. 353.
If I am right in this, I think it follows that a gift from one spouse to another, being revocable at any time during the lifetime of the donor without the knowledge of the donee, does not fulfil the condition which is essential to defeat the claim of legitim. It appears to be in the same position as a donation mortis causa in a question of legitim, and it is settled that although a mortis causa deed may in express terms bar legitim it will be unavailing, because the legitim has vested in the child at the same moment the deed comes into operation. In the present case the gift to the defender did not become absolute till the donor's death, and at that period the legitim had fully vested in the pursuer.
The defender pleads on record that the action ought not to be allowed to proceed unless the pursuer's husband sists himself as a party. But I am not referred to any authority in support of this plea, and I think that in an action such as this effect cannot be given to it.
“On the whole matter I am of opinion that the pursuer is entitled to legitim out of the funds transferred by her father, and that the defender must account to her therefor.”
The defender reclaimed, and argued—If the gift had been made to a stranger instead of to the wife the claim for legitim would have been excluded, and there was no reason why a wife should be in a less favoured position than a stranger. Admittedly the gift was revocable as a gift inter virum et uxorom, but in its other aspects it was an absolute gift. Moreover, the revocability of the gift was a resolutive, not a suspensive condition, and where, as here, the power to revoke was not exercised, the gift took effect from its own date, not from the date of the donor's death.
It was not a gift in trust to the donee to be held for the donor—Ersk. Inst., i, 6, 32; Bell's Prin., sec. 1617; Fraser, Husband and Wife (2nd ed.), vol. ii, p. 959; Morris v. Riddick, July 16, 1867, 5 Macph. 1036, per Lord President (Inglis) at 1041, 4 S.L.R. 184, at 186; Crosbie's Trustees v. Wright, May 28, 1880, 7 R. 823, per Lord Shand at p. 834,17 S.L.R. 597, at 603; Kemp v. Napier, February 1, 1842, 4D. 558; Edward v. Cheyne, March 12, 1888, 15 R. (H.L.) 37, 25 S.L.R. 424. The husband's executors could not have claimed it— Thomson's Trustees v. Thomson, July 9, 1879, 6 R. 1227, 16 S.L.R. 727. Nor were they liable for any obligations to third parties which might arise out of it— Wright's Executors v. City of Glasgow Bank, January 24, 1880, 7 R. 527, 17 S.L.R. 333. The legitim fund consisted of what was in bonis of a father at the time of his death— Lashley v. Hog, July 12, 1804, 4 Pat. 581, per Lord Chancellor (Eldon) at pp. 610 and 622; Fraser, Husband and Wife, 2nd ed., p. 1001; M'Laren, Wills and Succession, 3rd ed., sec. 245. It might be that if the power to revoke were express the gift might be liable to a claim for legitim, but in the present case the power to revoke was not express but was only implied by law— Mackintosh & Nicolson v. Hunter, March 3, 1841, 16 F.C. (8vo.), 728, per Lord Justice-Clerk (Boyle) at p. 736, 3 D. 675; Bell's Prin., sec. 1585. The cases cited by the Lord Ordinary were irrelevant so far as regards the question in the present case, because these cases dealt with the question whether or not there had been divestiture by the donor. The following cases were also referred to— Balmain v. Graham, January 18, 1721, M. 8199; Spalding v. Spalding's Trustees, December 18, 1874, 2 R. 237, 12 S.L.R. 169; Boustead v. Gardiner, November 4, 1879, 7 R. 139, 17 S.L.R. 67.
Argued for the respondent—If, as here, the donor was not completely divested of the gift, the children were entitled to legitim out of it— Buchanan v. Buchanan, cit.; Lord Advocate v. Gunning's Trustees, 1907 S.C. 800, 44 S.L.R. 514; Fraser, Husband and Wife, 2nd ed., ii, pp. 959 and 1001. Alternatively, the gift had been revoked by the donor's settlement, and therefore it fell into the executry estate and formed part of the legitim fund.
At advising—
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I do not consider it necessary to go at length into the authorities and cases which were quoted at the debate. I have had an opportunity of considering an opinion which has been prepared by Lord Salvesen, in which he has gone most fully into the matter. And concurring as I do in the result at which he has arrived, I content myself with expressing that concurrence, and in the grounds he gives for his decision, and would therefore move your Lordships to adhere to the interlocutor of the Lord Ordinary.
The defenders' counsel conceded that according to the law of Scotland a donation by a husband to his wife (subject to certain exceptions with which we are not here concerned) is revocable at any moment, and may be revoked even by a mortis causa settlement. It follows that the subject of the donation is, up to the moment of the donor's death, under his control. If he dies bankrupt without having revoked, his creditors are entitled to claim the subject of the gift as part of his estate, and this even although sequestration is only taken out a considerable time after death. It follows, I think necessarily, that such a donation cannot operate an exclusion of the children's legitim from the subject of the gift, for they are entitled to claim legitim from all moveable estate which was in bonis of their father at the time of his death. The failure of the husband to revoke the donation only makes the gift absolute in favour of the donee as in a question with the husband's representatives, but legitim is a claim of debt and not a right of succession, and while it cannot even rank alongside of the claims of ordinary creditors it takes precedence of any testamentary provision in favour of third parties. It was argued that the right of revocation which is inherent in the donating husband, and of which he cannot deprive himself, when it becomes absolute by his death without revoking draws back to the date when the gift was made. I do not doubt it, but here the gift only became absolute subject to the right of creditors and to the children's right of legitim, which vested in them the moment the breath was out of the father's body.
I put one illustration which I think demonstrates that legitim cannot be excluded from the subject of a donation revocable during the father's life. Suppose that in this instance the deceased, instead of leaving his whole estate to his widow, had by his will directed that it should be conveyed to third parties, and expressly included in the conveyance the donations to his wife, I apprehend it could not have been contended for a moment that any part of his moveable estate would have been exempt from a claim of legitim. Can there be a different result because he leaves unrevoked the donations in favour of his wife The legitim fund in each case must be precisely the same whoever may be the object of the testator's bounty.
It has been suggested that as the claim for legitim only arises on the father's death and is a claim against his executry estate it cannot be payable out of moveable property which has been made the subject of a donation inter vivos, which donation has become absolute on his death without revocation. Precisely the same thing might be said of a claim by the Government for succession duty. Yet it was held in the case of the Lord Advocate v. Gunning's Trustees ( 1907 S.C. 800) that the estate upon which succession duty fell to be paid included donations made by the testator to his wife stante matrimonio. The executor maintained there, as here, that as the testator had not revoked his gift the subject of it formed no part of his estate at the time of his death; but the Court held that it was still property of which the deceased was at the date of his death competent to dispose, and was therefore liable to duty. The test seems to me to be exactly the same in the case of legitim. I know of no case, and can conceive none, where-moveable property over which the testator had the full control during his life and right to dispose of after his death has been excluded
Page: 720↓
One other concession which the defenders' counsel made seems to me to put him out of Court. He conceded that where a gift has been made in favour of a third party by a deed which expressly reserved the granter's power to revoke it at any time the deed would not be effectual to bar legitim. I should certainly not hold a party bound by his counsel's concession in law if I believed it to be erroneous, but an examination of the authorities satisfies me that the concession was rightly made. All the text-writers seem agreed that while a father may defeat legitim by alienating his moveables onerously or gratuitously, the alienation must be such as to divest him completely of the property. Thus Fraser on Husband and Wife says, page 1001— “I. The deed of alienation or of gift must be absolute and irrevocable. 2. It must be inter vivos, and not mortis causa.” So again Bell, in his Principles, section 1585, deals with the matter thus—“Legitim may be defeated by an irrevocable deed inter vivos although the term of payment is after the husband's death and although a liferent or any annuity is reserved, but not by a deed mortis causa or by one which does not absolutely divest the father.” It is true that in the original edition the word irrevocable does not appear, nor the last clause above quoted, but there is nothing in the original text inconsistent with these additions, and they have the authority of a distinguished lawyer. In M'Laren's Wills and Successions, section 249, the proposition is stated in different terms but to the same effect—“The legitim fund is therefore effectually diminished by deeds of alienation or conversion executed inter vivos and in liege poustie, provided they are absolute and irrevocable and are not intended as a mere device for diminishing the children's legal provisions.” In Erskine's Institutes the matter is dealt with precisely on the same lines. It would be remarkable if all the text-writers who deal with the subject should have misread the authorities on which their statement of the law is based. I have studied some of these for myself, and I think they have rightly apprehended their import. I shall cite only two or three as examples. In the case of Nicholson's Assignee (1841, 3 D. 675, also reported 16 F.C. 8vo, 728) the question was whether estate settled by a gratuitous trust deed for payment of debts and of a restricted liferent annuity to the granter, and disposing otherwise of the fee of his property, barred the children's claim to legitim, and it was held that it did not. The ground of decision was thus expressed by Lord Ordinary Lord Moncreiff, a very weighty authority on a subject like this—“For it appears to him to be a very clear matter of law that the truster was not by the trust deed divested of his estate and funds to all effects whatever. That trust might have been superseded altogether if the truster's condition and the state of his affairs were such as to admit of sequestration, or of a process of ranking and sale.…The question is whether the truster was so divested that diligence directed against him would not have been effectual to attach the residue of the funds, not through the trustees but directly through the truster himself, and such proceedings might have arisen in consequence of new debts by the truster after the execution of the trust deed.” This decision was affirmed by the Second Division. Lord Justice-Clerk Boyle in giving the leading opinion says—“But if there is the least indication on the face of the deed that the divestiture is not total and absolute (for it may be such that the granter has no power to attach the subjects conveyed, but is divested out and out), we must look at the deed to ascertain this, and if we are satisfied that power over the estate is still retained, then the other principle comes into play and the claim of legitim will be sustained.” I pause to observe that it is long settled that in event of sequestration of a donor, whether during his lifetime or after his death, a donation to the bankrupt's wife would fall under the sequestration.
Again, in the case of Collie ( 13 D. 506) the circumstances were that a party had lent a sum of money on a bond taken, payable to trustees for behoof of his two grandsons, reserving his own liferent right to the interest, and the debtors had by his direction delivered the bond to his son-in-law, one of the trustees, whom he desired to keep it till he should receive further notice. Interest was paid to the son-in-law both before and after the lender's death. Parole evidence was led which showed that it was the lender's intention that the deed should be irrevocable; and it was accordingly held that it was effectual to exclude a claim of legitim at the instance of a daughter. Apart from the parole proof, it is plain that all the circumstances indicated that the granter had completely divested himself of the fee by the deed in question. The beneficiaries were two of his grandchildren, his own liferent interest was reserved, and the deed was in possession of one of the trustees whom he had appointed to hold the estate. Nevertheless the Court thought it necessary to have parole evidence that there was no sort of understanding between him and the trustees that he should be reinvested in his property if he so desired. The whole reasoning of the Judges proceeded upon the view that the granter had been completely divested of his estate so far as it related to the fee of the subjects; and it is plain that they would have reached the
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These cases appear to me to establish beyond question in the case of donations to third parties inter vivos that if they are revocable during the granter's life and do not completely divest him of his estate they are ineffectual to exclude legitim. If so, I think it impossible to differentiate such a case from one where the right of revocation, although not expressly reserved, is implied by law. Suppose that the deposit receipts which are here in question had been assigned by a writing which expressly reserved the husband's right of revocation, such a case would admittedly have been within the scope of previous decisions. How can it make any difference that the condition is not expressed but is implied by law? The donee must be assumed to know the law and to take the gift subject to the implied condition that the donor may at any time revoke it.
Can it then be said there is anything in the quality of an inter vivos gift between man and wife which differentiates it from other similar gifts? There may certainly be distinctions, but they are not favourable to the wife. Thus in Collie's case the donation could not have been revoked by a testamentary act of the donor although ineffectual as in a question with his creditors; whereas it is certain that a donation to a wife may be revoked by will. The truth is that where the donee is a husband or wife the property donated is held on a highly precarious tenure. “The donee cannot … alienate the subject nor charge it with any burden to the prejudice of the donor; and consequently the donor returns, upon his revocation, to the full property of the subject, free from the consequences of all the intermediate deeds granted by the donee, even to his creditors or singular successors” (Ersk. Inst. i. 6, 32).
This passage probably refers primarily to a donation of heritable estate; and so far as the rights of third parties are concerned it probably falls to be qualified when the subject of the donation is money or moveables, as explained in Fraser on Husband and Wife, p. 960. As in a question with the donee, however, the rule holds good; and it may even be that the donee is accountable for the income of the subject gifted unless it has been consumed with the consent, express or implied, of the donor. Until the donor's death, therefore, the donee is a mere trustee for the donor, having the chance of becoming absolutely entitled to the gift in the event of the donor dying without revokirg it. If the donor in his last settlement expressly confirmed a donation it would become absolute in virtue of a testamentary act; and it cannot be any better that the law implies such a confirmation where no inconsistent testamentary act can be founded on.
In short, in order that the donation inter vivos may be effectual to exclude legitim, it must, to use the language of Professor Bell, “be absolute and irrevocable”; and the gifts which are treated in this case are admittedly not in that position. On these grounds I have no difficulty in reaching the same conclusion as the Lord Ordinary.
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One must consider somewhat closely the legal nature and quality of a claim for legitim on the one hand, and of a donatio inter sponsos on the other. Legitim—the legitima pars liberorum—may, I take it, with sufficient accuracy be described as the share of the deceased's personal estate to which his surviving children are by law entitled on his death. Their claim emerges only on the father's death. It is a claim, not against the living father, but against his executors for a share of the executry estate, and cannot extend to anything not comprehended within that estate. I do not see how the subject of such a gift as we are here discussing can be, in bonis defuncti, part of the executry estate of the deceased husband and father. The case of Gunning's Trustees ( 1907 S.C. 800) was founded on as supporting the affirmative of that contention. It seems to me to have no bearing in that direction. It decided that the Crown was entitled to estate duty upon a sum of money which the deceased had gifted to his wife and had never recalled. The decision was reached on the ground that it was “property of which the deceased was at the time of his death competent to dispose” within the meaning of section 2 (1)( a) of the Finance Act 1894, as the words quoted are defined by section 22(2) (a) thereof. To put it otherwise, the donor was entitled to revoke. Therefore it was within his competency to dispose of the money by revocation. But that is very different from affirming that the gift unrevoked did form part of his executry estate. The two things seem to me to have no true relation to one another. Thus, by another sub-head of the same section of the Finance Act (section 2 (1) ( c), duty is claimable upon gifts made inter vivos by the deceased if within twelve months of his death. Yet it could never be maintained that these formed part of his executry estate. It is not hujus loci to consider whether or not the Crown may have a claim for duty in this case, or against whom; but I think one may discard Gunning's Trustees as an authority in point for the present discussion. Now it seems to me that a claim by this pursuer against her father's executors for payment of a share of the moneys gifted by him to his wife would have been completely met by the executors with the defence that the moneys sued for were neither in their possession nor under their control. The executors could not, so far as I see, have successfully sued the wife for recovery of the moneys; for a trust settlement in general terms does not revoke a donation inter virum et uxorem (Ersk. Inst. i, 6, 31; Fraser, Husband and Wife (2nd ed.), p. 953; Thomson's Trustees, 1879, 6 R. 1227). Thomson's case is worth notice as being, so far as I know, the only direct authority on the point before us. The question was raised in that case, not (as here) by a child claiming legitim, but by testamentary trustees claiming the subject of the wife's gift as forming part of the deceased husband's general estate. The Court repelled the claim on the ground that the gift, not having been recalled, could not be held to be part of the husband's estate at his death. If the decision was sound (and I see no reason to doubt it) it is clear that a claim to a part of the subject in name of legitim must have been refused on the same ground, viz., that the subject gifted was not in bonis of the father at his death. Such a donation, as already said, is by our law not void but only voidable; it is a valid gift, subject only to a resolutive condition (Ersk. Inst. i, 6, 32; Bell's Prin., section 1617; Fraser, Husband and Wife, 959). In the present case the condition cannot now come into operation, for the husband did not revoke the gifts, and there is no suggestion that there is any creditor in a position to do so. I think, therefore, that the gifts were valid alienations of his moveable estate, vesting in the donee at their respective dates, subject only to a possible defeat which cannot now take place, and that they cannot be held as forming part of the donor's executry estate in this question of legitim.
A gift of this sort does not constitute a trust for the donor in the person of the donee—it is something very different; at the moment of gift the husband is divested and the wife vested, not in the mere title, but in the beneficial right of ownership. The gift is indeed subject to the risk of recal, but unless and until that event shall happen her right of ownership is as full and complete as that of any other donee, and on the husband's death the gift holds good as against the executors under his general settlement. It is equally clear that such a gift does not stand in pari casu with a mere testamentary bequest, for if the wife should predecease the husband and he thereafter die leaving the gift unrecalled, the gift, having vested in her as at its date, would pass to her own executors or representatives as part of her estate—Fraser, Husband and Wife, 952, 959. Nor is it, I respectfully think, a tenable view—though it seems to commend itself to the Lord Ordinary and to your Lordships—that a gift inter sponsos, such as we are here considering, is in the same position as a donation mortis causa. In the latter case “the property is immediately transferred to the grantee, upon the condition that he shall hold for the granter so long as he lives, subject to his power of revocation, and failing such revocation then for the grantee on the death of the granter. It is involved of course in this definition that if the grantee predecease the granter the property reverts to the granter, and the qualified right of property which was vested in the grantee is extinguished by his predecease” ( per Lord President M'Neill in Morris v. Riddick, 1867, 5 Macph. 1036, 1041). I have already referred to sufficient authority to show that a gift inter sponsos is not held in
Page: 723↓
It was, however, strongly maintained that inasmuch as donations inter sponsos are by law revocable, and the donor cannot effectively discharge his or her right to revoke, they fall short of what the Lord Ordinary calls the “test” or “essential condition” necessary to defeat a claim of legitim, viz., the absolute and irrevocable divestiture of the property by the donor. Lord Salvesen observes that the defender's counsel put himself out of court by conceding “that where a gift has been made in favour of a third party by a deed which expressly reserved the granter's power to revoke it at any time, the gift would not be effectual to bar legitim.” I did not recollect and have not noted that such a concession was made, but if it was I should not be prepared to hold a party litigant as bound by a concession in law made by counsel in the course of a somewhat perfunctory debate, if, as I consider to be the case, the legal point conceded was erroneous. The element of irrevocability is no doubt important in all questions of gift or alienation, and it is dealt with by the text-writers and by the Judges in discussing gifts to third parties. But one must be careful to read any particular passage in the light of the decisions cited as supporting it, and any dictum along with its full context; and I do not think that if that is done there will be found either authority or decision for the proposition that a gift to a third party is subject to a claim for legitim on the sole ground that it was not irrevocable. I believe that all the cases where the claim was allowed were decided on the ground that the alienation founded on was truly of a testamentary character, i.e.,not merely revocable, but also intended to be prestable, and taking effect only after the granter's death. There are some cases where the deed or transaction under review has been set aside or disregarded as being “simulate”—by which I apprehend is meant a transaction ex facie and in form duly completed inter vivos, but in truth and substance not taking or intended to take effect during life. A recent type of this class of case is Buchanan ( 1876, 3 R. 556). In the case before us, however, upon the postulates of the argument, there is no “simulate” transaction or alienation, for ex hypothesi the donee dealt with the subjects of gifts throughout as her own property. Reverting now to the institutional and text-writers, Mr Erskine (Inst. iii, 9, 16), under the title “Of Succession in Moveables,” observes that “the husband, though he should be in liege poustie, cannot dispose of his moveables to the prejudice of the jus relictæ, or right of legitim, by way of testament, or indeed by any revocable deed; for revocable grants create no debt till the death of the granter, and at that period the right of the society goods is fully vested in the widow and children.” I think the words which I have italicised can mean no more than that a claim for legitim is not to be defeated by any revocable deed which does not take effect until after the death of the granter; for the only case cited by Mr Erskine (Henderson, 1728, M. 8199) was clearly of that nature, as appears from the report in Morison. Lord Fraser, writing more than a hundred years later than Erskine, says, under the head of “Legitim” (Husband and Wife, ii. p. 1001), that a father's deed or gift, in order to effectually defeat a claim for legitim, must be—1, absolute and irrevocable; 2, inter vivos, and not mortis causa. In considering the first of these propositions one must not lose sight of, nor entirely disjoin it from, the second. Under the heading that, “the father's deed must be irrevocable,” the learned author, after citing the passage in Erskine I have just referred to, discusses a series of cases. The first is the well-known case of Hog v. Lashley ( 1804, 4 Pat. App. 501). The subject of controversy there was certain bank shares, part of which the father had ostensibly given to his son while continuing to draw the dividends, &c., himself, and another part of which he had ostensibly given to the son while in fact the latter held them upon an agreement or understanding that he would invest the same in land to be entailed after the father's death. The House of Lords held, in regard to both classes of shares, that a claim for legitim was not excluded—in regard to the former class, upon the ground, as I gather from the report, that the fact of the father having continued to receive the dividends, &c., was sufficient to warrant the legal inference that he had never ceased to be the true beneficial owner—in other words, that there was truly no gift at all to the son; and as to the latter class, that in respect of the understanding between father and son as to the application of the shares after the father's death there was no true gift to the son, who was to be merely the instrument for carrying out his father's testamentary intentions. I do not think Hog v. Lashley touches the present question, for, on the assumption postulated by the argument, there was here a bona fide gift (or series of gifts) of which the donee thereafter recpived the interest as her own property, without any understanding or restriction as to the ultimate disposal of principal or interest. Lord Fraser next cites the important case of Nicolson's Assignee 1841, 3 D. 675; better reported 16 F. C. 8vo, 728). But the decision in that case, so far as it supported the claim for legitim, proceeded, I think, plainly upon the ground that the deed under consideration was of a testamentary character. The counter-pleas on the point were as follows:—The defenders pleaded that the granter “had irrevocably” (the deed bore ex facie to be irrevocable) “by a proper and rational deed conveyed away his property inter vivos, reserving only to himself an annuity.” The pursuer pleaded
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I have now stated the reasons which lead me to a conclusion opposite to that of the Lord Ordinary. I think (differing from your Lordships) that his interlocutor ought to be recalled. But the case would in that event have to go back to the Outer House for proof. The argument at our bar was necessarily conducted on the footing that, as averred by the defender, she dealt with the subjects of gift, from the respective dates of gift, entirely as her own property, collected the revenue derived from them, and paid it into her own bank account. This is denied by the pursuer, who avers that the defender during the lifetime of her husband did no act of ownership in regard to the deposits and investments, the same, although in her name, being really the property of her husband, who collected the revenue and directed the investment thereof. If the latter account of the matter were proved to be true, it might well be that the result of the case would be different from that which, upon the postulates of the argument before us, I think we ought, upon the legal question, to affirm.
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The question at issue is whether bona fide inter vivos donations, made inter virum et uxorem without a deed and unrevoked at the donor's death, exclude claims for legitim of the donor's surviving children. But I think the question may be stated more broadly, namely, if A gifts, whether inter vivos or mortis causa, personal estate to B with a right of revocation reserved to A, whether express or implied in law, and dies without revoking, is the gift in the hands of B or of B's representatives liable to the legal claims of A's surviving spouse and children? There is no sound distinction between the case where a right of revocation is expressly stipulated and the present case where it is implied by law, or between the case where the gift is accompanied by a deed and where it is given without a deed, or between the claims of children and those of a surviving spouse.
The pursuer contends, and the Lord Ordinary affirms the proposition, that by the law of Scotland no donation of moveable estate, although bona fide and inter vivos, can exclude the legal claims of the donor's surviving children unless it be originally, or have been made prior to the donor's death, irrevocable. The pursuer says that, apart from the claims of the Revenue and of outside creditors, a revocable donation of moveable estate can only take full effect in Scotland in favour of the donee in the event of the donor leaving no surviving spouse and no children whose claims have not been discharged. In the case of a mortis causa donation this result, admitted by the defender, is attributed by her to the fact that in that case the donor remains in full control of the donation till his death, at which date it is still in bonis. But the pursuer maintains that the same principle applies to the case of an inter vivos donation which is subject to recal, because although in the case of an inter vivos donation the donor may part with the possession, he still retains control, although indirectly, being able to recal it instantly and without reason assigned if the donee is not dealing with it as he thinks proper.
It is Scarcely disputed that, if the passages to whichyour Lordships have referred in the works of Erskine, Bell, Fraser, and M'Laren (and the corresponding passages in reference to Jus relictæ be read apart from the authorities to which they refer, the pursuer's contention must prevail. The passages say, in express terms, that to exclude legitim claims, not only must a donation be bona fide and inter vivos, but it must also be irrevocable. It is, no doubt, true that there is no case referred to by these writers or subsequently decided which affirms the exact proposition now maintained by the pursuer, namely, that a bona fide inter vivos gift to a wife unrevoked at the death of the donor, her husband, is liable to be affected by a legitim claim. It is also true that the cases hitherto decided turned directly, not on revocability, but either on whether the alleged donation was not truly simulate, or on whether an alleged inter vivos donation was not truly mortis causa. But this does not seem to me to conclude the question, if the generality of the words (which must be assumed to have been carefully chosen) unambiguously covers the precise case we are now dealing with, unless indeed there be some clear reason for excluding it.
I do not find such a clear reason in the fact that legitim is only due to children, who survive the parent, out of whose estate legitim is claimed. It was argued that legitim cannot be claimed out of an unrevoked inter vivos donation, because before the right to legitim has vested, the right of the donee has become irrevocable. But what truly happens at the death of the donor is, that the donee's right to the donation as irrevocable, and the children's right to legitim, arise at the same moment; and the emergence of the right to legitim prevents the right to the donation becoming irrevocable so far as the donation is required to satisfy the legitim claim. As Mr Erskine puts it (Inst. iii, 9, 16)—“The husband cannot dispose of his moveables to the prejudice of the right of legitim by way of any revocable deed; for revocable deeds create no debt till the death of the granter, and at that period the right of the society goods is fully vested in the widow and children.”
Then it was said, that seeing that on the death of the donor the donation draws back to the original date of the gift, no right like legitim, which arises only on the death of the donor, can affect it. But this consideration (which obviously does not apply to the case of a sequestration after the death of a donor) loses all force if I am right in thinking that the right to legitim prevents (to the extent above mentioned) the donation becoming irrevocable and so drawing back to its original date.
It was also maintained that legitim was excluded because if the donation was bona fide inter vivos and unrecalled at the donor's death it was not in bonis of the deceased at his death. Now no doubt, in
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I am therefore unable to adopt a view which would, I think, read out one of the conditions laid down by the institutional writers in the case of donations as necessary to exclude claims of legitim, namely, irrevocability.
Like Lord Dundas, my opinion is not affected by the case of Gunning's Trustees, 1907 S.C. 800. The question in that case turned entirely on the construction of the Finance Act of 1894, sec. 2 (1) (a). Lord Kinnear put it thus—“The question is whether certain pecuniary interests did or did not belong to the deceased in the sense of the statute.” The clause of the statute was not declaratory of the common law, but involved consideration of a special provision which provided a test different from that applicable to the present case. In that case the question was whether the deceased was competent to dispose of certain funds— a provision which may be wider or narrower in its scope, but is certainly not co-extensive with the question whether funds are, even if only for a special purpose, in bonis defuncti.
I am therefore of opinion that the Lord Ordinary has come to a right conclusion, and I agree in the grounds of his opinion and of the opinion of Lord Salvesen.
The Court adhered.
Counsel for the Reclaimer (Defender)— Maclennan, K.C.— Morton. Agents— W.& J.L. Officer,W.S.
Counsel for the Respondent (Pursuer)— A.J.P.Menzies. Agents— Shiels, Macintosh, & Ward,W.S.
