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transfer.

a bankrupt has no beneficial interest, does not pass to II. Who may his assignees under the assignment, therefore where a bill has been accepted by another for his accommodation, he may, after an act of bankruptcy, indorse it, so as to convey a right of action thereon to a third person, against the accommodation acceptor'. But if there were an exchange of acceptances or securities between the bankrupt and the accommodation acceptor, then the bill would be considered as accepted for value, and the indorsement after the act of bankruptcy would be invalid. And where a trader having securities in his banker's hands to a certain amount, after a secret act of bankruptcy, drew on them a bill for a larger amount for his accommodation, payable to his own order, which, after acceptance, he indorsed to the plaintiff, (who knew of his partial insolvency, but not of the act of bankruptcy) and a commission of bankrupt having been afterwards taken out, it was held that the plaintiff, who was to make title through the bankrupt's indorsement, after his bankruptcy, though he were entitled to sue the acceptors upon the bill, yet could only recover on it the amount of the sum accepted for the accommodation of the bankrupt, over and above the amount of the bankrupt's effects in the hands of the acceptors at the time

'Arden v. Watkins, 3 East. 317.-Wallace v. Hardacre, 1 Campb. 46 and 47. and Ramsbottom v. Cater, 1 Stark. 288.

Arden v. Watkins, 3 East. 317. On the 5th October, 1801, Lewis Jones committed an act of bankruptcy, on which a commission issued on 31st December, 1801. On the 4th December, 1801, he drew a bill on Watkins for £100, payable to his own order, and indorsed it to the plaintiff, who paid him full value; Watkins owed Jones nothing, but accepted the bill to enable him to raise money upon it, and Jones deposited a lease with him, as an indemnity; the assignees insisted upon a restoration of the lease, and Watkins refused to pay the bill; action on the bill and reference. The arbitrator awarded against Watkins, but stated the facts specially to enable him to take the opinion of the court. After a rule nisi, to set aside the award, cause shewn, and time taken to consider, the court was clear that the defendant was liable; that as Jones had no effects in Watkins's hands, no right to indorse devolved upon the assignees, and therefore his indorsement was effectual, and transferred the property to the plaintiff. Rule discharged.

1 Campb. 179. in notes.-Buckler v. Buttivant, 3 East. 72.

II. Who may transfer.

of the bankruptcy; for which latter amount alone they were liable to account'.

This rule of law invalidating transfers by a bankrupt after a secret act of bankruptcy, having been found extremely inconvenient to commerce, it was enacted by the 19 Geo. 2. c. 32. "That no person who is or shall be really and bonâ fide a creditor of any bankrupt, for or in respect of goods really and bonâ fide sold to such bankrupt, or for or in respect of any bill or bills of exchange, really and bonâ fide drawn, negotiated, or accepted, by such bankrupt, in the usual or ordinary course of trade and dealing, shall be liable to refund or repay to the assignee or assignees of such bankrupt's estate, any money which, before the suing forth of such commission, was really and bonâ fide, and in the usual and ordinary course of trade and dealing, received by such person of any such bankrupt, before such time as the person receiving the same shall know, understand, or have notice, that he is become a bankrupt, or that he is in insolvent circumstances."

Willis v. Freeman and another, 12 East. 656. In an action by the indorsee, of the drawer of a bill against the acceptor, a verdict was found for the plaintiff, subject to the opinion of the court, upon a case, stating that Anderson, the drawer, being indebted to the plaintifi in more than £2000, and being insolvent, proposed to pay the plaintiff a composition of 13s. 6d. in the pound, together with the costs of an action which had been brought by the plaintiff against him, by a bill upon the defendants. This proposal being acceded to, Anderson applied to the defendants to accept a bill for £1400 for his accommodation. The defendants accepted the bill, drawn on the 5th of July, and payable on the 10th November, 1809, having in their hands effects of Anderson, to the amount of £888. 16s. 8d. Anderson had committed a secret act of bankruptcy on the 7th of March, 1809, upon which a commission issued on the 25th of July. The court of King's Bench held, that to the extent of £888. 16s. 8d. the defendants had a right to resist payment, on the ground of their being answerable for that amount to the assignees, to whom these funds devolved upon the act of bankruptcy; and that therefore the indorsement by Anderson to that extent, was inoperative; but as to the surplus (£511. 3s. 8d.) for which the acceptance was accommodation, the case of Arden v. Watkins was in point, to shew that the indorsement was valid. And they held that the law in this respect had not been altered by the 49 Geo. 3. c. 121. s. 8. And they therefore ordered the verdict to be entered for this reduced sum of £571. 3s. 4d.

transfer.

It does not appear to be settled, whether promis- II. Who may sory notes are within this statute'. The act only protects payments of two descriptions of debts, viz. for goods sold, and bills of exchange; and it also requires that this payment shall be made in the usual and ordinary course of trade. With respect to the

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See Harwood v. Lomas, 11 East. 127.

2 Pinkerton v. Marshall, 2 Hen. Bla. 234.-Southey v. Butler, 3 Bos. & Pul. 237.-Vernon v. Hall, 2 T. R. 648.—Harwood v. Lomas, 11 East. 127.-Bagley v. Scholfield, 1 M. & S. 338.

Pinkerton v. Marshal, 2 Hen. Bla. 334. A. having recovered a verdict for a certain sum of money against B, B. commits an act of bankruptcy; afterwards A. having had no notice of the bankruptcy, gives time to B, and instead of entering up judgment and suing out execution, takes a bill drawn by B. on C, at a distant period, for the amount of the sum recovered. This is not a payment protected by the stat. 19 Geo. 2. c. 32. A. therefore is liable to refund the money received on the bill to the assignees of B.

Southey v. Butler, 3 Bos. & Pul. 237. A trader, subsequent to an act of bankruptcy, being arrested and detained in prison at the suit of several creditors, sent for all his creditors but one, and paid their debts in full; but no other circumstance occurred from which it could be presumed that they knew of his bankruptcy or insolvency. Held that such payments were not protected by the stat. 19 Geo. 2. c. 32.

Vernon and another v. Hall, 2 T. R. 648. If the payee of a bill of exchange, received from a third person as the price of an estate, give time to the drawee, on condition that he shall allow interest, and afterwards the drawee discharge the bill, having in the meantime committed an act of bankruptcy, this is not such a payment in the ordinary course of trade as is protected by the 19 Geo. 2. c. 32. and the assignees may recover the money from the payce.

Harwood and another v. Lomas, 11 East. 127. Odell being indebted to the defendant in £ 400, gave him, in August 1805, his note for that sum, payable at twelve months, with interest half-yearly. Part only of the money being paid, the defendant, in 1806, arrested Odell for the residue; and in Hilary term 1807, obtained judgment, which was affirmed on error the 5th of February, 1808; and the next day (the 6th of February) Odell paid the amount of the damages, interest, and costs. Odell had committed an act of bankruptcy on the 27th of January, 1808, on which a commission issued, dated the 19th of February, 1808. In an action by his assignees to recover this money, the only question was, whether the payment by the bankrupt were protected by the 19 Geo. 2. c. 32. The court inclined to think that it was incumbent on the party receiving the money, to shew that the payment was protected by the statute: but it being admitted that the note had been given for the balance of an account stated, consisting (inter alia) of money lent to the bankrupt, the court, without expressing any opinion as to whether the statute could be construed to extend to notes, held that this note could not be said to have been given in the ordinary course of trade and dealing. Postea to the plaintiffs.

Bayly and others, assignees of Luckraft, bankrupt, against Schofield and another, 1 M. & S. 338. It was held that a creditor of the bankrupt, who had sued out a writ against him, and, without proceeding upon it, afterwards received from him a bill of exchange in part payment of his debt, after being apprised that there had been a meeting

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II. Who may transfer.

term "payment" it has been decided, that if a trader, after he has committed a secret act of bankruptcy, indorse a bill of exchange to a creditor, who received the money due upon a bill, before a commission issues against the trader, such payment is protected by this statute'. And if a bill of exchange were indorsed by a trader after a secret act of bankruptcy, in payment of a debt for goods sold, it should seem that such transfer would be valid with reference to the construction on the stat. 1 Jac. 1. c. 15. s. 14, although the bill be not paid until after the issuing of the commission, because the indorsement of a bill of exchange is deemed a payment in satisfaction, provided the bill be paid when due'; and therefore it should seem, that of his creditors, and that the bankrupt's affairs at that time were only capable of paying the demands of his creditors by instalments, although he was assured by the bankrupt's agent that they would come round, was liable to refund the proceeds of such bill to the assignees of the bankrupt, as a payment not in the usual course of trade and before notice of his insolvency; and per Lord Ellenborough," the next question and most important one is, whether the payment by Luckraft was a payment bonâ fide, and in the usual and ordinary course of trade, within the 19 Geo. 2. before such time as the defendants had notice that he was become bankrupt, or was in insolvent circumstances. It may be admitted that they did not know that he was a bankrupt; but how does the case stand with respect to their knowledge of his being in insolvent circumstances. By insolvent circumstances, is meant that a person is not in a condition to pay his debts in the ordinary course, as persons carrying on trade usually do. Looking at the letter of the 11th of October, which inclosed the bill, it emphatically shews him to have been in insolvent circumstances; it speaks of his being unable to muster a sufficient sum, and of his having been obliged to pay every one a little as it came to hand, can that peyment then be said to be in the ordinary course when a man confesses he is obliged to pay by minute portions to each of his creditors; it is more like a distribution under a deed of composition than a payment by a trader appearing openly at his counter. I should say, this was not the mode in which a solvent man proceeds."

See the cases upon this part of the provision in the act, 1 Mont. 313, &c.

'Hawkins v. Penfold, 2 Ves. sen. 550. Per Lord Chancellor, There is no difference between an actual payment of money in satis faction of a debt and indorsing bills of exchange, provided the money was received on them before the commission of bankruptcy issued, for I should take that only as a medium of payment and no more; and otherwise it would be very hard.-See also 1 Mont. 311. n. h.

2 Wilkins v. Casey, 7 T. R. 711. A factor was indebted to his principal in £228. 18s. the principal committed an act of bankruptcy, and drew on his factor for £222. 186. the factor did not know of the act of bankruptcy, and accepted the bills; before they came due a commission issued, notwithstanding which the factor paid them; then the assignees sued the factor for £222, 18s, and on a case reserved, insisted

transfer.

although in general a partner who has committed a 11. ho may secret act of bankruptcy, cannot indorse a bill so as to affect the firm', yet if he were bonâ fide, and in the ordinary course of trade to indorse the bill in payment of a debt for goods sold, such indorsement would be valid under this statute.

It has been recently decided, that the term insolvent circumstances, means that a person is not in condition to pay his debts, in the ordinary course, as persons carrying on trade usually do, for the object of the statute was to protect those persons only who receive money under circumstances not calculated to raise suspicion; but if any such circumstances occur, then they receive the money or bills at their peril, and are liable to refund; as where a bankrupt, before his transfer of bills, proposed to pay his creditors by instalBut the insolvency mentioned in this and the stat. 46 Geo. 3. c. 135. means a general inability in the bankrupt to answer his engagements, and which is not to be inferred merely from his renewing bills of exchange in a particular instance 3.

ments.

that though the stat. (1 Jac. 1. c. 15.) would protect a payment before notice of bankruptcy, it would not a mere acceptance. Sed per Lord Kenyon, C. J. the statute ought to receive a liberal construction; giving goods in exchange would have been a payment, though not in money, and so is giving an acceptance, if the bill be paid when due. The other judges concurred, and the defendant received judgment.

It appears from the case of Bayly v. Schofield, 1 M. & S. 338.and ante,154, 4, n. 2. that as the bill was given in payment for goods sold, the party might have retained the amount, although the transfer of the bill was made to him after the act of bankruptcy, if such transfer had been made in the ordinary course of trade and dealing. 'Ante, 46, 7.-In Thomason v. Freere, 10 East. 418.-and in Willis v. Freeman, 12 East. 656. the bills were not indorsed for goods sold, and in the last case Lord Ellenborough expressly alluded to the exceptions introduced by the statutes.

Per Lord Ellenborough, Le Blanc, J. and Bailey, J. in Bayly v. Schofield, 1 M. & S. 350, 353, 354. See this case ante, 154, 4, n. 2. 3 Anon. 1 Campb. 492. in notes, sittings in Trin. Vac. 1808. Plaintiff declared as indorsce of a bill of exchange drawn by J. S. payable to his own order; the defence was, that J. S. had committed an act of bankruptcy before the indorsement; in answer to this the plaintiff relied upon Sir Samuel Romilly's act, 46 Geo. 3. c. 135. whereby it is enacted," that all contracts and transactions by and with any bankrupt bonâ fide, made or entered into more than two calendar months before the date of the commission shall, notwithstanding any prior act of bankruptcy committed by such bankrupt, be good, provided the person so dealing with such bankrupt, had not at the time notice of any prior act of bankruptcy having been committed

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