3. The time when the mutual debts or credits arose. 5. Mutual credit. have been liable to at the time of the bankruptcy, but which there is in the latter, and a creditor cannot be permitted to vary the relation in which he stood to the bankrupt's estate at that time, by an act ex post facto, in a transaction with a third party, and thereby to put himself in a better condition than the rest of the creditors'. In the case of Dickson v. Evans, Lord Kenyon, observing upon this rule, said, "It would be most unjust indeed if one person, who happens to be indebted to another at the time of the bankruptcy of the latter, were permitted, by any intrigue between himself and a third person, so to change his own situation, as to diminish or totally destroy the debt due to the bankrupt, by an act ex post facto. In cases of this sort, the question must be considered in the same manner as if it had arisen at the time of the bankruptcy, and cannot be varied by any change in the situation of one of the parties." So a bill of exchange bonâ fide negociated by an indorser before an act of bankruptcy by the acceptor, and taken up and paid by such indorser after the bankruptcy, cannot be set off by him under the commission against the acceptor. This point was established in the case Ex parte Hale, and in that case the Chancellor said, "Pay the £90 that you owe the estate, and prove the £200. I see no objection to that, but you cannot, by paying that bill, put yourself in a better situation than any other creditor. There was no mutual credit. There was a debt created upon the estate, and due at the time of the bankruptcy, but that debt was not due to you; therefore, in that respect, the set-off fails. In the latter case cited, there was no prejudice to the estate; it made no larger demand." The statute 46 Geo. 3. c. 185. s. 3. has provided that mutual debts and credits con 2 Ex parte Hale, 3 Ves. jun. 304.-Dickson v. Evans, 6 T. R. 57. 3 Ves. jun 304. ; see also Hankey v. Smith, 3 T. R. 509.—Dick, 3. The time when tracted or grown after a secret and unknown act of 5. Mutual credit. bankruptcy, two calendar months before the date of the mutual debts the commission may be set off. or credits arose. VI. GENERAL EFFECT OF BANKRUPTCY ON THE PROPERTY OF THE BANKRUPT AND OF OTHERS. IN considering who may indorse a bill', and by and to whom payment may be made, several of the points relating to bankruptcy have necessarily been considered. A few others remain to be stated, which may be arranged under the following heads, as they relate to 1st. The property of the bankrupt, and contracts 2dly. The property of others. First. The uniform principle laid down by the courts upon this subject is, that assignees takes a bankrupt's property in the same situation, and subject to the same burthens as the bankrupt himself had it, and they stand in his place, and are bound by all acts fairly done by him in relation to his property, and that this remains in their hands subject to all equitable liens, by which it was affected in the hands of the bankrupt himself3. And though a chose in action cannot strictly be assigned at law, yet if a bankrupt, before his bankruptcy, for a valuable consideration, and without fraud, assign to a creditor, a debt or bill of exchange or note, it will be binding on the assignees *. And if a bill or note be not capable of delivery at the time, a transfer of it, without delivery, will be binding upon the assignees, provided notice of the assign 3 Parker v. Elliason, 1 East. 544.—5 T. R. 133.—3 'T. R. 599.— Cullen, 185, 6. Rowe v. Dawson, 1 Ves. jun. 331.-Graff r. Greffulke, 1 Camph. 1. The property of the bankrupt, and contracts en tered into by him. 6. Effect of bank- ment be given to the debtor'. ruptey, &c. But as soon as the 1. The property security is capable of being delivered, it must be handed of the bankrupt, over, for if it remain in the hands of the bankrupt, texed into by him. the assignees will be entitled to it. And where a trader delivered a bill for a valuable consideration to another, previously to an act of bankruptcy, and forgot to indorse it, it was held that he might indorse it after his bankruptcy. And if the bankrupt has no beneficial interest or valuable property in a bill, as where it is 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. And in Willis v. Freeman, where the bill was drawn by the bankrupt partly for value, and partly for accommodation, and he indorsed it after his act of bankruptcy to a creditor, it was held that the latter might recover on the bill the difference between the real debt and the whole sum for which the bill was drawn. And assignees cannot, any more than the bankrupt himself could, hold property obtained by his fraud or crime, and therefore, they have been held liable to restore money received by them upon bills, which he had got in return for one, of which he knew the acceptance was a forgery. So bills of exchange, or promissory notes indorsed by the bankrupt after he had dishonoured bills, and been otherwise irregular in his payments, may be retained by the indorsee, unless it were known to him at the time that the insolvency of the bankrupt was decidedly a general inability to answer his engage 1 Brown v. Heathcote, 1 Atk. 160.-Lempriere v. Pasley, 2 T. R. 485.-Cullen, 189, 190. 308.-1 Mont. 342, 343, 344. 2 Jones v. Gibbons, 9 Ves. jun. 410.-Cooke, 349 to 352. 3 Smith v. Pickering, Peake's Ca. Ni. Pri, 50.-Rolleston v. Hibbert, 3 T. R. 411. Arden v. Watkins, 3 East. 317.-Wallace v. Hardacre, 1 Campb. 46, 7.; but qualified in notes, id. 179. 5 12 East. 656. Harrison v. Walker, Peake's Ca. Ni. Pri. 111. ruptcy, &c. of the bankrupt, ments'. So, if a trader, after he has committed a 6. Effect of banksecret act of bankruptcy, indorse a bill of exchange 1. The property to a creditor, who receives the money due on the bill and contracts enbefore a commission issues against the trader, such tered into by him, payment is protected by the statute. But if the holder of a bill of exchange give time to an acceptor, upon condition that he shall pay interest, and the acceptor afterwards pay the bill after having committed a secret act of bankruptcy, this is a payment of a loan of money 3 at interest, and not a payment in the course of trade. But a payment by a trader, after having had time given him for payment, but not upon an over-due security, may, as it seems, be protected by the statute. A payment of a bill before it is duc, or upon a trader's soliciting his creditor to receive the money, seems not to be a payment in the course of trade 7. Where the bankrupt has accepted bills for goods which he has purchased, this does not divest the right of the vendor to stop the goods in transitu upon the bankruptcy of the vendee'. perty of others. 2dly. With respect to the property of others in 2d. The prothe hands of a bankrupt, it is frequently affected by his bankruptcy, either in the case of liens, or of his being reputed owner. A banker has a lien for the general balance due to him upon bills or notes in his hands paid in generally. So a person has a lien upon all property placed in his possession as a consideration Vernon v. Hall, 2 T. R. 684, ante, 611. Per Eyre, J. in Holmes v. Wennington, 2 Bos. & Pul. 399. 6 Per Heath, J. in Cox v. Morgan, 2 Bos. & Pul. 398. 7 Id. ibid. and Singleton v. Butler, 1 Bos. & Pul. 283. See various decisions as to payments by and to bankrupts, in 1 Mont. 311 to 324. Cullen, 234 to 239. 8 Lickbarrow v. Mason, 2 T. R. 63.-Solomons v. Nissen, 2 T. R. 674.-Hodgson v. Loy, 7 T. R. 440.-Kinlock v. Craig, 3 T. R. 119.1 Cullen, 266.-1 Mont. 265. 9 9 Jordan v. Le Fevre, 1 Esp. 66.-Davis v. Boucher, 5 T. R. 488. ruptcy, &c. 2d. The pro perty of others. 6. Effect of bank for his acceptance of a bill, which he is liable to pay after the bankruptcy of the owner who made the deposit'. Property in the possession of a bankrupt, though he be not the real owner, will pass to his assignees, on the ground of his being reputed owner under the Stat. 21 J. 1. c. 19. s. 10, 11. In the case of the bankruptcy of a factor or banker, bills remitted to them, and entered short while unpaid, and bills paid in generally, to be received, and not discounted or treated as cash, and bills sent for a particular purpose, are not affected by the bankruptcy of the factor or banker, and the property in them is not altered, and, they or the proceeds received by the assignees, must be returned by them to the principal, subject to such lien as the factor or banker may have thereon, and this has been so 2 Hammonds v. Barclay, 2 East. 227. Ante, 158.-Zinck v. Walker, 2 Bla. Rep. 1154.-Brown v. Kewley, 2 Bos. & Pul. 523.—Bolton v. Richard, 6 T. R. 139.—5 T. R. 215. 494.-1 East. 547. 550.-Paley P. & A. 71. Ex parte Sargeant, 1 Rose, 153.-Ex parte Sollers, 18 Ves. jun. 229. S. P. The proceeds of short bills were ordered to be returned, unless upon enquiry, it should appear that with the knowledge of the party depositing them, or from the habits of dealing between the parties they were to be considered as cash; the onus of proving which lies in the assignees of the bankrupt banker. Per the Lord Chanceller. It is quite clear that short bills in the possession of bankers, are to be considered as still remaining in the possession of the parties by their agents to be specifically returned; and if these bills were written short, the petitioner could have compelled Kensington and Co. so to settle with Burrough, as not to break in upon his claim. That they were not written short, amounts to nothing, unless there he a cancurrence manifested at the time, or to be inferred from the habits of dealing between the partics, that they were to be considered as cash; if they were there with the petitioner's knowledge as cash, and the drawing or entitled to draw upon them as having that credit in cash, be would thereby be precluded from recurring to them specifically; but it is upon them to prove that to be the case, and petitioner is therefore entitled unless they have been carried to his credit as cash, with his knowledge or consent. Ex parte Pease and others, in the matter of Boldero, 1 Rose, 232. 19 Ves. jun. 25. Bills remitted by a country bank, to their banker in Loudon, remaining at his bankruptcy in his hands undue or unapplied, according to the authority given, or afterwards coming to the hands of the assignees, and the proceeds received, restored, and paid to the remitters, taking up the acceptances on their account, and subject to the banker's lien for any balance by the contract, remaining the property of the remitters, in the hands of the banker, as |