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CHAPTER VII.

OF BANKRUPTCY.

IN the preceding chapters, our attention has been principally directed to the consideration of the remedies in cases where the parties to a bill or other negotiable security, may be supposed to be solvent. In this chapter the rights and liabilities of the parties, and the course of proceeding in the case of bankruptcy, will be treated of. In this inquiry, we shall only consider that part of the law of bankruptcy which peculiarly relates to bills of exchange and other negotiable securities.

The subject is to be considered under the following heads :

I. What constitutes a trading by being a party to bills.
II. The act of bankruptcy in relation to bills.

III. The petitioning creditor's debt by being holder of bill,
IV. The proof of bills, &c.

1st. What bills may be proved.

2d. Who may prove.

3d. Against whom and under what commission.

4th. For what sums or to what extent the proof may be made. 5th. The time of proof and of claims.

6th. The mode and terms of proof, and remedy for the dividend. 7th. The consequences of not proving, and effect of certificate.

V. Of mutual credit.

VI. General effect of bankruptcy on the property of the bankrupt and of others.

1. WHAT CONSTITUTES A TRADING BY BEING A PARTY

TO A BILL.

In

With respect to the trading; drawing and redrawing bills of ex- 1. The trachange, for the sake of the profit, is a trading sufficient to subject a ding. party to be made a bankrupt, without other circumstances, if it be general and not merely occasional. This is founded on the 13 Eliz. c. 7, and 21 James. 1. c. 19. s. 2, which enact, "That every person [431] "using the trade of merchandize by way of bargaining, exchange, bar"tering, chevisance, or otherwise, in gross or by retail, may become "bankrupts." Instances of this description do not often occur. the case of Richardson v. Bradshaw, the bankrupt, Wilson, for several years received money from officers and other persons, and his cashier gave accountable notes for it, and these persons drew from time to time upon Wilson for such sums, payable either to bearer or order, as they thought proper; and this repeated dealing was held to be a trafficking in exchange, and a trading sufficient in itself to subject him to a commission of bankruptcy, upon the principle, that persons of this description

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Richardson v. Bradshaw, 1 Atk. 129. Hankey v. Jones, Cowp. 745. 1 Mont. 22. Cullen, 10. Cook, 52.

b1 Atk. 128. Cook, 61.

Richardson v. Bradshaw, 1 Atk. 129.
Ex parte Wilson, 1 Atk. 218.

1. The tra- make merchandize of money and bills, and gain an extensive credit upon ding. the profits of that course of dealing, in the same manner as other merchants and traders do by buying and selling, or using the trade of merchandize in gross, or by retail, with respect to other goods and moveable chattels. On the same principle, borrowing money abroad for the purpose of repaying it in England at a certain rate of exchange, and repaying it by bills upon bankers in London, to whom foreign bills were remitted to make the payment, was held to be a trading. But an occasional drawing and redrawing bills of exchange, though for the sake of profit, as where it is done for the purpose of raising money to improve a person's own estate, or for other private occasions, will not render a person liable to the bankrupt laws. And the statutes relating to Exchequer Billss expressly provide that a party circulating the same shall not be deemed a trader within the bankrupt laws.

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II. THE ACTS OF BANKRUPTCY IN RELATION TO BILLS. 2. Act of With respect to the act of bankruptcy; stopping payment, or refusing bankrupt payment of, or renewing a bill of exchange, does not amount to an act of bankruptcy. But a denial by a trader to the holder of a bill of exchange actually due, or to his clerk, at any time of the day, when it be came due, constitutes an act of bankruptcy, which cannot be avoided by afterwards appearing in public and paying the bill before five o'clock [432]of that day. So if a commission has been issued against a party to a bill, and he afterwards compromises with the petitioning creditor by paying a part of the debt, this will in itself constitute an act of bankruptcy; and though stopping payment is not of itself an act of bankruptcy, the statutes which protect payments and other transactions taking place after a secret act of bankruptcy, expressly provide that stopping payment shall be equivalent to notice of the act of bankruptcy; but the mere circumstance of a person's renewing a bill is not deemed stopping payment or notice of insolvency.m

3. Petition

III. OF A PETITIONING CREDITOR IN RESPECT OF A

BILL.

With respect to the petitioning creditor's debt, when founded in part ing credi- or the whole on a bill or note, there must be a debt of £100, or debts tor's debt. of £150, independently of interest, for interest accruing before the act of bankruptcy, cannot be added to the principal, so as to constitute a good petitioning creditor's debt, unless interest be specially made payable on the face of the bill." When the bill or note is completely due and payable before the act of bankruptcy, his right to strike a docket stands precisely in the same situation as that of other demands completely due. But with respect to bills and other negotiable securities not due at the time of the act of bankruptcy, the holder stands in a dif

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tor's debt.

ferent situation. The date of a promissory note made by a bankrupt, 3. Petitionis prima facie evidence to show that the note existed before the banking, crediruptcy; but no declaration by the bankrupt, subsequent to his bankruptcy, would be admissible to prove the fact. But if two persons exchange acceptances, and before the bills are mature, one of them commits an act of bankruptcy, there is not such a debt due from him to the other, as will sustain a commission.P

The 7 Geo. 1. c. 31, enables persons, who have given credit on bills, bonds, promissory notes, or other personal securities, not due at the time of the act of bankruptcy, to prove the same under a commission, deducting a rebate of interest at £5 per cent.; however, the 3d section enacted, That no such creditor shall be deemed or taken "to be a sufficient creditor for or in respect of such debt, to petition, "or join in any petition, for the obtaining, or suing forth any com-[433] "misston of bankruptcy, until such time as such debt shall become "actually due and payable." But the statute 5 Geo. 2. c. 30. s. 22. reciting that this last restriction has been found to be inconvenient, enacts,That persons taking bills, bonds, promissory notes, or other "personal security for their money, payable at a future day, may "petition for, or join in petitioning for, any commission of bank"ruptcy."

Since this statute, if a bill be accepted before the act of bankruptcy, though it be not then payable, the holder may issue a commission against the acceptor: and as a bill, although not due at the time of the bankruptcy of the drawer or indorser, may be proved under a cominission against them, it should seem, that since the stat. 5 Geo. 2. c. 32. s. 22, a commission might also be issued against such parties; and though it was doubted, at Nisi Prius, whether a bill of exchange is a good petitioning creditor's debt against the drawer before it becomes due, or has been dishonoured by the acceptor; it has since been settled, that such a bill does constitute a sufficient petitioning creditor's debt, and that a commission may be issued against the drawer, although the bill was neither due nor had been presented for acceptance or payment, and though after the issuing of the commission, and when the bill became due, the drawee had duly paid it.*

It was recently determined, that a bill of exchange to the precise amount of £100, drawn and issued by a trader, before an act of bankruptcy, but becoming due afterwards, is sufficient, when due, to found a petition for a commission of bankrupt against him, though, allowing a rebate of interest, there was not at the time of the act of bankruptcy a debt of £100.

A creditor, by a bill or note, made by the bankrupt before the act of bankruptcy, but not indorsed to the holder till after, is allowed to be a petitioning creditor; for this is a case in which the law allows the as

Taylor v. Kinlock, 1 Stark. 175. 179.

2 Rose, 474.

P Sarratt v. Austin, 4 Taunt. 200. 208. 2 Rose, 112.

9 See the statute in the Appendix ; and as to the words "give credit," see Lord Ellenborough's observations in Starey v. Barnes, 7 East, 441.

1 Mont. 44. Cullen, 74. CHITTY ON BILLS.

Macarty v. Barrow, 2 Stra. 949.

3 Wils. 16. S. C. Ex parte Adney, Cowp.
460. 1 Mont. 150. Cullen, 98. Bayl.
193, 4.

Starey v. Barnes, 7 East, 435.

Rose v. Rowcroft, 4 Campb. 245.
* Ex parte Douthat, 4 B. & A. 67.
y Brett v. Levett, 13 East, 213. Bayl.
193, n. 3. 1 Rose, 112.

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3. Petition-signment of a chose in action, and the assignment relates to the original ing credi- debt, and the assignee stands in the original creditor's place. For the [434] same reason, a creditor may, to a debt due to himself before, take a

tor's debt.

note of the bankrupt, indorsed to him after the bankruptcy, to make up the sum required by the statute: it being sufficient within the words of the statute, that there is an existing debt (of the requisite amount) in the person of the petitioning creditor at the time he petitions. It must be proved, however, in order to support the commission, that the bill was indorsed by the bankrupt to the petitioning creditor before the suing out of the commission."

The holder of a bill or note to the amount of £100, or upwards, though he may have bought it for less, is a creditor for the full sum, and may issue a commission. But these statutes only enable creditors, upon written securities to issue a commission, and do not enable a creditor, for goods sold on credit not elapsed, to strike a docket, although the agreement were, that the goods should be paid for by a present bill payable at a future day. And these statutes do not affect bills of exchange or other securities given or indorsed after the act of bankruptcy, on which the commission is founded, in respect of which a person cannot in general be a petitioning creditor; and though the 46 Geo. S. c. 135. s. 2, enables persons to prove debts, contracted after a secret act of bankruptcy, and before the commission, yet it does not authorize a creditor to strike a docket in respect of such a debt.

But when a good petitioning creditor's debt, and an act of bankruptcy subsequent to it has been proved, it is not sufficient, in order to invalidate a commission founded on it, to prove a prior act of bankruptcy, without also proving a prior debt, sufficient to sustain a commission and it is not competent for the bankrupt himself to set up a former act of bankruptcy, in order to invalidate his commission. And if a creditor take a bill after an act of bankruptcy for a debt contracted before, drawn by the bankrupt upon one who had no effects in his hands at the time, or previous to the bill's becoming due, the original debt is not extinguished by, want of notice to the drawer, of the bill's having been dishonoured, and is sufficient to [433] support a commission. Want of notice, though in general tantamount to payment, is not so in this case, for having no effects in the drawee's hands, he cannot be injured.h And it has even been held, that if, after committing a secret act of bankruptcy, a trader gives to his creditor a bond for a debt due on simple contract before the act of bankruptcy, it does not so far extinguish the simple contract debt as to deprive the creditor of his right to petition. Where, however, the

Ex parte Thomas, 1 Atk. 73. Anon. 2 Wils. 135 Bingley v. Maddison, Co. Bank. Law, 19. Cullen, 74. 1 Mont. 43. 46. 4 Campb. 246, in notes. Bayl. 194, 5.

a Glaister v. Hewer, 7T. R. 498. Cooke,
20. Cullen, 75. 1 Mont. 48.

Rose v. Rowcroft, 4 Campb. 245.
Ex parte Lee, 1 P. W. 783. Ex parte
Marlar, 1 Atk. 150. 1 Mont. 48.

d Hoskins v. Duperoy, 9 East, 498.
Cothay v. Murray, 1 Campb. 335.

• Moss v. Smith, 1 Campb. 489. 490. Cullen, 73. 1 Mont. 40, 41; but see as to the

validity of all contracts entered into after a secret act of bankruptcy, more than two calendar months before the date of the commission, 46 Geo. 3. c. 135. Bayl 195, 6.

f Moss v. Smith, 1 Campb. 489.

8 The King v. Bullock, 1 Taunt. 71. Bayl. 195, 6.

b Bickerdike v. Bollman, 1 T. R. 405. Cullen, 75.

i Ambrose v. Clendon, 2 Stra. 1043. Daw v. Holdsworth, Peake, 64. Cullen

75. 1 Mont. 41 to 44.

tor's debt.

laches, or conduct of the holder have deprived him of his remedy at 3. Petition. law against the trader, who has committed an act of bankruptcy, it incredi will be equally incompetent to him to strike a docket. And in general, if the commission be against the drawer or indorser of a bill, it must be proved that he had due notice of non-payment, the same as in an action, but proof that after an act of bankruptcy he admitted that he knew the bill would not be paid, will suffice.*

It was held in the case of Man v. Shepherd, that if a creditor, knowing that his debtor has committed an act of bankruptcy, receive. part of his debt, the payment is void, and the original debt remains in force, and will support a commission, founded on the petition of such creditor. But a debt which could not be recovered in an action, in consequence of a plea of the Statute of Limitations, nor in equity by analogy to it, will not be sufficient to support a commission, or be proveable under it. And in general, whatever objection would preclude the holder of a bill from recovering at law, or in equity, will equally preclude him from issuing a commission of bankruptcy; for, as observed by Lord Chancellor Eldon, in the case Ex parte Dowdney, "The meaning of the legislature in the bankrupt acts, requiring the "Lord Chancellor to give execution to all the creditors was, that this "species of execution should be given to those creditors who, if a "commission had not issued, could by legal or equitable remedies "have compelled payment." Hence, it is necessary in considering when a person may strike a docket, or prove in respect of a bill of exchange, to keep in view the rules which have been stated in the previous part of this work, as well as those more particularly relating to this part of the subject.

When the debt, in respect of which the docket is to be struck, is [ 436 ] due to several persons, whether as general partners or otherwise, they must all be petitioning creditors, and a commission, founded upon the petition of one of such creditors, could not be supported ; the proceedings under a commission being analogous in this respect to an action. But it is not necessary that all the partners should join in. the affidavit of the debt. It will suffice, if one of them swear that the debt is due to himself and partners."

The petitioning creditor is considered as having determined his election by taking out a commission, and is not allowed afterwards to proceed at law, though for a demand which is alleged to be distinct from that on which he sued out the commission.

IV. OF THE PROOF OF BILLS UNDER A COMMISSION.

Previously to the statute 7 Geo. 1. c. 31, no debt, unless it were 4. Proof of completely due, and payable at the time of the act of bankruptcy could bills.

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