I. Where there is cross paper between the parties to the accommodation. II. Where the accommodating party has taken a security. 1st, When he has paid before the bankruptcy. III. Where the accommodating party has no security. 3d, When he may compel the holder to prove. 2d, When he has not paid. 4th, When he may prove under the Stat. 49 Geo. 3. c. 121. s. 8. 2d. Who may prove. [ 443 ] bills. First, If a bill of exchange or promissory note, be given either in 1. Cross consideration of another bill or note, the consideration is valid, and the holder may prove it under a commission of bankruptcy; and whether in an exchange of bills, one bill were transferred in consideration of the other, it must be determined by the particular circumstances of each case. The bills need not be payable at the same time, but any variation in the times of payment of the respective bills, is evidence, whether the parties did or did not transfer the bills in consideration of each other; nor need the bills be for the same sums, but any variation, is evidence, whether the parties did or did not transfer the bills in consideration of each other. And it seems, that an agreement by each party to pay his own acceptance, is conclusive evidence that the bills were given in consideration of each other. The consideration of the bill, for this purpose, may be an acceptance of the party to whom it is transferred, or the acceptance of another person, or a promissory note." There is a material difference, however, between the right of such a party to a bill to prove it, and that of a person who has actually advanced a valuable consideration for a bill. The latter is entitled, without qualification, to prove and receive a dividend immediately in equal proportion with the other creditors." But the former, though he is entitled to prove the cross bill before he has taken up his own, yet the [ 444 dividends will be withheld until the account relative to the cross bill is finally settled and adjusted. A person, who has accepted a bill in consideration of the drawer's Ex parte Maydwell, and Ex parte Beaufoy, Cooke, 159. Ex parte Clanricarde, Cooke, 162. Rolfe v. Caslon, 2 Hen. Bla. 570. Cowley v. Dunlop; 7 T. R. 565. Buckler v. Buttivant, 3 East, 72. 1 Mont. 138. 8 Vide judgment of Lord Ellenborough in Buckler v. Buttivant, 3 East, 72. 1 Mont. 138. As to distinction between cross bills and reciprocal accommodation, see Bayl. 201. May prove, but cannot issue commission, Bayl. 203, n. 2. 4 Taunt. 200. b Ex parte Maydwell, Cooke, 159. Buckler v. Buttivant, 3 East, 73.-1 Mont. 138. i Buckler v. Buttivant, 3 East, 72. Ex parte Lee, 1 P. Wms. 782. 1 Mont. 839. 3 East, 84. Cowley v. Dunlop, 7 T. R. Ex parte Clanicarde, Cooke, 162.- " Ex parte Maydwell, Cooke, 159-1. Mont. 139. Ex parte Marshall, 1 Atk. 130. Ex P Ex parte Clanricarde, Cooke, 160. In Cooke, 5th edit. 162, it is stated, that the surety cannot prove till he has taken upon his own paper; but, in 1 Mont. 139, it is stated to be settled otherwise, though formerly doubted. But the dividends are withheld, see 4 Taunt. 204, 5. See the observations of Le Blanc, J. Bayl. 204, n. 1. 205. 8 Ves. 531. CHITTY ON BILLS. * Cowley v. Dunlop, 7 T. R. 565.Buckler v. Buttivant, 3 East, 72. 1 Mont. 139. 3 E 2d. Who accepting a cross bill, and where it is understood that each party shall may prove. pay his own acceptances, cannot prove under a commission against 1. Cross such drawer any payment made on his own acceptance, either before or bills. after the bankruptcy of the drawer, there being no implied contract of indemnity in the case of such cross acceptances; but each party is considered as looking to the liquidation of his claim on the other, by the bill which he took in lieu of his own, and his remedy thereon, and to those only; in which case the law will not raise any implied promise ultra the bills. The party as acceptor, has no remedy against the drawer, for payment of his own acceptances, because he did not accept in consideration of a promise of indemnity, but in consideration of an agreement, or rather of an actual and executed delivery of other ac ceptances to the same, or nearly the same amount." And consequently, in these cases of cross acceptance, the payment made by a party on his own acceptance, cannot be proved under a commission against the other acceptor, although no payment whatever has been made by the latter on his acceptance, the only remedy being on the cross bill. It has been held, that if a person become a bankrupt, and the dealings between the bankrupt and a creditor consists of cross bills, which are respectively dishonoured, and a cash account composed of payments in money, and of payments on bills duly dishonoured, all the dishonoured bills must be struck out on both sides, and only the cash balance be proved under the commission." But if the drawer of a bill, accepted in consideration of his own acceptance, take up and pay the whole bill after the bankruptcy of the acceptor, and the bill has not been proved by the holder under the commission, such drawer may prove it. Though if the assignees of the drawer of a bill, accepted in consideration of his own acceptance, pay dividends to the holder, who also receives dividends under the commission against the acceptor, [445] the drawer cannot prove the amount of such dividends under such latter 2. Surety curity. commission.y Secondly, Besides these cases of cross paper, a party to an accomhaving a se-modation bill frequently receives by way of indemnity a bill or note. If an accommodation acceptor, or other party, who puts his name to a bill without having received value, take at the same time from the prin cipal, or party accommodated, by way of indemnification, a bill or note for a sum of money payable at a day certain, he will be allowed to prove immediately upon such counter security, though the debtor be comes a bankrupt before such counter security is payable, and before the surety himself has paid or been called upon, or even could, by the terms of his engagement, be called upon to pay to the creditor; and this, notwithstanding the counter security has been negotiated by the party and returned to him after the bankruptcy. It has been observed, that such a construction, however it may appear, to a common apprehension, repugnant to the real truth of the transaction, and the real justice of the case as between the parties, has been founded upon this, that such a counter security creates an absolute debt at law, for which 2d. Who the surety's liability is a sufficient consideration, and on which, there. may prove. fore, he is entitled immediately to come in as a creditor under the, 2. Surety cominission. With a view, however, to prevent the injury which might curity. be done to real creditors by allowing such constructively absolute, but really contingent creditors, to receive dividends upon debts which may never exist but in law, it has been thought necessary, where there are cross demands between the surety and the bankrupt upon counter paper, as it is called, and upon which, till either has actually paid, they are substantially only sureties, though nominally creditors of each other, to suspend the dividends till it appear what the surety actually pays, and how far he exonerates the bankrupt's estate from his own paper. d A security of this nature must be a bill, note, or bond, payable at all events, and not a mere parol, or written undertaking to indemnify. A promissory note payable on demand, or a bill payable at all events, are sufficient securities to enable a surety to prove, though no demand has been made before the act of bankruptcy. But if the acceptor of a[446] bill receive from the drawer an undertaking to indemnify, or a receipt for his acceptance, as for money received, this is not such a counter security as creates a debt capable of being proved. In Ex parte Metcalfe, where A. and B. became bankrupts, the assignees of B. were allowed to prove under the commission against A., a cash balance due from A. to B., but the dividends were ordered to be retained to reimburse the estate of A. what it should be compelled to pay upon a distinct transaction, viz. a loan of bills from A. to B., some of which had been dishonoured, so that the money, thus in the hands of A., was in the nature of a cross security and indemnification against the accommodation paper. So in the case of Willis v. Freeman, Lord Ellenborough said, that the case of Wilkins v. Casey, has established, that if a man, who has funds in his hands belonging to a trader who had committed a secret act of bankruptcy, accept a bill for that trader without knowing of such act of bankruptcy, he may apply those funds, when the bill becomes due, to the discharge of his own acceptance, though a commission of bankruptcy may have issued in the interim, and will be protected against any claims the assignees may afterwards make upon him in respect of the funds so applied. It is not necessary, in all cases, that the security to the accommodating party should be given expressly as an indemnity. Thus it was held, in the case Ex parte Bloxham, that bankers, who have accepted bills for the accommodation of the bankrupt, may prove upon the bills drawn by him and remitted to them in the course of their banking account, though their acceptances were not due at the time of the bankruptcy; and it being objected, that the acceptance was not such a consideration as gave the bankers a right to prove upon the bills deposited, but not due till after the bankruptcy, and that when the banker accepted, not having bills, but bills were deposited afterwards, to indemnify him, that is not such a giving credit as falls within the statute 2d. Who 7 Geo. 1. c. 31, and that in Ex parte Maydwell, the acceptance was may prove. upon the express credit of the note, and that consequently this case 2. Surety having a se. Was distinguishable. The Lord Chancellor said, that "in Ex parte curity. "Maydwell, it was held, that the liability by the acceptance was a "good consideration for the promissory note, and the proof was per"mitted. Cases occurred afterwards demonstrating some mischief in "that doctrine: the party proving, but not taking up his own accept[447]"ance; and the Lord Chancellor afterwards put that condition upon "them, that they should take up their acceptances. Upon this sort of "transaction, bankers accepting upon the credit of bills remitted from "the country, they must be entitled to prove, but they should prove "upon the securities." Where a person has become a party to a bill or note, for the accommodation of another, and has been obliged to pay it after the bankruptcy, he may set off such payment against a debt due from him to the bankrupt at the time of his bankruptcy. But this is a case of mutual credit under the statute 5 Geo. 2. c. 30, which will be afterwards more fully considered. 3. Where Thirdly, Where a person has become a party to an accommodation there is no bill, or note, though there is neither cross paper nor a security in his security. hands to indemnify him, yet, if he has paid the bill before the act of bankruptcy of his principal, it is proveable under the commission but if he has paid such bill or note after the act of bankruptcy of his principal, he cannot, in general, prove under a commission, unless he can avail himself of the provisions in the statute 49 Geo. 3. c. 221. s. 8. This is perfectly clear in the case of an accommodation acceptor, or maker of a note, who, being the party primarily liable, can have no remedy upon them. Thus where a person accepted a bill to accommodate the drawer, upon a parol promise by the latter to find money to take it up when due, and to save the acceptor harmless, but who did not take it up when it became due, and soon after was a bankrupt, and the acceptor, after the bankruptcy of the drawer, was sued upon the bill and taken in execution for the debt and costs, it was held, that no debt accrued to him from the drawer, till he paid the debt and costs, or (which was the same thing as actual payment) till he rendered his body in satisfaction thereof, and this not being till after the bankruptcy, could not be proved under the commission against the drawer. And it makes no difference if, instead of a parol promise, the surety takes a promise in writing from the drawer that he will take up the bill when due. The right of an indorser of a bill or note, who has become so merely for the accommodation of another, and has paid the bill after [448] the bankruptcy, seems not perfectly settled." It was held in the case of Brooks v. Rogers that, if the payee of a bill of exchange, not The leading cases upon this point are Brooks v. Rogers, 1 Hen. Bla. 640. Howis v, Wiggins, 4 T. R. 714. and Howle r. Baxter, 8 East, 177. 3 Bos. & Pul. 395. P 1 Hen. Bla. 640. In 1 Mont. 151. note d. there is a question whether this case in law, and Cowley v. Dunlop, 7 T.R 565, and Buchler v. Buttivant, 3 East, 72, are referred to; and it is suggested that the whole question is, whether the payee and drawer stood in the situation of principal and surety. In Cowley Dunlop, Lawrence, Justice, speaking of there is no being a creditor of the drawer, indorse and get it discounted merely 2d. Who for the purpose of raising money for him, and hand the money to him, may prove. and is afterwards obliged to pay it to the indorsee, but not till after 3. Where the drawer becomes a bankrupt, he cannot prove it under the drawer's security. commission; because no debt accrued to him from the drawer till the money was actually paid, which was not till after the bankruptcy. In the case of Howis v. Wiggins, 4 T. R. 714, where a party became payee, and indorser of a promissory note for the accommodation of the maker, who delivered it to a third person with the payee's indorsement, and afterwards became bankrupt, it was held that the payee and indorser, paying it after the bankruptcy, was not entitled to prove his debt accruing only upon payment of the note. In the case of Howle v. Baxter, 3 East, 177, the bill had been accepted by the bankrupt for the accommodation of the drawer, and the plaintiff, at the [ 449 ] request of the drawer, indorsed the bill, merely to give it additional credit, after which the drawer got it discounted, and the acceptor became bankrupt, and the plaintiff was afterwards obliged to pay the account to a bona fide holder, after which the defendant obtained his certificate, and the court said, that the plaintiff contracted no liability at the defendant's request, and that he never became surety for him in this transaction, and that the plaintiff's demand against the defendant, the acceptor, arose solely upon the bill, and that there was nothing to prevent his proving it under the commission, and consequently that the bankrupt was discharged by his certificate. Where the party from being acceptor of the bill or maker of the note is primarily liable, and could not have any claim by virtue of the instrument itself upon any party to it, there seems sufficient grounds for his not being allowed to prove under the commission; because, independently of 7 Geo. 1. c. 31, no person can prove, unless he has a subsisting legal demand actually payable at thr time of the act of bankruptcy, and there is no ground for permit the case of Brooks v. Rogers, says, "I argued that case as being the case of principal and surety, and considered Brooks as lending his name to Rogers to get money on the draft of Rogers, of the Olney bank, and that, in substance, it was an advance of money to Rogers on the credit of Brook's name as surety to the bank; but I doubt if that argument is not fallacious; for on Brooks carrying the bill to the bank, the bank lent him the amount of it on the security of the bill, on which Brooks was entitled to recover when returned to him for non-payment." 9 Mr. Montague, in Vol. i. 155, n. e. observes on this decision "that it is a stronger case of principal and surety than the case of Brooks v. Rogers, 1 Hen. Bla. 640, above mentioned, because in Howis v. Wiggins, no money consideration passed between the payee and maker before the bankruptcy of the latter." And see the argument in Howle v. Baxter, 3 East, 177. In Cowley v. Dunlop, 7 T. R. 565. Grose, J. says. "the case of Howis v. Wiggins came on before this court on a motion for a new trial; and possibly under a misapprehension of it, I considered it as a case of indemnity; and the ground on which the rule was refused was, on the supposition that Van derhayden and De Paiba was in point. I |