TITLE BY BANKRUPTCY. [Book II. fiable, but necessary. And if by accidental calamities, as, by the loss of a ship in a tempest, the failure of brother traders, or by the non-payment of persons out of trade, a merchant or trader becomes incapable of discharging his own debts, it is his misfortune and not his fault. To the misfortunes, therefore, of debtors, the law has given a compassionate remedy, but denied it to their faults: since, at the same time that it provides for the security of commerce, by enacting that every considerable trader may be declared a bankrupt, for the benefit of his creditors as well as himself, it has also (to discourage extravagance) declared that no one shall be capable of being made a bankrupt, but only a trader; nor capable of receiving the full benefit of the statutes, but only an industrious trader. The first statute made concerning any English bankrupts was 34 Hen. VIII, c. 4, when trade began first to be properly cultivated in England: which has been almost totally altered by statute 12 Eliz. c. 7, whereby bankruptcy is confined to such persons only as have used the trade of merchandise, in gross or by retail, by way of bargaining, exchange, re-change, bartering, chevisance, (1) or otherwise; or have sought their living by buying and selling. And by statute 21 Jac. I, c. 19, persons using the trade or profession of a scrivener, receiving other men's monies and estates into their trust and custody, are also made liable to the statutes of bankruptcy: and the benefits, as well as the penal parts of the [ *475] law, are *extended as well to aliens and denizens as to natural-born subjects; being intended entirely for the protection of trade, in which aliens are often as deeply concerned as natives. By many subsequent statutes, but lastly by statute 5 Geo. II, c. 30, (m) bankers, brokers, and factors, are declared liable to the statutes of bankruptcy; and this upon the same reason that scriveners are included by the statute of James I, viz.: for the relief of their creditors; whom they have otherwise more opportunities of defrauding than any other set of dealers; and they are properly to be looked upon as traders, since they make merchandise of money, in the same manner as other merchants do of goods and other movable chattels, grazier, or drover, shall (as such) be liable to be deemed a bankrupt: for, But by the same act, (n) no farmer, though they buy and sell corn, and hay, and beasts, in the course of husbandry, yet trade is not their principal, but only a collateral, object; their chief concern being to manure and till the ground, and make the best advantage of its produce. And, besides, the subjecting them to the laws of bankruptcy might be a means of defeating their landlords of the security which the law has given them above all others, for the payment of their reserved rents; wherefore, also, upon a similar reason, a receiver of the king's taxes is not capable, (o) as such, of being a bankrupt; lest the king should be defeated of those extensive remedies against his debtors, which are put into his hands by the prerogative. By the same statute, (p) no person shall have a commission of bankrupt awarded against him, unless at the petition of some one creditor, to whom he owes 1007.; or of two, to whom he is indebted 150l.; or of more, to whom altogether he is indebted 2007. For the law does not look upon persons whose debts amount to less, to be traders considerable enough, either to enjoy the benefits of the statutes themselves, or to entitle the creditors, for the benefit of public commerce, to demand the distribution of their effects. (2) (1) That is, making contracts. Dufresne, II, 569. (m) 39. (n) 40. (0) Ibid. (p) i 23. (2) The English law of bankruptcy was entirely remodeled by the act 32 and 33 Vic. c. 71, which took effect on the first day of January, 1870. The following is a summary of its pro visions: [First, all persons, even including persons who have privilege of parliament, may be adjudged bankrupt, whether they be traders or not. Next, a person becomes a bankrupt, when adjudged so by the court, upon the petition of a creditor whose debt, which must be a liquidated and unsecured debt, amounts to 50l, or upwards, or of several creditors whose debts in the aggregate amount to that sum at least. But before such petition can be presented the debtor must have committed one of the acts or defaults which are constituted "acts of bankruptcy." *In the interpretation of these several statutes, it hath been held that buying only, or selling only, will not qualify a man to be a bank- [*476] rupt; but it must be both buying and selling, and also getting a livelihood by it. As, by exercising the calling of a merchant, a grocer, a mercer, or in one general word, a chapman, who is one that buys and sells any thing. But no handicraft occupation (where nothing is bought and sold, and where, therefore, an extensive credit for the stock in trade is not necessary to be had) will make a man a regular bankrupt; as that of a husbandman, a gardener, and the like, who are paid for their work and labour. (q) Also an inn-keeper cannot, as such, be a bankrupt: (r) for his gain or livelihood does not arise from buying and selling in the way of merchandise, but greatly from the use of his rooms and furniture, his attendance, and the like: and though he may buy corn and victuals, to sell again at a profit, yet that no more makes him a trader than a school-master or These are, 1. Making a conveyance or assignment of all his property to a trustee for the benefit of his creditors generally. 2. Making a fraudulent conveyance, gift, delivery or transfer of his property, or any part or it. 3. Doing, with intent to defeat or delay his creditors, any of the following acts, viz. departing from or remaining out of England; or (being a trader) departing from his dwelling-house or otherwise absenting himself; or beginning to keep house, or suffering himself to be outlawed; 4. Filing, in the manner prescribed by the rules of the court, a declaration that he is unable to pay his debts; 5. Having execution levied by seizure and sale of his goods, for payment of a debt of 501. or upwards; 6. Having neglected to pay, or secure, or compound the prisoner's debt, after having had a debtor's summons served upon him, being a trader, within seven days, and, being a non-trader, within three weeks after service. An adjudication founded upon any of these acts of bankruptcy will not, however, be granted, unless the petition be presented within six months after the act has been committed. The act of bankruptcy upon which the petition is founded, or the earliest act of bankruptcy that is proved to have been committed within twelve months preceding the presentation of the petition, constitutes the commencement of the bankruptcy. As soon as the bankrupt has been so adjudicated, no creditor may commence or prosecute any proceeding against the bankrupt without leave of the court, and all the ordinary remedies are taken away, the rights only of secured creditors with respect to their security being, however, preserved. Every creditor must prove his debt under the bankruptcy, and is bound by it. Immediately an order of adjudication has been made, the property of the debtor becomes divisible among his creditors, and, for the purpose of making a division, a meeting of the creditors is to be called, at which they are to appoint some fit person, whether a creditor or not, as a trustee, and also nominate some other fit persons, not exceeding five, who are to be creditors who have proved their debts, as a committee of inspection, for the purpose of guiding and in some measure controlling the trustee in the discharge of his duties, or the creditors may leave the appointment of the trustee to the committee. The title of the trustee relates back to the commencement of the bankruptcy. The creditors may at the same or any subsequent meeting give any special directions they may please as to the manner in which the property is to be administered by the trustee, and such directions are to be binding upon him. The property which is to be divisible among the creditors is not to include any property held by the bankrupt on trust for any other person, nor the tools, if any, of his trade, nor the necessary wearing apparel and bedding of himself, his wife and children; such tools, apparel and bedding not exceeding in value 201. But it is to include, first, all such property as may be vested in the bankrupt at the commencement of the bankruptcy, or may be acquired by or devolve upon him during its continuance. Second, the capacity to exercise or take proceedings to exercise all powers over property which might be exercised by the bankrupt for his own benefit at the commencement, or at any time during the continuance of the bankruptcy. Third, all goods and chattels being at the commencement of the bankruptcy in the possession, order or disposition of the bankrupt, being a trader, by the consent and permission of the true owner; of which goods and chattels the bankrupt is reputed owner, or of which he has taken upon himself the sale and disposition as owner: but it is provided that things in action, other than debts due to him in the course of his trade or business, are not to be deemed goods and chattels within the meaning of this clause. Upon the appointment of the trustee the property vests, without any conveyance, assignment or transfer, in him; and the certificate of the court of his appointment constitutes his title-deed. Until the appointment of a trustee, and during any vacancy which may occur, the registrar of the court is the trustee; and the property also vests, as new trustees (if any) are from time to time appointed, on their respective appointments. When the property has been realized, the court makes an order declaring the bankruptcy closed, and the bankrupt may apply for his discharge. The order of discharge will only be granted upon condition that the assets have been sufficient to pay a dividend of not less than 10s. in the pound, unless the creditors shall have passed a resolution, by a majority in number 649 VOL. I.-82 TITLE BY BANKRUPTCY. [Book II. other person is that keeps a boarding-house, and makes considerable gains by One single act of buying and selling will not make a man a trader; but a repeated practice, and profit by it. Buying and selling bank-stock, or other government securities, will not make a man a bankrupt; they not being goods, wares or merchandise, within the intent of the statute, by which a profit may be fairly made. (u) Neither will buying and selling under particular restraints, [*477 ] or for particular purposes; as, if *a commissioner of the navy uses to buy victuals for the fleet, and dispose of the surplus and refuse, he is not thereby made a trader within the statutes. (w) An infant, though a trader, cannot be made a bankrupt; (3) for an infant can owe nothing but for necessaries: and the statutes of bankruptcy create no new debts, but only give a speedier and more effectual remedy for recovering such as were before due: and no person can be made a bankrupt for debts which he is not liable at law to pay. (x) But But a feme-covert in London, being a sole trader according to the custom, is liable to a commission of bankrupt. (y) 2. Having thus considered who may, and who may not, be made a bankrupt, we are to inquire, secondly, by what acts a man may become a bankrupt. (4) ́A (8) Skinn. 292. 3 Mod. 330. (t) Cro. Car. 31. Skinn. 292. (u) 2 P. Wms. 308. representing three-fourths in value of the debts, present at a meeting called specially for the purpose, to the effect that a discharge should be granted. An order of discharge releases the bankrupt from all debts provable under the bankruptcy, except those which he incurred by means of any fraud or breach of trust, and those of which he obtained forbearance by means of fraud; and also except debts due to the crown or relating to the revenue: but of these last he may be discharged if the commissioners of the treasury certify their consent in writing to such discharge. If the bankrupt fail to obtain an order of discharge, then, after the close of the bankruptcy, the following consequences ensue: a period of three years is given to the bankrupt, during which, if he pays to his creditors such additional sum as, together with the dividend already paid, makes up 10s. in the pound, he is to obtain an order of discharge; and meanwhile no debt provable under the bankruptcy shall be enforced against his property; but, if at the expiration of the three years, he has not in this manner obtained an order of discharge, any balance remaining unpaid in respect of any debt proved under the bankruptcy (without interest) shall be deemed an existing debt, in the nature of a judgment debt, and may be enforced as such.] In the United States power is conferred upon congress by the constitution to establish a uniform system of bankruptcy. This power has been three times exercised; by act of April 4, 1800, repealed Dec. 19, 1803; by act of Aug. 19, 1841, repealed in 1843; and by act of March 2, 1867, now in force. The present act embraces within its provisions not traders only, but " person residing within the jurisdiction of the United States," and owing debts to the amount of more than three hundred dollars provable under it. It contains what are called voluntary proany visions, under which an insolvent debtor may himself be the petitioner for his discharge, and involuntary provisions, under which the creditors become petitioners when they believe an act of bankruptcy has been committed. No debt created by the fraud or embezzlement of the bankrupt, or by his defalcation as a public officer, or while acting in any fiduciary capacity, is barred by a certificate of discharge issued under the act. Original jurisdiction of the proceedings is possessed by the United States district courts, but registers in bankruptcy are appointed, by whom the major part of the business is transacted; but contested issues are adjourned by the registers for hearing in court, and the debtor who disputes the allegations of the creditors against him may demand trial by jury. See the Treatise of Avery and Hobbs on this law. And for decisions under it, see digest of cases in bankruptcy in the American Law Review for April, 1869, and subsequent numbers. (3) See Belton v. Hodges, 9 Bing. 365; O'Brien v. Currie, 3 C. and P. 283; Stevens v. Jackson, 4 Camp. 164. United States law. See Matter of Book, 3 McLean, 317. And a married woman doubtless But an infant may probably apply under the voluntary provisions of the may, if resident where the law permits her to transact business in her own name: see Marshall v. Rutton, 8 T. R. 545; or, if the wife of a transported convict. Ex parte Franks, 7 Bing. 762. (4) The acts of bankruptcy enumerated in the act of congress of March 2, 1867, are as follows (sec. 39): Chap. 31] TITLE BY BANKRUPTCY. bankrupt is "a trader, who secretes himself, or does certain other acts, tending to defraud his creditors." We have hitherto been employed in explaining the former part of this description, "a trader;" let me now attend to the latter, "who secretes himself, or does certain other acts tending to defraud his creditors." And, in general, whenever such a trader, as is before described, hath endeavoured to avoid his creditors, or evade their just demands, this hath been declared by the legislature to be an act of bankruptcy, upon which a commission may be sued out. For, in this extrajudicial method of proceeding, which is allowed merely for the benefit of commerce, the law is extremely watchful to detect a man whose circumstances are declining, in the first instance, or at least as early as possible; that the creditors may receive as large a proportion of their debts as may be; and that a man may not go on wantonly wasting his substance, and then claim the benefit of the statutes, when he has nothing left to distribute. To learn what the particular acts of bankruptcy are, which render a man a bankrupt, we must consult the several statutes, and the resolutions formed *Among these may therefore be reckoned: by the courts thereon. 1. Departing from the realm, whereby a man withdraws himself from the [*478] jurisdiction and coercion of the law, with intent to defraud his creditors. (z) 2. Departing from his own house, with intent to secrete himself, and avoid his creditors. (a) 3. Keeping in his own house, privately, so as not to be seen or spoken with by his creditors, except for just and necessary cause; which is likewise construed to be an intention to defraud his creditors, by avoiding the process of the law. (b) 4. Procuring or suffering himself willingly to be arrested, or outlawed, or imprisoned, without just and lawful cause; which is likewise deemed an attempt to defraud his creditors. (c) 5. Procuring his money, goods, chattels, and effects, to be attached or sequestered by any legal process; which is another plain and direct endeavour to disappoint his creditors of their security. (d) 6. Making any fraudulent conveyance to a friend, or secret trustee of his lands, tenements, goods or chattels; which is an act of the same suspicious nature with the last. (e) 7. Procuring any protection, not being himself privileged by parliament, in order to screen his person from arrests; which also is an endeavour to elude the justice of the law. (f) 8. Endeavouring or desiring, by any petition to the king, or bill exhibited in any of the king's courts against any creditors, to compel them to take less than their just debts; or to procrastinate the time of payment originally contracted for; which are an acknowledgment of either his poverty or his knavery. (g) 9. Lying in prison for two months or more, upon arrest or other detention for debt, without finding bail (z) Stat. 13 Eliz. c. 7. (b) Stat. 13 Eliz. c. 7. (c) Ibid. 1 Jac. I, c. 15. (g) Ibid. 1. Departing from the state, territory or district of which the person is an inhabitant, with intent to defraud his creditors: 2. Remaining absent when abroad with the like intent: 3. Concealing himself to avoid the service of legal process for the recovery of any debt provable under the act: 4. Concealing or removing property to avoid legal process: 5. Making an assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits, with intent to delay, hinder or defraud creditors: 6. Being under arrest for a period of seven days on an execution upon a debt provable under the act, and for more than one hundred dollars: 7. Being actually imprisoned for more than seven days in a civil suit founded on contract, for one hundred dollars or upwards: 8. Making any payment, gift, grant, sale, conveyance or transfer of money or other property, estate, rights or credits, or giving any warrant to confess judgment, or procuring or suffering his property to be taken on legal process, while bankrupt or insolvent, or in contemplation of bankruptcy or insolvency, with intent to give a preference to one or more of his creditors, or to persons liable for him as sureties or otherwise, or with intent, by such disposition of his property, to defeat or delay the operation of the act: 9. A banker, broker, merchant, trader, manufacturer or miner fraudulently stopping or suspending, and not resuming payment of his commercial paper within a period of fourteen days. 651 in order to obtain his liberty. (h) For the inability to procure bail, argues a [Book II. strong deficiency in his credit, owing either to his suspected poverty, or ill character; and his neglect to do it, if able, can arise only from a fraudulent intention; in either of which cases, it is high time for his creditors to look to [*479] themselves, and compel a distribution of his effects. 10. Escaping from prison after an arrest for a just debt of 100l. or upwards. (i) For, no man would break prison, that was able and desirous to procure bail; which brings it within the reason of the last case. any just debt to the amount of 100l. within two months after service of legal 11. Neglecting to make satisfaction for process for such debt, upon any trader having privilege of parliament. (k) These are the several acts of bankruptcy, expressly defined by the statutes relating to this title: which being so numerous, and the whole law of bankrupts being an innovation on the common law, our courts of justice have been tender of extending or multiplying acts of bankruptcy by any construction or implication. And, therefore, Sir John Holt held, (1) that a man's removing his goods privately to prevent their being seized in execution, was no act of bankruptcy. For, the statutes mention only fraudulent gifts to third persons, and procuring them to be seized by sham process in order to defraud creditors: but this, though a palpable fraud, yet falling within neither of those cases, cannot be adjudged an act of bankruptcy. So, also, it has been determined expressly, that a banker's stopping or refusing payment is no act of bankruptcy; for it is not within the description of any of the statutes, and there may be good reasons for his so doing, as suspicion of forgery, and the like: and if, in consequence of such refusal, he is arrested, and puts in bail, still it is no act of bankruptcy: (m) but, if he goes to prison, and lies there two months, then, and not before, he is become a bankrupt. We have seen who may be a bankrupt, and what acts will make him so: let us next consider, 3. The proceedings on a commission of bankrupt; so far as they affect the bankrupt himself. And these depend entirely on the several statutes. [*480] of bankruptcy; all which I shall endeavour to blend together, and digest into a concise, methodical order. And, first, there must be a petition to the lord chancellor by one creditor to the amount of 100l. or by two to the amount of 150l., or by three or more to the amount of 2001., (5) which debt must be proved by affidavit: (n) upon which he grants a commission to such discreet persons as to him shall seem good, who are then styled commissioners of bankrupt. (0) The petitioners, to prevent malicious applications, must be bound in a security of 2001. to make the party amends in case they do not prove him a bankrupt. And if, on the other hand, they receive any money or effects from the bankrupt, as a recompense for suing out the commission, so as to receive more than their ratable dividends of the bankrupt's estate, they forfeit not only what they shall have so received, but their whole debt. These provisions are made, as well to secure persons in good credit from being damnified by malicious petitions, as to prevent knavish combinations between the creditors and bankrupt, in order to obtain the benefit of a commission. When the commission is awarded and issued, the commissioners are to meet, at their own expense, and to take an oath for the due execution of their commission, and to be allowed a sum not exceeding 20s. per diem each, at every sitting. And no commission of bankrupt shall abate, or be void, upon any demise of the crown. (p) When the commissioners have received their commission, they are first to receive proof of the person's being a trader, and having committed some act of bankruptcy; and then to declare him a bankrupt, if proved so; and to give notice thereof in the Gazette, and at the same time to appoint three meetings. At one of these meetings an election must be made of assignees, or persons to whom the bankrupt's estate shall be assigned, and in whom it shall be vested (h) Ibid. (Z) Stat. 4 Geo. III, c. 33. (2) Lord Raym. 725. (m) 7 Mod. 139. |