XXVII. would formerly have been deemed a dormant partner, was CHAPTER postponed to the claims of other creditors by 28 & 29 Vict. c. 86, s. 5 (now repealed, but re-enacted in Partnership Act, 1890, s. 3), should the debtor become bankrupt or die in insolvent circumstances (x). within. Where a creditor assigns a trade debt, and then becomes Assigned bankrupt, the general rule is that the debt so assigned debts, when passes nevertheless to the trustee in bankruptcy, as being in the order and disposition of the bankrupt with the consent of the true owner, unless the debtor have had notice of the assignment. It is, however, sufficient if the assignee of the debt do all he can to give notice or despatch a notice before the bankruptcy, though it be not received by the debtor till after the bankruptcy (y). It has been held that a debt, in order to pass under the reputed ownership clause, must have been unconscientiously allowed to remain in the disposition of the bankrupt (z). The debtor's knowledge of the assignment is not necessary where a negotiable bill or note is indorsed or transferred, for the legal title to the debt is conveyed by the indorsement or delivery. But if a trader, who afterwards becomes bankrupt, indorses a bill or note not negotiable, unless the debtor have had notice, the bill or note passes to the bankrupt's trustee by reputed ownership (a). Bills or notes may pass to the trustee of a bankrupt under Bills and notes the clause of reputed ownership. A person having three within it. bills of exchange, applied to a country banker with whom he had had no previous dealings, to give for them a bill on London for the same amount; and the bill given by the banker was afterwards dishonoured :-Held, that this was a complete exchange of securities, and that trover would not lie for the three bills of exchange; and that if the exchange had not been complete, still that, the banker having become a bankrupt, and the three bills having come to the (x) In re Ramsden, 40 L. J., Bkcy. 89. (y) Belcher v. Bellamy, 17 L. J., Exch. 219; 2 Exch. 303. See Brewin v. Short, 5 E. & B. 227; 24 L. J., Q. B. 297. (-) See Joy v. Campbell, 1 Sch. & Lef. 336; 9 R. R. 39; and Load v. Green, 15 M. & W. 216; Hamilton v. Bell, 10 Exch. 545. Where the creditor had assigned a debt, and drew on the (a) Belcher v. Campbell, 8 XXVII. CHAPTER possession of his assignees, must be considered as goods and chattels in the order and disposition of the bankrupt at the time of the bankruptcy, within the meaning of the Bankrupt Act. "These bills," says Abbot, C.J., "being negotiable securities, of which the bankrupts might dispose, and having remained in their possession till the time of the bankruptcy, and so come to their assignees, are, in my opinion, within the operation of the statute. It has been held that debts are within the statute; if so, à fortiori, bills of exchange must be " (b). Bills in the hands of an agent, factor, or banker becoming bank rupt, not within it. But a bill or note in the hands of an agent for a specific purpose does not pass to his trustees by reputed ownership (c). Bills remitted to an agent as a factor or banker, and entered short while unpaid, or paid in generally, for the amount to be received (d) by such banker, or for any other specific purpose (e), and not discounted or treated as cash, are considered as still in the possession of the principal; and, therefore, in case of the bankruptcy of such agent, banker, or factor, they do not pass to his trustee, but must be returned to the principal, subject to such lien as the agent may have upon them. "Every man," says Lord Ellenborough, "who pays bills not due into the hands of his banker, places them there, as in the hands of his agent, to obtain payment of them when due. If the banker discount the bill, or advance money upon the credit of it, that alters the case; he then acquires the entire property in it, or has a lien on it, pro tanto, for his advance"(f). (b) Hornblower v. Proud, 2 (c) Bruce v. Hurly, 1 Stark. (d) See Jombart v. Woollett, 2 M. & C. 389; Er parte Edwards, 11 L. J., Bank, 36. Puller, 1 B. & P. 539; 4 R. R. And the law is the same though the amount of the bills be entered by the banker in the cash column of the ledger and pass-book, and though the banker pay them away or discount them at his discretion. A customer was in the habit of indorsing and paying into his banker's hands bills not due, which, if approved, were immediately entered as bills to his credit, to the full amount; and he was then at liberty to draw for that amount by cheques on the bank. The customer was charged with interest upon all cash payments to him, from the time when made, and upon all payments by bills from the time. when they were due and paid, and had credit for interest upon cash paid into the bank from the time of the payment, and upon bills paid in from the time when the amount of them was received. The bankers paid away such bills to their customers as they thought fit. The bankers having become bankrupt, it was held, that the customer might Inaintain trover against their assignees for bills paid in by him, and remaining in specie in their hands, the cash balance, independently of the bills, being in the favour of the customer at the time of the bankruptcy; Bayley, J., observing, "It has been argued for the defendants, that we must infer an agreement to have been made between the banker and his customer, that, as soon as bills reached the hands of the banker, the property should be changed. Undoubtedly, if there were any such bargain, the defendants would be entitled to our judgment; but if there be no such bargain, then the case of customer and banker resembles that of principal and factor; and the bills, remaining in the banker's hands in specie, will, notwithstanding the bankruptcy of the banker, continue the property of the customer.' Though the amount of the bills was carried into the cash column, it does not follow that the customer consented to their being considered as cash (g). trustee may be restrained by injunction from negotiating the bills (h). The CHAPTER XXVII. As to the position of the bankrupt prior to discharge, POSITION OF certain points have been before the Courts. (g) Thompson v. Giles, 2 B. & C. 422; 3 Dowl. & R. 733; 26 R. R. 392; Ex parte Barkworth, 27 L. J., Bkey. 5. In Er parte Stannard, 10 Morr. 193, Vaughan Williams, J., held that the decision in Thompson v. Giles was largely grounded on the fact that the bills were handed to the banker before (h) Ex parte Jombert, Cor. BANKRUPT /A. c. 281. CHAPTER Transfer, in case of bank ruptcy of holder. Where the bankrupt is a trustee. When the transfer of a bill by a debtor approaching bankruptcy is valid. Transfer to a bankrupt. When his capacity admitted. EFFECT OF If the holder of a bill of exchange, in which he has a beneficial interest, becomes bankrupt, the property in the bill vests, from the time of the act of bankruptcy, in his trustee; and under the earlier Acts it was held that the assignees must indorse (i). But as, in general, property, in which a bankrupt has no beneficial interest, does not pass to his trustees, he may, after an act of bankruptcy, indorse a bill accepted for his accommodation, so as to convey to his indorsee a right of action against the accommodation acceptor (k). The distinction (7) between a payment in money and a payment or satisfaction by bills, is, at this day, of less moment, since now, not only payments, but all contracts, dealings and transactions with a bankrupt prior to receiving order, and without notice of an act of bankruptcy available for adjudication, are protected (m). Where a negotiable instrument is given to the bankrupt after his bankruptcy, the bankrupt has the property in it, unless the trustees choose to interfere (n). Until the trustee intervenes, all transactions by a bankrupt after his bankruptcy with any person dealing with him bona fide and for value, in respect of his after-acquired property, whether with or without knowledge of the bankruptcy, are valid as against the trustee (o). If a man already a bankrupt be payee of a negotiable bill or note, the acceptor or maker cannot dispute the payee's capacity to indorse (p). The order of discharge releases the bankrupt from all debts provable in bankruptcy except recognizances, crown (i) Pinkerton v. Marshall, 2 H. B. 335; Thomason v. Frere, 10 East, 418; 10 R. R. 341. (k) Arden v. Watkins, 3 East, 317; Wallace v. Hardacre, 1 Camp. 45; 10 R. R. 629; Ramsbottom v. Cator, 1 Stark. 228. (1) Hawkins v. Penfold, 2 Ves. sen. 550; Wilkins v. Casey, 7 T. R. 711; 4 R. R. 558; Bayly v. Schofield, 1 M. & Sel. 338; see Bishop v. Crawshay, 3 B. & C. 415; 5 Dowl. & R. 279. (m) See ante, PROTECTED DEALINGS, p. 457. (n) Drayton v. Dale, 2 B. & C. 293; 3 Dowl. & R. 534; 26 R. R. 356; Herbert v. Sayer, 5 Q. B. 965; 13 L. J., Q. B. 209. In re Pettit, 1 Ch. D. 478. (0) Cohen v. Mitchell, 25 Q. B. D. 267. But when the bill discounted by the bankrupt was really acquired before, the trustee can follow the proceeds. In re Rogers, 8 Morr. 236. (p) Drayton v. Dale, 2 B. & C. 293; 26 R. R. 356; Pitt v. Chappelow, 8 M. & W. 616: Braithwaite v. Gardiner, 8 Q. B. 473. Code, s. 54 (1). See the Chapter on ACCEPTANCE. XXVII. debts, and liabilities for revenue offences or on bail bonds CHAPTER in prosecutions for such offences (in which excepted cases the written consent of the Treasury to his discharge is required), nor will the discharge release him from liability incurred by means of any fraud or fraudulent breach of trust to which he was a party (q). Nor, again, will the order release any person who at the date of the receiving order was partner or co-trustee with the bankrupt or jointly bound with him or surety for him (r). Under the Act of 1869 and Rules of 1870 it was held Valuation of that bills held by a banker "pending discount," i.e., during securities for inquiries as to the solvency of the acceptors, the banker purpose of voting. meanwhile making some advances to the customer on the credit of the bills, were not securities which the banker was bound to value in proving under the bankruptcy of the customer (s). But as to voting, it is expressly provided by the Act now in force (t) that no creditor under such circumstances shall be entitled to vote unless he is willing for the purpose of voting, but not for the purposes of dividend, to estimate and deduct the value of the security from his proof. (q) 46 & 47 Vict. c. 52, s. 30 (1), (2). The words in italics were not in sect. 49 of the Act of 1869. See Cooper v. Prichard, 11 Q. B. D. 351. As to bills accepted in blank before bankruptcy and filled up after discharge, see Temple v. Pullen, 8 Exch. 389; 22 L. J., Ex. 151; Awde v. Diron, 6 Exch. 869; L. & S. W. Bank v. Whitworth, B.B.E. 31 |