Front Page Titles (by Subject) CHAPTER XXXI.: OF TITLE BY BANKRUPTCY. - Commentaries on the Laws of England in Four Books, vol. 1
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CHAPTER XXXI.: OF TITLE BY BANKRUPTCY. - Sir William Blackstone, Commentaries on the Laws of England in Four Books, vol. 1 
Commentaries on the Laws of England in Four Books. Notes selected from the editions of Archibold, Christian, Coleridge, Chitty, Stewart, Kerr, and others, Barron Field’s Analysis, and Additional Notes, and a Life of the Author by George Sharswood. In Two Volumes. (Philadelphia: J.B. Lippincott Co., 1893). Vol. 1 - Books I & II.
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OF TITLE BY BANKRUPTCY.
The preceding chapter having treated pretty largely of the acquisition of personal property by several commercial methods, we from thence shall be easily led to take into our present consideration a tenth method of transferring property, which is that of
X. Bankruptcy; a title which we before lightly touched upon,(a) so far as it related to the transfer of the real estate of the bankrupt. At present we are to treat of it more minutely, as it principally relates to the disposition of chattels, in which the property of persons concerned in trade more usually consists, than in lands or tenements. Let us, therefore, first of all consider, 1. Who may become a bankrupt: 2. What acts make a bankrupt: 3. The proceedings on a commission of bankrupt: and, 4. In what manner an estate in goods and chattels may be transferred by bankruptcy.
1. Who may become a bankrupt. A bankrupt was before(b) defined to be “a trader, who secretes himself, or does certain other acts, tending to defraud his creditors.” He was formerly considered merely in the light of a criminal or offender;(c) and in this spirit we are told by Sir Edward Coke,(d) that we have fetched as well the name, as the wickedness, **472]of bankrupts from foreign nations.(e) But at present the laws of bankruptcy are considered as laws calculated for the benefit of trade, and founded on the principles of humanity as well as justice; and to that end they confer some privileges, not only on the creditors, but also on the bankrupt or debtor himself. On the creditors, by compelling the bankrupt to give up all his effects to their use, without any fraudulent concealment: on the debtor, by exempting him from the rigour of the general law, whereby his person might be confined at the discretion of his creditor, though in reality he has nothing to satisfy the debt: whereas the law of bankrupts, taking into consideration the sudden and unavoidable accidents to which men in trade are liable, has given them the liberty of their persons, and some pecuniary emoluments, upon condition they surrender up their whole estate to be divided among their creditors.
In this respect our legislature seems to have attended to the example of the Roman law. I mean not the terrible law of the twelve tables; whereby the creditors might cut the debtor’s body into pieces, and each of them take his proportionable share: if, indeed, that law, de debitore in partes secando, is to be understood in so very butcherly a light; which many learned men have with reason doubted.(f) Nor do I mean those less inhuman laws, (if they may be called so, as their meaning is indisputably certain,) of imprisoning the debtor’s person in chains; subjecting him to stripes and hard labour, at the mercy of his rigid creditors; and sometimes selling him, his wife and children, to perpetual foreign slavery trans Tiberim:(g) an oppression which produced so many **473]popular insurrections, and secessions to the mons sacer. But I mean the law of cession, introduced by the Christian emperors; whereby, if a debtor ceded, or yielded up, all his fortune to his creditors, he was secured from being dragged to a gaol, “omni quoque corporali cruciatu semoto.”(h) For, as the emperor justly observes,(i) “inhumanum erat spoliatum fortunis suis in solidum damnari.” Thus far was just and reasonable; but, as the departing from one extreme is apt to produce its opposite, we find it afterwards enacted,(k) that, if the debtor by any unforeseen accident was reduced to low circumstances, and would swear that he had not sufficient left to pay his debts, he should not be compelled to cede or give up even that which he had in his possession: a law which, under a false notion of humanity, seems to be fertile of perjury, injustice, and absurdity.
The laws of England, more wisely, have steered in the middle between both extremes: providing at once against the inhumanity of the creditor, who is not suffered to confine an honest bankrupt after his effects are delivered up; and at the same time taking care that all his just debts shall be paid, so far as the effects will extend. But still they are cautious of encouraging prodigality and extravagance by this indulgence to debtors; and therefore they allow the benefit of the laws of bankruptcy to none but actual traders; since that set of men are, generally speaking, the only persons liable to accidental losses, and to an inability of paying their debts, without any fault of their own. If persons in other situations of life run in debt without the power of payment, they must take the consequences of their own indiscretion, even though they meet with sudden accidents that may reduce their fortunes: for the law holds it to be an unjustifiable practice for any person but a trader to encumber himself with debts of any considerable value. If a gentleman, or *[*474one in a liberal profession, at the time of contracting his debts, has a sufficient fund to pay them, the delay of payment is a species of dishonesty, and a temporary injustice to his creditor: and if at such time he has no sufficient fund, the dishonesty and injustice is the greater. He cannot therefore murmur, if he suffers the punishment which he has voluntarily drawn upon himself. But in mercantile transactions the case is far otherwise. Trade cannot be carried on without mutual credit on both sides: the contracting of debts is therefore here not only justifiable, 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 13 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, rechange, bartering, chevisance,(l) 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 moneys 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 law, are *[*475extended 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. But by the same act,(n) no farmer, grazier, or drover, shall (as such) be liable to be deemed a bankrupt: for, 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 100l.; or of two, to whom he is indebted 150l.; or of more, to whom altogether he is indebted 200l. For the law does not look upon persons whose debts amount to less, to be traders considerable enough, either to enjoy the benefit of the statutes themselves, or to entitle the creditors, for the benefit of public commerce, to demand the distribution of their effects.1
**476]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 bankrupt: 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,2 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 innkeeper 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 schoolmaster or other person is, that keeps a boarding-house, and makes considerable gains by buying and selling what he spends in the house; and such a one is clearly not within the statutes.(s) But where persons buy goods, and make them up into salable commodities, as shoemakers, smiths, and the like; here, though part of the gain is by bodily labour, and not by buying and selling, yet they are within the statutes of bankrupts:(t) for the labour is only in melioration of the commodity, and rendering it more fit for sale.
One single act of buying and selling will not make a man a trader;3 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, or for particular purposes; as, if *[*477a 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; 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 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. A 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 us 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 by the courts thereon. **478]Among these may therefore be reckoned, 1. Departing from the realm, whereby a man withdraws himself from the 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 in order to obtain his liberty.(h) For the inability to procure bail argues a 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 themselves, **479]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. 11. Neglecting to make satisfaction for any just debt to the amount of 100l. within two months after service of legal process for such debt upon any trader having privilege of parliament.(k)4
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(l) that a man 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 *[*480on the several statutes 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 200l., which debts 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.(o) The petitioners, to prevent malicious applications, must be bound in a security of 200l. 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 for the benefit of the creditors; which assignees are to be chosen by the major **481]part in value of the creditors who shall then have proved their debts, but may be originally appointed by the commissioners, and afterwards approved or rejected by the creditors: but no creditor shall be admitted to vote in the choice of assignees whose debt on the balance of accounts does not amount to 10l. And at the third meeting, at furthest, which must be on the forty-second day after the advertisement in the Gazette, (unless the time be enlarged by the lord chancellor,) the bankrupt, upon notice also personally served upon him or left at his usual place of abode, must surrender himself personally to the commissioners; which surrender (if voluntary) protects him from all arrests till his final examination is past: and he must thenceforth in all respects conform to the directions of the statutes of bankruptcy; or, in default of either surrender or conformity, shall be guilty of felony without benefit of clergy, and shall suffer death, and his goods and estate shall be distributed among his creditors.(q)
In case the bankrupt absconds, or is likely to run away, between the time of the commission issued and the last day of surrender, he may, by warrant from any judge or justice of the peace, be apprehended and committed to the county gaol, in order to be forthcoming to the commissioners, who are also empowered immediately to grant a warrant for seizing his goods and papers.(r)
When the bankrupt appears, the commissioners are to examine him touching all matters relating to his trade and effects. They may also summon before them and examine the bankrupt’s wife,(s) and any other person whatsoever, as to all matters relating to the bankrupt’s affairs. And in case any of them shall refuse to answer, or shall not answer fully, to any lawful question, or shall refuse to subscribe such their examination, the commissioners may commit them to prison without bail till they submit themselves and make and sign a full answer: the commissioners specifying in their warrant of commitment the question so refused to be answered. And any gaoler permitting such person to escape or go out of prison shall forfeit 500l. to the creditors.(t)
**482]The bankrupt, upon this examination, is bound upon pain of death to make a full discovery of all his estate and effects, as well in expectancy as possession, and how he has disposed of the same; together with all books and writings relating thereto: and is to deliver up all in his own power to the commissioners, (except the necessary apparel of himself, his wife, and his children;) or, in case he conceals or embezzles any effects to the amount of 20l., or withholds any books or writings, with intent to defraud his creditors, he shall be guilty of felony without benefit of clergy, and his goods and estates shall be divided among his creditors.(u) And, unless it shall appear that his inability to pay his debts arose from some casual loss, he may, upon conviction by indictment of such gross misconduct and negligence, be set upon the pillory for two hours, and have one of his ears nailed to the same and cut off.(v)
After the time allowed to the bankrupt for such discovery is expired, any other person voluntarily discovering any part of his estate, before unknown to the assignees, shall be entitled to five per cent. out of the effects so discovered, and such further reward as the assignees and commissioners shall think proper. And any trustee wilfully concealing the estate of any bankrupt, after the expiration of two-and-forty days, shall forfeit 100l., and double the value of the estate concealed, to the creditors.(w)
Hitherto every thing is in favour of the creditors, and the law seems to be pretty rigid and severe against the bankrupt; but, in case he proves honest, it makes him full amends for all this rigour and severity. For, if the bankrupt hath made an ingenuous discovery, (of the truth and sufficiency of which there remains no reason to doubt,) and hath conformed in all points to the directions of the law; and if, in consequence thereof, the creditors, or four parts in five of them in number and value, (but none of them creditors for less than 20l.,) will sign a certificate to that purport; the commissioners are then to authenticate such certificate under their hands and seals, and to transmit it to the lord chancellor; and he, or two of the judges whom he shall appoint, on oath *[*483made by the bankrupt that such certificate was obtained without fraud, may allow the same; or disallow it, upon cause shown by any of the creditors of the bankrupt.(x)
If no cause be shown to the contrary, the certificate is allowed of course; and then the bankrupt is entitled to a decent and reasonable allowance out of his effects, for his future support and maintenance, and to put him in a way of honest industry. This allowance is also in proportion to his former good behaviour in the early discovery of the decline of his affairs, and thereby giving his creditors a larger dividend. For, if his effects will not pay one-half of his debts, or ten shillings in the pound, he is left to the discretion of the commissioners and assignees to have a competent sum allowed him, not exceeding three per cent.; but if they pay ten shillings in the pound, he is to be allowed five per cent.; if twelve shillings and sixpence, then seven and a half per cent.; and if fifteen shillings in the pound, then the bankrupt shall be allowed ten per cent.; provided that such allowance do not in the first case exceed 200l., in the second 250l., and in the third 300l.(y)
Besides this allowance, he has also an indemnity granted him of being free and discharged forever from all debts owing by him at the time he became a bankrupt; even though judgment shall have been obtained against him, and he lies in prison upon execution for such debts; and for that, among other purposes, all proceedings on commissions of bankrupt are, on petition, to be entered of record, as a perpetual bar against actions to be commenced on this account: though, in general, the production of the certificate, properly allowed, shall be sufficient evidence of all previous proceedings.(z) Thus *[*484the bankrupt becomes a clear man again; and, by the assistance of his allowance and his own industry, may become a useful member of the commonwealth; which is the rather to be expected, as he cannot be entitled to these benefits unless his failures have been owing to misfortunes rather than to misconduct and extravagance.
For no allowance or indemnity shall be given to a bankrupt unless his certificate be signed and allowed as before mentioned; and also, if any creditor produces a fictitious debt, and the bankrupt does not make discovery of it, but suffers the fair creditors to be imposed upon, he loses all title to these advantages.(a) Neither can he claim them if he has given with any of his children above 100l. for a marriage portion, unless he had at that time sufficient left to pay all his debts; or if he has lost at any one time 5l., or in the whole 100l., within a twelvemonth before he became bankrupt, by any manner of gaming or wagering whatsoever; or within the same time has lost the value of 100l. by stock-jobbing. Also, to prevent the too common practice of frequent or fraudulent or careless breaking, a mark is set upon such as have been once cleared by a commission of bankrupt, or have compounded with their creditors, or have been delivered by an act of insolvency: which is an occasional act, frequently passed by the legislature: whereby all persons whatsoever, who are either in too low a way of dealing to become bankrupts, or, not being in a mercantile state of life, are not included within the laws of bankruptcy, are discharged from all suits and imprisonment, upon delivering up all their estate and effects to their creditors upon oath, at the sessions or assizes; in which case their perjury or fraud is usually, as in case of bankrupts, punished with death. Persons who have been once cleared by any of these methods, and afterwards become bankrupts again, unless they pay full *[*485fifteen shillings in the pound, are only thereby indemnified as to the confinement of their bodies; but any future estate they shall acquire remains liable to their creditors, excepting their necessary apparel, household goods, and the tools and implements of their trades.(b)
Thus much for the proceedings on a commission of bankrupt, so far as they affect the bankrupt himself personally. Let us next consider,
4. How such proceedings affect or transfer the estate and property of the bankrupt. The method whereby a real estate in lands, tenements, and hereditaments may be transferred by bankruptcy, was shown under its proper head in a former chapter.(c) At present, therefore, we are only to consider the transfer of things personal by this operation of law.
By virtue of the statutes before mentioned,(d) all the personal estate and effects of the bankrupt are considered as vested, by the act of bankruptcy, in the future assignees of his commissioners, whether they be goods in actual possession, or debts, contracts, and other choses in action: and the commissioners, by their warrant, may cause any house or tenement of the bankrupt to be broken open in order to enter upon and seize the same. And when the assignees are chosen or approved by the creditors, the commissioners are to assign every thing over to them; and the property of every part of the estate is thereby as fully vested in them as it was in the bankrupt himself, and they have the same remedies to recover it.(e)5
The property vested in the assignees is the whole that the bankrupt had in himself at the time he committed the first act of bankruptcy, or that has been vested in him since, before his debts are satisfied or agreed for. Therefore it is usually said, that once a bankrupt and always a bankrupt; by which is meant, that a plain direct act of bankruptcy once **486]committed cannot be purged or explained away by any subsequent conduct, as a dubious, equivocal act may be;(f) but that, if a commission is afterwards awarded, the commission and the property of the assignees shall have a relation or reference back to the first and original act of bankruptcy.(g) Inasmuch that all transactions of the bankrupt are from that time absolutely null and void, either with regard to the alienation of his property or the receipt of his debts from such as are privy to his bankruptcy; for they are no longer his property, or his debts, but those of the future assignees. And if an execution be sued out, but not served and executed on the bankrupt’s effects till after the act of bankruptcy, it is void as against the assignees. But the king is not bound by this fictitious relation, nor is he within the statutes of bankrupts;(h) for if, after the act of bankruptcy committed, and before the assignment of his effects, an extent issues for the debt of the crown, the goods are bound thereby.(i) In France, this doctrine of relation is carried to a very great length; for there every act of a merchant, for ten days precedent to the act of bankruptcy, is presumed to be fraudulent, and therefore void.(k) But with us the law stands upon a more reasonable footing: for, as these acts of bankruptcy may sometimes be secret to all but a few, and it would be prejudicial to trade to carry this notion to its utmost length, it is provided, by statute 19 Geo. II. c. 32, that no money paid by a bankrupt to a bonâ fide or real creditor, in the course of trade, even after an act of bankruptcy done, shall be liable to be refunded. Nor, by statute 1 Jac. I. c. 15, shall any debtor of a bankrupt, that pays him his debt without knowing of his bankruptcy, be liable to account for it again; the intention of this relative power being only to reach fraudulent transactions, and not to distress the fair trader.
The assignees may pursue any legal method of recovering this property so vested in them, by their own authority; but *[*487cannot commence a suit in equity, nor compound any debts owing to the bankrupt, nor refer any matters to arbitration, without the consent of the creditors, or the major part of them in value, at a meeting to be held in pursuance of notice in the Gazette.(l)
When they have got in all the effects they can reasonably hope for, and reduced them to ready money, the assignees must, after four and within twelve months after the commission issued, give one-and-twenty days’ notice to the creditors of a meeting for dividend or distribution; at which time they must produce their accounts, and verify them upon oath if required. And then the commissioners shall direct a dividend to be made, at so much in the pound, to all creditors who have before proved, or shall then prove, their debts. This dividend must be made equally and in a ratable proportion to all the creditors, according to the quantity of their debts; no regard being had to the quality of them. Mortgages, indeed, for which the creditor has a real security in his own hands, are entirely safe; for the commission of bankrupt reaches only the equity of redemption.(m) So are also personal debts, where the creditor has a chattel in his hands as a pledge or pawn for the payment, or has taken the debtor’s lands or goods in execution. And, upon the equity of the statute 8 Anne, c. 14, (which directs that upon all executions of goods being on any premises demised to a tenant, one year’s rent, and no more, shall, if due, be paid to the landlord,) it hath also been held that, under a commission of bankrupt, which is in the nature of a statute-execution, the landlord shall be allowed his arrears of rent to the same amount in preference to other creditors, even though he had neglected to distrein while the goods remained on the premises, which he is otherwise entitled to do for his entire rent, be the quantum what it may.(n) But, otherwise, judgments and recognizances, (both which are debts of record, and therefore at other times have a priority,) and also bonds and obligations by deed or special instrument, (which are called debts by specialty, and are usually the next *[*488in order,) these are all put on a level with debts by mere simple contract, and all paid pari passu.(o) Nay, so far is this matter carried, that, by the express provision of the statute,(p) debts not due at the time of the dividends made, as bonds or notes of hand payable at a future day certain, shall be proved and paid equally with the rest,(q) allowing a discount or drawback in proportion. And insurances and obligations upon bottomry or respondentia, bonâ fide made by the bankrupt, though forfeited after the commission is awarded, shall be looked upon in the same light as debts contracted before any act of bankruptcy.(r)
Within eighteen months after the commission issued, a second and final dividend shall be made, unless all the effects were exhausted by the first.(s) And if any surplus remains, after selling his estates and paying every creditor his full debt, it shall be restored to the bankrupt.(t) This is a case which sometimes happens to men in trade, who involuntarily, or at least unwarily, commit acts of bankruptcy, by absconding and the like, while their effects are more than sufficient to pay their creditors. And, if any suspicious or malevolent creditor will take the advantage of such acts, and sue out a commission, the bankrupt has no remedy, but must quietly submit to the effects of his own imprudence; except that upon satisfaction made to all the creditors the commission may be superseded.(u) This case may also happen: when a knave is desirous of defrauding his creditors, and is compelled by a commission to do them that justice which otherwise he wanted to evade. And therefore, though the usual rule is that all interest on debts carrying interest shall cease from the time of issuing the commission, yet, in case of a surplus left after payment of every debt, such interest shall again revive and be chargeable on the bankrupt(w) or his representatives.
[(a) ] See page 283.
[(b) ] Ibid.
[(c) ] Stat. 1 Jac. I. c. 15, 17.
[(d) ] 4 Inst. 277.
[(e) ] The word itself is derived from the word bancus or banque, which signifies the table or counter of a tradesman. (Dufresne, i. 969,) and ruptus, broken,—denoting thereby one whose shop or place of trade is broken and gone; though others choose to adopt the word route, which in French signifies a trace or track, and tell us that a bankrupt is one who hath removed his banque, leaving but a trace behind. 1 Inst. 277. And it is observable that the title of the first English statute concerning this offence, (34 Hen. VIII. c. 4,) “against such persons as do make bankrupt,” is a literal translation of the French idiom, qui font banque route.
[(f) ] Taylor, Comment. in L. Decemviral. Bynkersh. Observ. Jur. I. 1. Heinecc. Antiq. iii. 30, 4.
[(g) ] In Pegu and the adjacent countries in East India, the creditor is entitled to dispose of the debtor himself, and likewise of his wife and children; insomuch that he may even violate with impunity the chastity of the debtor’s wife; but then, by so doing, the debt is understood to be discharged. Mod. Un. Hist. vii. 128.
[(h) ] Cod. 7, 71, per tot.
[(i) ] Inst. 4, 6, 40.
[(k) ] Nov. 135 c. 1.
[(l) ] That is, making contracts. Dufreane, ii. 569.
[(m) ] 38.
[(n) ] 40.
[(o) ] Ibid.
[(p) ] 32.
[1 ] But all these statutes have been superseded by the Bankrupt Law Consolidation Act, 1849, (12 & 13 Vict. c. 106,) by which all previous acts are repealed; and by sect. 65 it is enacted that all alum-makers, apothecaries, auctioneers, bankers, bleachers, brokers, brickmakers, builders, calenderers, carpenters, carriers, cattle or sheep salesmen, coach-proprietors, cow-keepers, and persons using the trade or profession of a scrivener, receiving other men’s moneys or estates into their trust or custody, and persons insuring ships or their freight, or other matters, against peril of the sea, warehousemen, wharfingers, packers, builders, carpenters, shipwrights, victuallers, keepers of inns, taverns, hotels, or coffee-houses, dyers, printers, fullers, and all persons using the trade of merchandise by way of bargaining, exchange, commission, consignment, or otherwise, in gross or by retail, all persons who, either for themselves or as agents or factors for others, seek their living by buying and selling, or by buying and letting for hire, or by the workmanship of goods or commodities, and some others expressly mentioned in the section, shall be deemed liable to become bankrupt; provided that no farmer, grazier, common labourer or workman for hire, receiver-general of the taxes, or member of or subscriber to any incorporate, commercial, or trading companies established by charter or act of parliament, shall be deemed, as such, a trader, liable by virtue of this act to become bankrupts.—Stewart.
By the act of Congress August 19, 1841, (5 Story, 2829,) there were two classes of bankrupts. First, those who became so upon their voluntary petition; and this class comprehended all persons whatsoever residing in any State, District, or Territory of the United States owing debts, which shall not have been created in consequence of a defalcation as a public officer, or as executor, administrator, guardian, or trustee, or while acting in any other fiduciary capacity. Second, persons declared bankrupts upon the petition of one or more of their creditors, to whom they owe debts amounting in the whole to not less than five hundred dollars; and this class comprehended all persons being merchants or using the trade of merchandise, all retailers of merchandise, and all bankers, factors, brokers, underwriters, or marine insurers, owing debts of not less than two thousand dollars. This act was repealed by the act of March 3, 1843, (5 Story, 2978,) with a proviso that the repeal should not affect any case or proceeding in bankruptcy commenced before the passage of the repeal, or any pains, penalties, or forfeitures incurred under the original act, but every such proceeding may be continued to its final consummation.—Sharswood.
[2 ] It has been long held that if the affidavit of debt term the debtor a “dealer and chapman,” that is a sufficient description of trading to support a commission of bankruptcy; and a general statement in the commission that the bankrupt “got his living by buying and selling” is enough to support it, though the bankrupt is described as a waterman, (ex parte Herbert, 2 Ves. & Bea. 400;) for no clearer information can be received from the expression “dealer and chapman” than would be conveyed by the description of the bankrupt as one who “gained his livelihood by buying and selling;” which general statement will admit the finding of any particular trading. Hale vs. Small, 2 Brod. & Bing. 27. S. C. 2 Wils. Cha. Ca. 86.—Chitty.
[(q) ] Cro. Car. 31.
[(r) ] Cro. Car. 549. Skinn. 291.
[(s) ] Skinn. 292. 3 Mod. 330.
[(t) ] Cro. Car. 31. Skinn. 292.
[3 ] It has been decided that a single purchase, made with intent to sell again, is enough to constitute a trading, so as to bring the party within the purview and operation of the bankrupt-laws. Holroyd vs. Gwynne, 2 Taunt. 176. Newland vs. Bell, Holt’s N. P. C. 223. This, however, must be qualified. Lord Ellenborough held that a fisherman who bought fish at sea from other boats for the purpose of making up his own cargo, which he carried ashore and sold, was a trader within the meaning of the bankrupt-laws, (Heanny vs. Birch, 3 Camp. 233;) but lord Eldon, adverting to this decision, expressed his opinion to be, that, although it would be immaterial whether the acts were few or many, if the fisherman went out for the purpose of buying fish, that would make him a general trader: still, if the case were no more than that a person who went to sea to fish, and, not obtaining a sufficient cargo, buys a few fish to make it up, it would be hasty to say that such a partial buying would amount to a general trading. Such a case, his lordship added, must always depend upon its own particular circumstances, and be properly the subject of a trial at law. It was further observed, that a farmer, who is converting his apples—the fruit of his orchard—into cider, and, finding he has not a sufficient supply from his own orchard, makes up the deficiency by purchasing apples from his neighbours, or the owner and worker of a coal-mine, who buys small articles, as bread, cheese, &c., in order to sell them again to his own pitmen, does not thereby render himself a trader within the bankrupt-laws. Ex parte Gallimore, 2 Rose, 427, 428.
But, it seems quite clear, the question of law is not now governed by the quantum of the trading: it is a settled rule that if any stranger may be supplied with the commodity which is sold, and it is not sold as a favour to any particular person, there the person so selling is subject to the bankrupt-laws. Patman vs. Vaughan, 1 T. R. 573. Wright vs. Bird, Price, 22.—Chitty.
[(u) ] 2 P. Wms. 308.
[(w) ] 1 Salk. 110. Skinn. 292.
[(x) ] Lord Raym. 443.
[(y) ] La Vie vs. Philips, M. 6 Geo. III. B. R.
[(z) ] Stat. 13 Eliz. c. 7.
[(a) ] Ibid. 1 Jac. I. c. 15.
[(b) ] Stat. 13 Eliz. c. 7.
[(c) ] Ibid. 1 Jac. I. c. 15.
[(d) ] Stat. 1 Jac. I. c. 15.
[(e) ] Ibid.
[(f) ] Stat. 21 Jac. I. c. 19.
[(g) ] Ibid.
[(h) ] Ibid.
[(i) ] Ibid.
[(k) ] Stat. 4 Geo. III. c. 33.
[4 ] The English Bankrupt Law Consolidation Act of 1849 (12 & 13 Vict. c. 106, s. 69) has increased the number of enumerated cases to fifteen, and modified six of these as set forth in the text. It is not deemed necessary to encumber the note with them. By the act of Congress Aug. 19, 1841, (5 Story, 2829,) the enumerated acts on which a man could be declared a bankrupt by the action of his creditors were,—1. Departing from the State, District, or Territory of which he is an inhabitant, with intent to defraud his creditors. 2. Concealing himself to avoid being arrested. 3. Willingly or fraudulently procuring himself to be arrested, or, 4. His goods and chattels, lands or tenements, to be attached, distreined, sequestered, or taken in execution. 5. Removing his goods, chattels, and effects, or concealing them to prevent their being levied upon or taken in execution, or by other process. 6. Making any fraudulent conveyance, assignment, sale, gift, or other transfer of his lands, tenements, goods, or chattels, credits, or evidences of debt: with a proviso, however, that any person so declared a bankrupt, at the instance of a creditor, shall be entitled, if he demands it, to a trial by jury.—Sharswood. under a bill filed by other creditors. Rush vs. Higgs, 4 Ves. 643. Martin vs. Martin, 1 Ves. Sen. 213. But, from the moment a final decree to that effect is made, it is considered as a judgment in favour of all the creditors; and there the court of equity could not execute its own decree if it permitted the course of payment to be altered by a subsequent judgment of a court of law. Largan vs. Bowen, 1 Sch. & Lef. 299. Paxton vs. Douglas, 8 Ves. 521. Between decrees and judgments the right to priority of payment is determined by their real priority of date.—Chitty.
[(l) ] Lord Raym. 725.
[(m) ] 7 Mod. 139.
[(n) ] Stat. 5 Geo. II. c. 30.
[(o) ] 3 Stat. 13 Eliz. c. 7.
[(p) ] Stat. 5 Geo. II. c. 30.
[(q) ] Stat. 5 Geo. II. c. 30.
[(r) ] Stat. 5 Geo. II. c. 30.
[(s) ] Stat. 21 Jac. I. c. 19.
[(t) ] Stat. 5 Geo. II. c. 30.
[(u) ] Stat. 5 Geo. II. c. 30. By the laws of Naples, all fraudulant bankrupts, particularly such as do not surrender themselves within four days, are punished with death; also all who conceal the effects of a bankrupt, or set up a pretended debt to defraud his creditors. Mod. Un. Hist. xxviii. 320.
[(v) ] Stat. 21 Jac. I. c. 19.
[(w) ] Stat. 5 Geo. II. c. 30.
[(x) ] Stat. 5 Geo. II. c. 30.
[(y) ] Stat. 5 Geo. II. c. 30. By the Roman law of cession, if the debtor acquired any considerable property subsequent to the giving up of his all, it was liable to the demands of his creditors, (Ff. 42, 3, 4;) but this did not extend to such allowance as was left to him on the score of compassion for the maintenance of himself and family. Si quid misericordiæ causa ei fuerit relictum, puta menstruum vel annum, ab mentorum nomine, non oportet propter hoc bona ejus iterati venundari: nec enim fraudandus est alimentis cottidianis Ibid. l. 6.
[(z) ] Stat. 5 Geo. II. c. 30.
[(a) ] Stat. 24 Geo. II. c. 57.
[(b) ] Stat. 5 Geo. II. c. 30.
[(c) ] Page 285.
[(d) ] Stat. 1 Jac. I. c. 15. 21 Jac. I. c. 19.
[(e) ] 12 Mod. 324.
[5 ] By the act of Congress August 19, 1841, (5 Story, 2830,) it was provided that all the property and rights of property, of every name and nature, and whether real, personal, or mixed, of every bankrupt, except as presently mentioned, who shall be declared to be a bankrupt, shall by mere operation of law, ipso facto, from the time of such decree, be deemed to be divested out of such bankrupt, without any other act, assignment, or other conveyance whatsoever. The exception referred to is necessary household and kitchen furniture, and such other articles and necessaries of the bankrupt as the assignee shall designate or set apart, having reference in the amount to the family, condition, and circumstances of the bankrupt, but altogether not to exceed in value, in any case, the sum of three hundred dollars; and also the wearing-apparel of such bankrupt, and that of his wife and children.—Sharswood.
[(f) ] Salk. 110.
[(g) ] 4 Burr. 32.
[(h) ] 1 Atk. 262.
[(i) ] Viner, Abr. tit. Creditor and Bankrupt, 104.
[(k) ] Sp. L. b. 29, c. 16.
[(l) ] Stat. 5 Geo. II. c. 30.
[(m) ] Finch, Rep. 466.
[(n) ] 1 Atk. 103, 104.
[(o) ] Stat. 21 Jac. I. c. 19.
[(p) ] Stat. 7 Geo. I. c. 31.
[(q) ] Lord Raym. 1549. Stra. 1211.
[(r) ] Stat. 19 Geo. II. c. 32.
[(s) ] Stat. 5 Geo. II. c. 30.
[(t) ] Stat. 13 Eliz. c. 7.
[(u) ] 2 Ch. Ca. 144.
[(w) ] 1 Atk. 244.