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of the drawers and recovered the amount; and that perhaps after the defendant's acceptance had been admitted as an item of account between him and the bankrupts; and at all events no debt could arise till after payment by the defendant, which was long after the bankruptcy, and therefore could not be set off; for at that time the bill was outstanding in the hands of third persons, and was therefore the subject of mutual credit, if at all, between them and the bankrupts. But in Groome's case (1) Lord HARDWICKE was clearly of opinion that a debt arising on a contingency after the bankruptcy could not be set off; and it has been determined, that though a note indorsed after an act of bankruptcy may be proved under a commission against the drawer (2), yet it cannot be set off against an action *by his assignees (3). The cases Ex parte Deeze (4), Ex parte Prescot (5), and French, assignee of Cox, v. Fenn (6), were all of them cases where the bankrupts were actually indebted to the defendants before the bankruptcies, in the sums which they set off against the demands of the assignees; which differs them materially from the present: but even supposing this were such a demand as could in a fair transaction be set off in a court of law under the statute, yet it cannot avail the defendant in this case, where the whole is vitiated by fraud. It therefore becomes material to examine what part of the transaction may be substantiated, and what is void. There is no fraud in the mere act of sale; and the defendant must be bound by that so far as he made himself liable for the amount of the goods : that would have been the case had the sale been made to a person who was no creditor of the bankrupt's; but the objection arises to the fraudulent use now attempted to be made of the sale. No party is entitled to set off a demand, against the assignees of a bankrupt, for which he could not have maintained an action, or which he could not have proved under a commission. Now, if the defendant could not have done either in the present instance before the bankruptcy, he shall not be permitted to recover the amount indirectly in this manner; for that would be to permit him to avail himself of his own fraud.
Gibbs, for the defendant, insisted, first, that if the whole were to be considered as a bonâ fide transaction, the defendant was entitled to set off the sum paid under his acceptance; and 2ndly, (1) 1 Atk. 119.
(6) Ib. 230. (2) Ex parte Thomas, 1 Atk. 73. (6) Tr. 23 Geo. III. Co. Bk. L. (3) Marsh v. Chambers, 2 Str. 1234. 2nd ed. (4) 1 Atk. 228.
that the finding of the jury, as to the undue preference, could not vary the case in favour of the plaintiffs in this action. The first question depends on the stat. 5 Geo. II. c. 30, s. 28; the true construction of which is, that wherever there is mutual credit between the bankrupt and another person before the bankruptcy, the debts may be set off against each other, although one of them may accrue after the bankruptcy, and although that one debt could not form an item of an account, so as to enable the bankrupt and such other person to strike a balance. The plaintiff's argument, that nothing can be set off under the statute but that which may form an item of an account at the time of the bankruptcy, and the payment of which is only postponed for a time, directly militates against the decision of French v. Fenn. If that case be law, the construction now attempted to be put on this statute *by the plaintiff's counsel cannot prevail. In that case Fenn owed nothing to Cox previous to the bankruptcy; so here Lewis and Potter owed Hodson nothing previous to their bankruptcy; but Fenn had been intrusted by Cox with that upon which he probably would become debtor, namely, the sale of the jewels, in which Cox was interested one-third part; so Lewis and Potter had been intrusted by Hodson with that upon which they probably would become his debtors, ss. with his acceptance for 4421. he having effects to the amount of 421. only; there Fenn, upon the credit of the jewels intrusted to him, trusted Cox on another account, so here, Lewis and Potter, on the credit of the acceptance intrusted to them, trusted Hodson on another account, namely, for the goods in question; there, after the bankruptcy of Cox, Fenn received a sum of money upon the sale of the jewels intrusted to him, which became due to Cox's estate ; so here, after the bankruptcy, Hodson paid a sum of money upon the acceptance intrusted to them, for which he has a claim upon their estate. In that case the Court allowed the set-off; and yet at the time of Cox's bankruptcy no balance could have been struck between the parties, because the defendant's claim arose from the produce of the pearls afterwards. What that produce would be, could not be known at the time of the bankruptcy, and consequently could not then form an item in an account between the parties. Secondly, the finding of the jury, as to the undue preference, is either nugatory as to the plaintiffs, or it operates as a ground of nonsuit. The plaintiffs have an option either to affirm or disaffirm the contract: if the former, the defendant is entitled to set off his demand; if the latter, though
the plaintiffs might recover in trover, they cannot maintain this action. The jury found that there was a fraud in the sale: the plaintiffs cannot therefore contend that the fraud is confined to the use made of the sale. If the defendant had obtained his defence by fraud, it would not have availed: but it does not follow that, because there was a fraud in the sale of goods, from the bankrupt to the defendant, the latter shall not set off a cross demand against the price of the goods. The fraud (if any) was in the sale of the goods; and the effect which it has is this (1), That the bankrupt conveyed no property in the goods to the defendant, and that it was a naked delivery; if so, the plaintiffs should bring trover, not assumpsit.
Russell, in reply: With respect to the case of French v. Fenn, *which seems to have been principally relied on by the other side, there are two very material distinctions between that and the present case : there did exist mutual debts between the parties in that case, though the precise amount was not actually ascertained at the time of the bankruptcy; but still it was capable of being reduced to a certainty at any time by the sale of the jewels; and if Fenn had become a bankrupt instead of Cox, it cannot be denied but that Cox might have come in under Fenn's commission for a third of the value of those jewels. Again : In that case the jewels were in the hands of the party between whom and the bankrupt the account was to be settled, and the mutual debts and credits allowed; whereas here the acceptance was in the hands of third persons at the time of the bankruptcy, without any certainty that they would ever be discharged by the defendant.
Cur. adv. vult.
LORD KENYON, Ch. J. now delivered the opinion of the Court:
His Lordship, after stating the facts, said : We have considered this case, and are of opinion that the defendant has made a sufficient defence against the action in its present form, and consequently that a judgment of nonsuit must be entered. It is expressly stated in the case, that the goods in question were delivered by the bankrupts to the defendant with a view to defraud the rest of the creditors; and therefore an action might have been
(1) Cook B. L. 2nd ed. R.R.-VOL. LIII.
framed to disaffirm the contract, which was thus tinctured with fraud; for if the assignees had brought an action of trover, they might have recovered the value of the goods. The statute 5 Geo. II. c. 30, s. 28, enacts, That where it shall appear to the commissioners that there hath been mutual credit between the bankrupt and any other person, or mutual debts between the bankrupt and any other person, before the bankruptcy, the commissioners or the assignees shall state the account between them, and one debt may be set against another; and the balance only of such accounts shall be claimed and paid on either side, in the most extensive words ; and therefore we are perfectly satisfied with the cases Ex parte Deeze (1), and French v. Fenn ; but if an action of trover had been brought instead of assumpsit, this case would have differed materially from those two; because in both those cases the goods had got into the hands of the respective parties prior to the bankruptcy, and without any view of defrauding the rest of the creditors; and therefore, according to the justice of those *cases, whether trover or assumpsit had been brought, the whole account ought to have been settled in the way in which it was, because the situation of the parties was not altered with a view to the bankruptcy: but here it was; and if trover had been brought, the defendant would have had no defence; and those cases would not have availed him. But this is an action on the contract for the goods sold by the bankrupt; and although the assignees may either affirm or disaffirm the contract of the bankrupt, yet if they do affirm it, they must act consistently throughout; they cannot, as has often been. observed in cases of this kind, blow hot and cold ; and as the assignees in this case treated this transaction as a contract of sale, it must be pursued through all its consequences (2), one of which is, that the party buying may set up the same defence to an action brought by the assignees, which he might have used against the bankrupt himself; and consequently may set off another debt which was owing from the bankrupt to him. This doctrine is fully recognized in Hitchin v. Campbell (3), and in King v. Leith (4). Now here the assignees, by bringing this action on the contract, recognized the act of the bankrupt, and must be bound by the transaction in the same manner as the bankrupt himself would have been: and if he had brought the action, the whole account (1) 1 Atk. 228.
[ *217 ]
56 L. J. Ch. 1081, 1087.-R. C. (2) This passage is cited by CHITTY, (3) 2 Bi. Rep. 827. J., in Republic of Peru v. Peruvian (4) 2 T. R. 141. Guano Co. (1886) 36 Ch. D. 489, 499,
must have been settled, and the defendant would have had a right to set off the amount of the bill. Therefore, on the distinction between the actions of trover and assumpsit, we are all of opinion that a judgment of nonsuit must be entered.
Judgment of nonsuit.
BATESON v. GREEN AND ANOTHER (1).
Nov. 21. (5 T. R. 411–417.)
Lord The right of commoners in a common may be subject to a right of the lord KENYON, to dig clay-pits, or empower others to do so, without leaving sufficient herbage Ch. J. for the commoners, and such a right may be proved by constant usage.
ASHHURST, J. Semble, such a right, where it exists, is not customary, but must be BULLER, J. attributed to an original reservation by the lord.
[5 T. R. 411 ] The declaration stated that the plaintiff was possessed of a messuage and land in the township of Worthy, &c., by reason whereof he ought to have common of pasture upon the whole of a common called the Upper Moor for all his cows, levant and couchant, &c.; and that the defendant cut and carried away turf, and dug holes and clay, and carried away the clay, &c. There was another count for a similar trespass upon another common; to which the general issue was pleaded. At the trial before the Lord Chief Baron, at the last York Assizes, the plaintiff proved his right of common together with other inhabitants of the township; and that about 25 years ago the defendants, who claimed under a lease from the lord to dig clay on the common, began to dig potting clay there. That the Upper Moor consisted of about ten acres, the herbage of about four acres of which was destroyed by the digging. That the other common contained about two acres. That the pits dug were very large, and were not filled up again after the clay was taken out. It was also proved that in 1741 there were the marks of similar pits which had before been dug on the common, over
(1) This case has been discussed, Div. 484, 518, the judgment of the and the apparent scope of the judg- C. A., delivered by Fry, L. J., seems to ments (at any rate as stated in the admit that like evidence might still be original head-note, which is now held to call for a like decision; and in modified) has been limited, in Arlett Ramsey v. Cruddas (1893) 1 Q. B. 228. v. Ellis, 31 R. R. 214 (7 B. & C. 346), 62 L. J. Q. B. 269, the C. A. sustained and Hilton y. Earl Granville (1844) a custom for the lord to make copy 5 Q. B. 701, 13 L. J. Q. B. 193; and in hold grants of the waste, with the 1877 HALL, V.-C. doubted, though it consent of the homage, although suffiwas not necessary to decide, whether it cient common was not left. The was still an authority to be followed: learned reader is requested to correct Hall v. Byron, 4 Ch. D. 667, 680. But the note in 31 R. R. 222 accordingly. in Robertson v. Hurtopp (1889) 43 Ch. ---F, P.