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tained. They were too sanguine, and therefore the preference was sanctioned.

Nothing can be more uncertain than a rule which makes the rights of parties depend upon the doubtful motives of the individual.

The circumstance that an insolvent trader acted under the advice of counsel, has been considered as evidence that a preference was not fraudulent.

Certain traders in London had ordered goods from the manufacturers in Manchester, to be sent to their agents, at Hull. On the arrival of the goods at Hull, from which place they were to be shipped to Hamburgh, the vendees, finding themselves insolvent, called a meeting of their creditors, and took legal advice, whether the goods should be given up. The opinion of counsel was, that the creditors had a right to stop the goods, with which the creditors generally concurred, and the goods were returned.

The court were of opinion, that the right of stoppage in transitu did not exist, but that "the circumstances of deliberation, consent of creditors, advice of counsel, and the publicity which attended the whole of the measure, exempted it from being properly considered as a fraudulent preference, in contemplation of bankruptcy."

In this case, the question submitted to counsel and to the creditors was, the right to stop in transitu. As they were mistaken in regard to the existence of that right, it would seem that the property ought to have been restored to the bankrupt's fund, for general distribution; but as the bankrupt acted under a mistaken idea of duty, there was no actual fraud. Constructive fraud was not admitted, and as the question depended upon the motive of the party, the policy of the bankrupt law was defeated.

It seems to have been regarded, in certain cases, sufficient to sustain a conveyance or payment, by way of

1 Dixon v. Baldwin, 5 East, R. 175.

preference, if, notwithstanding the intent to prefer, the debtor might also have been influenced by another motive, not fraudulent.

As where a trader, on the eve of bankruptcy, sent his clerk to the creditor with checks, as a security, but before they were delivered, the creditors, not knowing they were sent, called upon the bankrupt and demanded payment. The checks were accordingly obtained by the creditor, the debtor having the double motive, to avoid legal coercion, and to make a preference.

Lord Ellenborough was of opinion, that the delivery of the checks was not to be deemed a voluntary preference.

2

* But in another case a voluntary payment, by a trader to his bankers, under circumstances which might reasonably lead the debtor to believe bankruptcy probable, was decided to be a fraud upon the creditors.

* When the vendee of goods upon credit, finds or suspects that he is insolvent, before the goods are accepted and blended with the mass of his property, so as to constitute his visible stock in trade, he may return the goods without a fraudulent preference.

But when goods have been ordered, and actually received, they cannot be sent back to give a preference, in contemplation of bankruptcy.

In cases of the former class, it is entirely consistent with equity, that the debtor should not receive the goods for which he is unable to pay, and, in returning them there is no fraudulent preference, as there would be, if they had even constituted the foundation of his credit. The only difficulty consists in determining in what cases the equity exists.

Bayley v. Ballard, 1 Camp. b. 416.
Polard v. Glyn, 2 D. & R. 314.
Atkin v. Barwick, 1 Strange, R. 165.
Neate v. Ball, 2 East, R. 117.

The bankrupt law having provided for the management of the estate of a bankrupt, as well as for its distribution, lord Mansfield was of opinion, that a deed made by a bankrupt to trustees, to pay all his creditors ratably, without the assent of the creditors, would be void.

In this country, it is probable, this doctrine would not prevail, if the deed of trust was in terms equally beneficial to the creditors; but if the assignment contained provisions inconsistent with the policy of the bankrupt law, or if it was designed to delay or hinder the creditors, it would undoubtedly be regarded as fraudulent, and an act of bankruptcy.

Whether a conveyance by an insolvent trader, the effect of which is to prevent an equal distribution of his property, may be sustained, or whether it is a fraud upon the law, depends upon the circumstances of each individual case.

In certain cases, fraud is an inference of law, but the presumption is capable of being repelled, and a range of inquiry has been admitted, in regard to the actual motives, which, in the cases that have arisen under the statute of Eliz. ch. 5, against fraudulent gifts and conveyances, has not been indulged.

If a different rule had prevailed, and if the doctrine of constructive fraud had been strictly applied, the policy of the law would have been better maintained, and much uncertainty and inconvenience avoided; but unfortunately a rule was adopted, which, while it left greater freedom to the operations of an insolvent and embarrassed trader, also obstructed the equitable policy of the law, and furnished an opening for fraud.

A wide field of inquiry is now presented, in every case of preference, and as everything depends upon the motives of the bankrupt, no established principle can be applied,

1 See Kettle v. Hammond, H. I. 1767; 1 Cooke, B. L. 106, 8th edition.

and the decision of the triers must be influenced by considerations of little weight, on grounds of equity.

It is greatly to be apprehended, also, that from the cases in which the policy of the law has been subsequently evaded, an insolvent trader, seeing bankruptcy inevitable, but cautiously avoiding that view of it which in the eyes of the law is regarded as a contemplation of bankruptcy, may be enabled to construct a code of preference, which shall protect conveyances designed to sweep the mass of his property into the hands of a favored creditor.

S. F. D.

NOTE TO ARTICLE II, CONTAINING THE OPINION OF MR JUSTICE THOMPSON, IN THE CASE OF THE W. M. CO. AGAINST THE ETNA INSURANCE COMPANY.

THE substantial question in this case was, whether the effect of the statute of the state of Maryland was to deprive individuals sued in their corporate capacity, of the right of notice of proceeding at law against them, and whether a judgment recovered without actual notice was a sufficient foundation for an action of debt.

It is impossible for individuals to enter into a valid agreement, that notice of the pendency of any subsequent action of law shall be unnecessary; for without an opportunity to appear and defend, there can be no trial, nor a judgment which proceeds upon the grounds that the justice of the cause of action is acknowledged, or that the defence is abandoned.

If the act had provided that whenever any foreign insurance company transacted business within the state, an action at law might be maintained against the corporation without notice, and judgment rendered without trial, the gross departure from acknowledged maxims of justice would be

so manifest, that the judgment would be disregarded as the foundation of an action in any other jurisdiction where the principles of the common law prevailed. Can the same result be attained indirectly?

The object of the act in question in the foregoing cases was to subject a corporation existing abroad, and created by the law of another state, to the jurisdiction of the state of Maryland, in the same manner as if it had been established within the state. To effect that purpose, corporations of a certain class are declared to be invested with franchises, that is with the franchise of being a body politic. Now this purpose, so far as it regards the investiture of the right, would be clearly subject to acceptance. Suppose the benefit of the act, then, accepted by a corporation already fully constituted such by the grant of another state. Such corporation will be a body politic by the creation of two legislatures, and will hold rights by the conditions of two several charters. If a forfeiture occurs in either state, the franchise will be subject to resumption on process of quo warranto.

If the state which originally granted the charter should proceed against the corporation for a forfeiture, the franchise would still exist, by virtue of the enactment of another state. Then, if a corporation is reduced to the condition of an unincorporated company, a mere fraternity or partnership, still the liability of a partnership will not belong to the individuals composing it, because they have a corporate capacity with all the rights and exemptions belonging to it by the laws of the state of Maryland. Though they may have acted as a mere partnership after forfeiture, where the charter was granted, still as they are a corporation in another state, the property held in that state would be held. as a corporation, and not as a partnership.

If after the forfeiture of the Connecticut charter, a bill in equity should be sustained in that state between the original corporators, a decree founded upon the dissolution could

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