by which the whole available funds of an insolvent trader are realized and divided among his creditors. The simple word bankrupt, however, applies more properly to the position in which the debtor has placed himself before such a process can commence. A man must commit, or suffer to be committed against him, one of those acts indicative of inability or unwillingness to meet his obligations, termed "Acts of Bankruptcy" (and which bear a generic resemblance to those coinciding events, which with us constitute notour bankruptcy), before the process can commence; and until his situation is so taken advantage of, his position in the eye of the law is not altered. Among those who cannot pay their debts then, the English law acknowledges two classes, bankrupts, or those whose estates, if they be mercantile people, are liable to distribution under the bankrupt statutes, and insolvents. In Scotland, without much practical distinction, there is a more enlarged nomenclature. The debtors unable to meet their engagements may be divided into three orders, Insolvents, Bankrupts, and individuals whose estates are under Sequestration.

*

SECT. 2.-Insolvency.

Simple Insolvents are, properly speaking, those whose funds will not meet their debts; but it is not to be inferred because the balance in a tradesman's books is against him, that his affairs are irretrievably embarrassed; and the law looks to some indication of his inability to meet, either by his property or his resources, the current demands on him, such as his allowing his bills to be dishonoured, or compounding with his creditors.1 Insolvency does not like bankruptcy place the debtor in a new legal character as a member of society; but it has a material effect over the contracts on which he may have entered during its continuance. Thus, it entitles a creditor to stop goods sold and not paid for, in transitu,† it entitles creditors to interfere with the debtor's disposal of his property to their prejudice, and it is a matter for consideration in taking those ulterior steps which convert the debtor into a legal bankrupt.

SECT. 3.-Bankruptcy.

A person insolvent becomes bankrupt by being imprisoned

As to whom, see below, p. 374.-1 B. C. ii. 163.-+ See above, p. 164. - See below, p. 368,

*

on horning and caption, or on a warrant according to the new form, or, when such a writ of imprisonment is issued against him-by seeking the sanctuary as a protection, fleeing, or absconding, or forcibly defending his person; or, if he be residing in the sanctuary, or abroad, or privileged, or have a personal protection, by a charge of horning, or a charge on an extract in terms of the late act, executed against him, together with either an arrestment not loosed within fifteen days, or a poinding or an adjudication.‡2 A person whose estate is sequestrated is a bankrupt from the date of the first deliverance in the petition for sequestration.§3 Imprisonment on an act of warding, or on a meditatio fuga warrant, will not form an ingredient in notour bankruptcy.*

All classes of persons, married women excepted, may become bankrupt under some one or other of these provisions. It is a matter of question how far a married woman trading on her own account may become bankrupt.5

For the effects of bankruptcy on the deeds of the bankrupt, see below, p. 371. For its effects in equalizing diligence, see Part XIV.

SECT. 4.-Gratuitous and Fraudulent Deeds by Insolvents.

The protection which the law gives to creditors from attempts on the part of insolvent debtors to make over their property to relations, or fraudulently to place it at the disposal of their personal friends, is founded on a statute of the reign of James VI., and the decisions through which it is interpreted. In terms of the act the law declares "all alienations, dispositions, assignations, and translations whatsoever made by the debtor of any of his lands, teinds, reversions, actions, debts, or goods whatsoever to any conjunct or confident person, without true, just, and necessary causes, and without a just price really paid, the same being done after the contraction of lawful debts from true creditors, to have been from the beginning, and to be in all time coming, null and of non avail, force, nor effect, at the instance of the true and just creditor, by way of action, exception, or reply, without farther declarator." For the protection of individuals who may have fairly purchased the property of the debtor

* See below, Part XIV. Chap. V.1 1696, c. 5. 1 & 2 Vict. c. 114, § 35. See Part XIV. Chap. V. § 6.- See as to the different kinds of diligence below, Part XIV.- 54 Geo. III. c. 137, § 1. 1 & 2 Vict. e. 114, § 35.-§ See below, p. 379.-32 x 3 Vict. c. 41, § 25.- See Part XIV. Chap. V. B. C. ii, 169.- Ibid. 166,

from any one to whom it has been so transferred, it is farther enacted that "In case of any of his Majesty's good subjects, no way partaker of the said frauds, have lawfully purchased any of the saids bankrupt's lands or goods by true bargains, for just and competent prices, or in satisfaction of their lawful debts from the interposed person, trusted by the saids dyvours; in that case, the right lawfully acquired by him who is nowise partaker of the fraud, shall not be annulled in manner foresaid, but the receiver of the price of the saids lands, goods, and others from the buyer, shall be holden and obliged to make the same forthcoming to the behoof of the bankrupt's true creditors in payment of their lawful debts."1

In the interpretation of this act it is held, that where a debtor who is insolvent is found to have granted such a gratuitous deed as that condemned by the act, after the debt incurred to the creditor pursuing reduction of it, the insolvency must be presumed to have had existence at the date of the deed, but it is capable of being disproved by evidence of solvency. The term "conjunct persons" applies to near relations. It has been held to extend to uncles, step-sons, and brothers-in-law, but not to uncles-in-law or nephewsin-law.3 The only definition of "confident persons" is that it embraces those connected in business with the debtor, e. g. partners, clerks, agents, &c.4

The conveyances struck at are such as are gratuitous. Where they are not to relations for whom the granter may be under an obligation more or less strong to provide, there will seldom be any difficulty in discovering whether they are onerous and fair, or not; and the chief impediments to the clear interpretation of the act have occurred in cases of family settlements. Where one of the parties to a marriage receives a provision from a relation of the other party, the transaction is held to be onerous, the marriage being the consideration.5 5* A future marriage is, in the general case, an onerous consideration, and so, reasonable provisions in an antenuptial contract will not be reducible by the husband's creditors.6 66 'But, onerous as those rights are, the court will, on the challenge of prior creditors, reduce even an antenuptial provision to a wife granted after insolvency, if it be exorbitant, or if the husband was known to be insolvent."7 A deed after marriage in implement of an obligation in an antenuptial contract is in a similar position; but in volun

3

1 1621, c. 18.- 2 B. C. ii. 183, 193.- Ibid. 187. E. iv. 1, 31. Sir George M'Kenzie on the act 1621, 22.- Ibid.-5 Blackburn v. Oliver, 29th May 1816.—* See above, p. 21.—o E. iv. 1, 33.—7 B. C. ii. 188, 189.

tary provisions after marriage, for which the other party is not presumed to give a consideration, a stricter rule is followed, which limits a provision to the wife to such as may be alimentary.1* Gratuitous provisions granted to

children after the father has contracted debts are in all cases struck at by the statute.2

The creditor who reduces a gratuitous deed achieves no particular advantage to himself over the other creditors, he merely removes a claim or encumbrance on the estate of the insolvent, leaving it open to the diligence of the creditors at large.3

SECT. 5.-Fraudulent Preferences under Act 1621.

By another branch of the act it is provided that if" any of the said dyvours, or their interposed partakers of their fraud, shall make any voluntary payment or right to any person in defraud of the lawful and more timely diligence of another creditor, having served inhibition, or used horning, arrestment, comprising, or other lawful mean duly to affect the dyvour's lands, or goods, or price thereof to his behoof; in that case, the said dyvour or interposed person shall be holden to make the same forthcoming to the creditor, having used his first lawful diligence, who shall likewise be preferred to the con-creditor, who, being posterior to him in diligence, hath obtained payment by the partial favour of the debtor or of his interposed confidant; and shall have good action to recover from the said creditor that which was voluntarily paid in defraud of the pursuer's diligence."4

;

The person entitled to proceed in a reduction in terms of the act, is one who has taken certain steps which would end in an attachment of the property, so conveyed to another creditor. If the property be moveable he must have done diligence affecting the moveables, as poinding or arrestment if it be heritable, the diligence must be such as will attach that species of property, as inhibition or adjudication.5 In the former case, it would appear that a charge either on letters of horning, or in the new form,† will be a sufficient progress in the diligence of poinding. Payments of prior creditors in cash are not challengeable by the act as interpreted in decisions, nor are bargains and sales in the regular

1 B. C. i. 642; ii. 190.-* See above, p. 26.-2 E. iv. 1, 34.-3 B. C. ii. 196. See commentary on the act 1621, in "The Law of Bankruptcy," &c., p. 142, et seq. 1621, c. 18.-5 E. iv. 1, 39. B. C. ii. 200.-+ See Part XIV. Chap. V.- E. iv. 1, 39. 1 & 2 Vict. c. 114, § 35.

course of business, though for the disposal of the subject towards which the creditor's diligence points.1 Deeds which the debtor is legally bound to grant are not struck at.2 The insolvency of the granter at the time of granting the preference, is necessary to a reduction on this as on the other branch of the act.*

SECT. 6.—Fraudulent Preferences under the Act 1696.

The bankruptcy act of 1696 (see above, p. 367), " declares all and whatsoever voluntary dispositions, assignations, or other deeds which shall be found to be made and granted, directly or indirectly, by the foresaid dyvour or bankrupt, either at or after his becoming bankrupt, or in the space of sixty days of before, in favours of his creditor, either for his satisfaction, or farther security, in preference to other creditors, to be void and null."3 The interpretation of the court has confined the right of challenge to those who were creditors at the date of the deed challenged.*

This act strikes at all conveyances of, and securities over heritable property, to a creditor within the excluded period, as well as to the transference of any moveable article of merchandise or other property, either directly, or by the transmission of a bill of lading or other negotiable title.

Money.-Payments in cash of debts due at the time of payment, are not affected by the act; and under the head of cash are included bank-notes and drafts on bankers.

Bill Transactions. In the case of a debtor and creditor living in the same place, if the debtor indorse to the creditor a bill, not as part of a series of transactions which stand against each other in a current account, but as a distinct provision for a specific debt, the transaction will come within the act.

The transmission to a creditor of an acceptance by a third party, avowedly to provide for a debt which the debtor admits that he cannot otherwise meet, and of which the creditor wishes direct payment, is struck at.

The replacement of bills indorsed but not accepted, by bills accepted in consideration of a separate security granted to the acceptor by the debtor, is a transaction struck at by the

act.

When, in the course of transactions between a commercial

1 B. C. ii. 201.-2 Ibid. 202.-* See the Law of Bankruptcy, &c., p. 160. 3 1696, c. 5.-B. C. ii. 208.