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Martin and others, assignees of EdwARD ROBARÍS, a bankrupt, v. Thomas Pewtress and JOSIAH RO BARTS.
NIIS was an action of trover brought by the assignees Sale to one of a bankrupt, for large quantities of goods of the Creditor to
bankrupt, to the amount of £19,562. 17s. 8d. cheat others void.
The cause was tried before Lord MANSFIELD, by a [See 3 Brown special jury at Guildhall, at the sittings after the last 503, 2 H, BI. Trinity Torm: and a verdict was given for the plaintiffs, )
for the above sum.
The defendants had obtained a rule to shew cause why, upon payment of costs, this verdict. should not be set aside, ani a new trial bad.
Upon shewing cause now, Lord- MANSFIELD reported the evidence.
The defendants were bankers, and large éreditors of the bankrupt. Edward Hobarts, the bankrupt, is the brother of the defendant Josiah Robarts.
The value of the goods for wlrich this action is brought, got into the hands of the defendants in the following manner. Edward Robarts bought goods upon credit, from several tradesmen who did not suspect his circumstances. The defendants employed agents to buy these goods from the bankrupt. Particularly, one Nathaniel Sweet, who had been a bankrupt, and was then insolvent, bought, between March 1767 and June 1768, (when Edward Robarts became bankrupt,) to the amount of £7709 at prime cost : for which, he gave his notes, payable at a future day. These notes were paid in to the defendants : and Sweet sold the goods for the use of the defendants, and accounted with them for the profits, as their agents.
The defendants sent another man, one Moses. Birch, to buy goods of the bankrupt, to the amount of £2169 15s. 11d. prime cost; and furnished him with banknotes to that amount, to pay for them. He paid these
notes to Edward Robarts the bankrupt; who changed ( 2478 j them, at the Bank, for others; which he paid in to the
defendants. Birch sold the goods, for the use of the defendants; and paid them the produce : and in like manner, as to all the rest. The price, at prime cost, was furnished in paper, by the defendants, to the agent; received by Edward Robarts; and returned to the defendants; or notes given by the agent, which notes Edward Robarts paid in to the defendants and discounted with
them; and the goods were all sold for the benefit of the
1769. defendants; and the money accounted for, to them, by the nominal and apparent purchasers.
MARTIN This was a gross fraud upon the creditors of the bank
PEWTRESS, rupt; and a cheat, by covin and collusion between him and the defendants.
But I don't think it amounted to an act of bankruptcy; because there was no fraudulent deed or conveyance.
I left it to the jury, to consider « whether it was a fair
sale, as between the bankers and the bankrupt; or a “cheat, to defraud innocent persons from whom the "goods were bought.”
This is an action of trover; in which the plaintiff's could not recover, unless the property was in the Bankrupt. The jury have considered this as no sale, but a void transaction. Therefore it is void on both sides : and the bankrupt has his goods. But the defendants have no right to set off the debts, so as to have the benefit of their fraud.
The bankrupt never dealt for more than £8000 a year, till this transaction. Now, his dealings were.encreased ta £28,000 in eighteen months. So that his debts, which were before only about £6000 were now encreased to £23,000.
The counsel for the plaintiffs (Mr. Thurlow, Dir. Serjeant Glynn, and Mr. Mansfield,) argued that this was as clear a fraud as could be: and therefore the defen dants ought not to have any advantage from it; much. less, the whole effect of it. The possession which they, obtained of these goods was tertious, criminal, and unlawful. Therefore tlwy had no title to them: and this action lies, and no equity car be pretended against it. It was a conveyance of them without any valuable consideration : it amounted to an act of bankruntcy. It was a combination to give an iniquitous and illegal prie ority to a particular creditor. The whole transaction was fraudulent and coid. It must have been in contemplation of an approaching bankruptcy; anu tended to induce a general belief that this bankrupt was engaged “ in an extensive trade;" when, in fact, the goods were (Ant. 2240] not sold at all, but sent in to one creditor, in preference to the rest; and to hieep up the bankrupt's creuit till that
[ 2179 ] creditor should be paid. Edward Robarts actually became bankrupt in June 1768. The defendants came to the possession of the goods by tort: the property remained in the bankrupt. The sale was merely colourable: it was a void coniract. Therefore they have no right to set off the monies ad,
vanced, as a debt due from the bankrupt : for, that would
give them the full effect of their fraud. MARTIN Though the bankrupt himself, being party to the fraud,
could not have sustained this action; yet his assignees PEWTRESS, may sustain it. All bis property is transferred to them.
Therefore this action of 'trover lies, and it is the proper action; and the jury may assess damages. No other verdict could have been given.
The counsel for tbe defendants, who prayed a new trial, (Mr. Dunning Solicitor - General, Mr. Serjeant Davy, Mş. Şerjeant Burland, and Mr. Cox,) contended that it would not be just, that the defendants should pay the whole sum given by the verdict ; and, on the other hand, only come in as creditors for part of it.
They contended also, " that trover is not the proper « action,"
They argued, that either the property of these goods continued in the original owners, and never vested in the bankrupt ; (for if fraudulent, the fraud would have affected the whole transiction ;) or else, it was transferred by him to the defendants. In neither case, could his assignces, they said, maintain trover for them.
In the former case, the original owners were intitled to the action : in the latter, the bankrupt might transfer these goods to the defendants or to whom he pleased, either with or without consideration, at any time before an act of hankruptcy was committed. The assignees have no right to recover them, as standing in the place of the bankrupt : for, the transaction is clearly good, as against him.
If these goods had been paid for in specie, that cash in specie would have been paid into the shop of the defendants, just as the notes were. So that this circumstance makes no difference,
The defendants did not apprehend the bankrupt to be insolvent, or in danger of insolvency, at the time of this
transaction. [ 2180 ] Therefore no action of trover will lie : and it is the
more improper ; because there can be no set-off in an action of trover.
Lord MANSFIELD-the two grounds of this motion are-Ist, that the jury have done wrong in finding the transaction to be a fraud: 2dly, that supposing the transaction to be fraudulent, yet the plaintiffs ought to have been nonsuited. And if that be so, a new trial ought to be granted ; in order that they may have the benefit of à nonsuit, upon a new trial.
As to the fraud–The fraudulent design and intention must depend upon circumstances.
In the present case, 'tis as clear as the Sun, that the 1769. whole was a wicked scheme, concerted between the defendants and the bankrupt Edward Robarts, to keep up MARTIN his credit, to enable him to get goods which were to be employed to satisfy and discharge the debt due to the PEWTRESS. defendants.
One of them is brother to the bankrupt. They must have known is insolvency : for, to their knowledge, the goods were sold at prime cost. The bankers did not deal in such goods. Had they bought them openly and in their own names, and applied the money to sink the debt due to them, the neighbourhood would have been imme, diately alarmed, They knew that the persons who sold their goods upon credit, to the bankrupt, would never
But I did not think it amounted to an act of bank, ruptcy, for the reason I have given , and left it to the jury on the point of fraud affecting and annulling the whole transaction.
I dictated my apprehension of the consequences of this verdict, in taking the account before the commissioners, to the following effect.
That in consequence of the verdict, the notes given by Sweet and the other purchasers of the goods, and “ delivered or paid by the bankrupt to the defendants, “ are not to be considered or imputed as any payments at “all, being totally void. And if any money was paid " by the defendants to the bankrupt, as in consideration “ of such goods so fraqdulently sold, such money is re“ ceived by the bankrupt without any consideration; " and therefore to the use of the defendants; and, conx sequently, to be set off under the commission."
His LordShip held the action of trover to be main. [ 2481 ] tainable. A trader can't alter the property of goods, by a criminal fraudulent transaction, to the prejudice of his creditors.
Mr. Justice YATES — The general question is, “ whether an action of traver is, in this case, maintains « able.'
One objection to it is, “ that the defendants are pre, " cluded from a set-off."
But this would be an objection against alt actions of trover: for, there can be no set-off, in any action of trover.
An action of traver must be founded on property.
The question then is whether this transaction altered " the property, with respect to the assignees.” If fraudulent, it does not alter the property.
V. PEWI RESS,
[ 2482 ]
The assignees do not stand in the place of the bankrupt, in every respect : particularly, where the act of bankruptcy has been fraudulent.
It must be 'inquired therefore, “whether this was a “ sale and a transfer of the property."
The jury have considered it as not so: and I think they were well warranted in such thrir notion of it.
It is said " that the bankrupt, before se had com. "mitted any act of bankruptcy, might have delivered 46 the goods, or paid the money to whom he pleased.”
But bere he has not done so; but has pursued a method which is fraudulent, and which is calculated to cheat innocent persons : and the defendants were pricy to it and assisting to keep up the credit of a sinking man, under false appearances:
This cannot be considered as a sale. The defendants are not linen-drapers ; they had no warehouses; they don't even appear in the matter. It is a scheme to save themselves, and to cheat innocent persons--a fraudulent design. This action of trover is a proper remedy to relieve the creditors.
He therefore concurred in opinion, with Lord MANS FIELD,
Mr. Justice ASTON—The question is " whether the property was changed by such a sale as this."
He held that it was not. And he was of opinion, that though this was not an act of bankruptcy in itself; yet being a scheme concerted, at the eve of a bankruptcy, to cheat innocent persons, in order to secure particular creditors, it is such a fraud as shall render the sale roid.
Then he mentioned several circumstances which shewed the fraudulent combination, and the contrivance of it in order to avoid the appearance of an express preference, at the expence of innocent persons. He said, the jury could not have found otherwise than they have done, unless they had been out of their senses.
The question " whether this action of trover lies," depends upon the evidence: and that shews, “ that the
property was never allered.”
Therefore the verdict is very right; the action is well brought; and it is the only action that could be brought. Mr. Justice WILLES concurred.
Per Cur’ unanimously