And Lord Mansfield, subsequently admitting this to be the rule of law, observed that the remark above quoted was incorrectly reported, and "that the reason why a man becomes a bankrupt, who conveys away all of his property, is that he thereby becomes totally incapable of trading."1 We shall have occasion to refer to this topic again.

§ 40. But where there is a substantial exception out of the debtor's property, such an exception as ought possibly to enable him to carry on his trade with advantage, a convey. ance of his property is not necessarily and by force of law, without reference to extrinsic circumstances showing fraud, an act of bankruptcy.2. And where the conveyance is of the whole property, not merely for an antecedent debt, but also for a present advance of which the debtor really has the advantage, and which he can apply to the purchase of stock or otherwise for his use, it is not necessarily and per se an act of bankruptcy. It should be further remarked, under the law, as it existed previous to 1869, two things were held necessary to constitute a fraudulent preference, first, the transaction was required to be the voluntary and spontaneous act of the debtor from which the desire to prefer was inferred; and secondly, it was required to be done in contemplation of bankruptcy." It is, therefore, clear that a

1 See Reporter's Note to Law v. Skinner, 2 W. Bl. 996.

2 Lomax v. Buxton, L. R. 6 C. P. 107; see Robson's Law of Bankr. (2d ed.) p. 124, and cases cited.

3

Whitwell v. Thompson, 1 Esp. 72; Hutton v. Crutwell, 1 El. & Bl. 15; Brittlestone v. Cook, 6 Id. 296; s. c. 2 Jur. N. S. 758; Harris v. Rickett, 4 H. & W. 1; s. c. 28 L. J. Exch. 197; see also Frazer v. Thompson, 5 Jur. N. S. 669; also, 8. c. on appeal, 4 De G. & J. 659.

4

Brown v. Kempton, 19 L. J. C. P. 169; Edwards v. Glyn, 2 El. & Bl. 20; s. c. 5 Jur. N. S. 1397; see also Smith v. Timms, 1 H. & C. 849; s. c. 9 Jur. N. S. 1285; 32 L. J. Exch. 215; Morgan v. Brundrett, 5 B. & Ad. 296; Pennell v. Heading, 2 F. & F. 744; Graham v. Candy, 3 Id. 206; Kennear v. Johnson, 2 F. & F. 753; Davidson v. Robinson, 3 Jur. N. S. 791; Bills v. Smith, 34 L. J. Q. B. 68; Robson's Law of Bankr. (2d ed.) p. 127.

Morgan v. Brundrett, 5 B. & Ad. 296; Atkinson v. Brindall, 2 Bing. N. C. 225; Abbot v. Burbage, 2 Scott, 656; Strachan v. Barton, 11 Exch. 647; Gibson v. Boutts, 4 M. & G. 169; s. c. 3 Scott, 229; Gibson v. Muskett, 4 M. & G. 160; s. c. 3 Scott N. R. 427; Poland v. Glyn, 4 Bing. 22, n.; Ex parte Simpson, De G. 9; Aldred v. Constable, 4 Q. B. 674; s. c. 7 Jur. 509; Robson's Law of Bankruptcy (2d ed.) p. 128.

general voluntary assignment by an insolvent debtor, permitting preferences, is, and always has been, regarded as an act of bankruptcy, unless it be assented to by all the creditors.

§ 41. Assignments for Equal Benefit of Creditors.Where, however, no preference is given, and the assignment is honestly made for the equal benefit of all the creditors, a more difficult question arises. The English cases have gone to the full extent of declaring such conveyances fraudulent in bankruptcy. "This doctrine," says Lord Henley, "has occasionally met with disapprobation, and the reasons upon which it is founded are by no means satisfactory."

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The first case in which the point was judicially deter mined, was Kettle v. Hammond, before Lord Mansfield at nisi prius, which was an assignment by a trader, to two of his creditors in trust for all the rest. A few years later, in the case of Eckhardt v. Wilson, the general doctrine was considered so clear that it was not argued, and in the early case of Tappenden v. Burgess, Mr. Justice Grose, in delivering the opinion of the court, said, "here the bankrupts have done an act to divest them of all their property, which by all the cases is an act of bankruptcy." And the court relied upon the authority of Bamford v. Baron." A little later Lord Eldon, in Ex parte Bourne, went somewhat more into the question. He said, "I recollect cases in which it was settled upon a singular ground, that an assignment of all the property is an act of bankruptcy, though the direct and immediate object is not to delay, but to satisfy the creditors; but it was held that a trader had not a right by deed to place his property under a distribution different from that ordained by the bankrupt law, and it was carried to this extravagant length, that though the assignment was intend

1 Eden on Bankruptcy, p. 28.

2 Cooke Bank. Law, 100; Eden on Bankruptcy, 29. 38 Term R. 140.

6 2 Term R. 594.

4 East, 220 (1803).

16 Ves. 148 (1809).

2

ed for the benefit of all the creditors, including that one, yet it was an act of bankruptcy." In a previous case, Ex parte Richardson,1 Lord Eldon, without passing upon the question, directly assumed the assignment to be an act of bankruptcy, and in later cases he adhered to the authority by which he had declared himself bound in Ex parte Bourne. The rule thus established has been frequently applied by the British courts, and although attempts have been made on the part of the legislature to relax it, none have fully succeeded, and it has now become an integral part of the English bankrupt law. The reasons adduced in support of this doctrine are substantially as follows:

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First, that announced by Lord Eldon, that a debtor has no right to place his property under a distribution different from that ordained by the bankrupt law. This objection lies not against the ultimate distribution effected by the assignment, but against the means employed in effecting it, assuming that the creditors have a legal right in cases of insolvency, to the privileges and methods provided by the bankrupt act, and to the assistance and protection of the bankrupt court in the distribution of the insolvent's estate.

The second is that advanced by Lord Mansfield, that by such a disposition of his property a trader deprives himself of the power of carrying on his trade.

§ 42. This doctrine, as we have seen, arose from judicial construction of the language of the statute 1 Jac. I, c. 17.7

1 14 Ves. 184 (1807).

2 Ex parte Smith, 1 Ves. & B. 518 (1813); Dutton v. Morrison, 17 Ves. 199; Ex parte Cawkwell, 19 Ves. 234.

* Linden v. Sharpe, 6 M. & G. 895; Stewart v. Moody, 1 C., M. & R. 777 ; Ex parte Wensley, 1 De G., J. & S. 273; Turner v. Hardcastle, 11 C. B. 704; Botcherly v. Lancaster, 3 N. & M. 383; Smith v. Timms, 7 Jur. N. S. 1015; Sperritt v. Willows, 13 W. R. 329; Ex parte Zwelchenbart, 3 M., D. & D. 671; Porter v. Walker, 1 M. & G. 686; Smith v. Cannan, 2 El. & Bl. 35.

'See Lord Henley, Eden on Bankruptcy, p. 31.

* Lord Chan. Westbury, in Ex parte Morgan in re Woodhouse, 32 L. J. Bank. 15.

7

Bankrupt Act, 1869, 32 & 33 Vic. 71, § 6.

* Mr. Justice Montague Smith, in Lomax v. Buxton, L. R. 6 C. P. 115.

When the words of that statute were altered by 6 Geo. IV, c. 16, from these, "with intent, or whereby his creditors may be defeated, &c.," to these, " with intent to defeat or delay his creditors, &c.," making the phraseology of the statute conform more nearly to that of 13 Eliz. c. 5, it was contended, in the case of Stewart v. Moody,' that though the former act might warrant the construction put upon it in cases where creditors were in fact delayed, though such was not the intention of the parties, yet in the latter act it was open to contend that the intent to defeat or delay the creditors was requisite and material to constitute an act of bankruptcy. To this Baron Parke replied, that the latter statute was the same in effect as the former, only more concise, and that the latter act was not intended to alter the former law; and he adds, "it has been clearly settled that if the necessary consequence of a man's acts is to delay his creditors, he must be taken to intend it;" but this answer hardly meets the force of the contention.

It had been well settled under 13 Eliz. c. 5, that a general assignment for the equal benefit of all creditors, honestly made, does not delay or defraud creditors within the meaning of that statute, and as a consequence no fraudulent intent on the part of the debtor could be presumed from the execution of such a conveyance. When the language of the bankrupt act, therefore, was made to conform to that of 13 Eliz. c. 5, why should a fraudulent intent be assumed under the language of the bankrupt act, when no such intent could be assumed under similar language in the statute of Eliza beth? No satisfactory answer to this question was then given, nor has any since been suggested.

1 C., M. & R. 777.

8

' Pickstock v. Lyster, 3 M. & S. 375; and see ante, p. 23.

'Lord Justice Mellish, in Ex parte Luckes in re Wood, 36 L. T. Chan. 117, in commenting upon the express reference to voluntary assignments contained in the 6th section of the act of 1869, observes: "Now I agree that the reason why that particular act of bankruptcy has been separated from the act of bankruptcy respecting fraudulent conveyances and transfers, in which it is included in all former acts, is this, that, although it was an undoubted rule of law that such a transfer or conveyance was to be deemed to be fraudulent, yet it was really absurd

§ 43. Exemption of Assignments from Operation of Act. -The provisions of the acts of 1849 and 1861, protecting general assignments for the benefit of creditors from the operation of those acts, upon compliance with the statutory regulations, have not been considered as altering the law making such assignments fraudulent within the policy of the bankruptcy system, except upon strict compliance with the terms imposed.1

When the bankruptcy system was extended to nontraders as well as traders, the argument that an assignment by a trader of all his estate was an act of bankruptcy because it prevented him from carrying on his trade, was applicable to a part only of those persons amenable to the act, for it might well be that an insolvent non-trader might be able to carry on his avocation, although he had executed such an assignment.2

The special provisions of these acts referred to were undoubtedly intended to relax the severity of the rule in reference to the execution of assignments by creditors ratably.

Lord Westbury, in commenting upon these provisions, remarked, "it was the object of the legislature in passing the 192d section of the bankruptcy act of 1861, and the seven or eight subsequent sections, to establish and give security to a private administration of an insolvent estate against process at common law, and also against proceedings in bankruptcy."

§ 44. General Grounds of English Rule.-—At the time of the passage by Congress of the bankrupt act of March 2,

to call it fraudulent. It had no taint of fraud at all about it in the great majority of cases, and therefore it was for the sake of making the language of the act rational, and not for the sake of altering the law-for it left the law exactly as it was that the act of bankruptcy comprised in the first subsection of the 6th section has been separated from the other acts of bankruptcy with which it was formerly joined, namely, from the fraudulent conveyances and transfers, and therefore the words 'with intent to defeat or delay his creditors' have been left out."

Ex parte Alsop in re Rees, 1 De G., J. & J. 289; Ex parte Morgan in re Woodhouse, 32 L. Ĵ. Bank. 15; Ex parte Rawlings, Ib. 27; Ex parte Godden in re Shettle, Ib. 37; Ex parte Spyer, Ib. 63; Dell v. King, 33 L. J. Exch. 47.

2 See Ex parte Luckes, 26 L. T. N. S. 113; In re Wood, 7 L. J. Chan. 302. * Ex parte Morgan in re Woodhouse, supra.