Scottish Court of Session Decisions

Subject_1 BANKRUPT.
Subject_2 DIVISION III.

Decisions upon the act 5th Parliament 1696, declaring Notour Bankrupts.
Subject_3 SECT. VIII.

Effect of Reduction on the act of 1696.

Smith
v.
Taylor

1728. July.
Case No. No 228.

Found in conformity with the above.

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In this case, mentioned formerly, No 196. p. 1128. the creditor who had received goods from the bankrupt had done no diligence; and therefore, in conformity with the decision immediately above, while he, (the defender in a reduction,) had to restore the goods, he was not allowed to come in pari passu with creditors who had done diligence.

Fol. Dic. v. 1. p. 84.

*** In support of this reduction, it was pleaded, that the intention of the act 1696, was, to put it out of the power of a debtor, in a state of bankruptcy, to prefer favourite creditors, by transferring his effects to them; and to leave every thing for the operation of diligence. If the transfer of moveables be not included in this provision, the law is imperfect. But, as the remedy of the law ought to be universal, so the terms of the statute bear, “All and whatsoever dispositions, assignations, and other deeds,” &c. i. e. dispositions to lands; assignations to bonds and personal rights; and other deeds whatsoever. This seems intended to comprehend all the indefinite ways of transferring moveables, the only kind of alienation not included under the other two; and this view of the law, is supported by the case of Forbes against Forbes, No 193. p. 1124.

Answered, Deeds can signify only written conveyances; and, a general expression, subjoined to particulars, must be regulated in its interpretation from those particulars: It never could be the intention of the law, to include the delivery of moveables. This would render trade unsafe, and stop the commerce of moveables. Moveables pass from hand to hand; and no man need inquire further, than, whether he obtained them in a fair way of delivery: In other cases, a man must know the condition of the person he contracts with. The present case is precisely similar to that of a purchase fairly made from a bankrupt by a creditor, for money paid over, and that money immediately returned, in payment of a prior debt. Neither the sale, nor the payment, in such a case, would be objectionable. If there were a fraudulent design, it would be easy to make a third party purchase. If the creditor should act entirely bona fide, it would be impossible to suppose the act should annul a sale, to reach such a creditor. Both the Roman law and ours agree in reducing fraudulent transactions: But the presumptive fraud, extended by statute to written deeds, as being deeds of importance, is not applicable to the transmission of moveables, meant to pass freely from hand to hand. The decision, Forbes against Forbes, alluded to, is, indeed, unfavourable to this argument; but it is single, and against the spirit of that of Tweedie, No 129, p. 1037. If, at any rate, the act be thought to apply; it ought certainly only to introduce an equality; that the creditor, who receives the goods, may be ranked pari passu with the creditor who challenges.

Replied, In our law, facts and deeds are reciprocal terms: The transference here objected to is an alienation, and a fact or deed, whether reduced to writing or not. No injury can happen to commerce; a fair purchaser, for a price, cannot be affected by the statute. Indorsations to bills are most of all favoured by commerce; yet they fall under the law, when granted for a prior debt. A sale, such as figured, intended to pay the creditor's debt, would be reducible as simulate. If the partial deed of the bankrupt be set aside, there is no foundation upon which the receiver of the goods can stand, in opposition to the pursuer, who has done legal diligence. The goods must be understood to remain in bonis of the bankrupt, subject to such diligence as has been led against them.

See Session-papers in Advocates' Library.