copartner, the solvent partner must prove such debt under the fiat or it will be barred by the bankrupt's certificate (a). For, by the 6 Geo. 4, c. 16, s. 52, " any person who, at the issuing the commission, (fiat), shall be surety or liable for any debt of the bankrupt, if he shall have paid the debt, or any part thereof, in discharge of the whole debt, (although he may have paid the same after the commission issued), shall be entitled to prove his demand as a debt under the commission." On the construction of the statute, in this respect, the case of Wood v. Dodgson (b) was decided. Upon the dissolution of partnership between three partners, two of the three assigned to the other all their shares in the partnership debts and effects, and the other covenanted to pay all debts then due from the partnership, and to indemnify the two from the payment of the same, and from all actions and costs by reason of the non-payment of the same. The remaining partner became a bankrupt, and a commission issued against him, under which he obtained his certificate. Afterwards, the holder of a bill accepted by the three partners, and due before the dissolution of the partnership, sued the two, and they were obliged to pay the bill. It was held, that the certificate might be pleaded in discharge of an action brought by the two against the other, upon his covenant.

It may be deduced from the case of Wood v. Dodgson, what indeed has been decided by a subsequent case (c), that the certificate under a separate bankruptcy is a bar to all actions for contribution by the bankrupt's copartners: and, generally, the certificate under a joint or separate bankruptcy discharges the bankrupt from all his debts, both joint and separate (d).

A bankrupt partner's certificate is no bar to an action against his copartner, for, by the 6 Geo. 4, c. 16, s. 121, no such certificate shall release or discharge any person who was partner with such bankrupt at the time of his bankruptcy, who was then jointly bound, or had made any joint contract with such

(a) But he cannot do so in competition with creditors. See post, Chap. 2, sect. 9.

(b) 2 Mau. & Sel. 195.

(c) Afflalo v. Fourdrinier, 6 Bing. 306; 3 Moore & P. 743.

(d) Horsey's case, 3 P. Wms. 23; Ex parte Yale, Id. 24, n.; Twiss v. Massey, 1 Atk. 67; Howard v. Poole, Davies, 451, 2 Str. 995; Wickes v. Strahan, 2 Str. 1143. But see 2 Mau. & Sel. 26.

bankrupt (a). In the same manner, signing the certificate of the surviving partner does not release the estate of the deceased partner (b).

VIII. 1. We shall now proceed to make a few observations on the effect of the bankruptcy of one partner on the dealings of the firm. And first, as to its effect upon the acts of the solvent partner.

The acts of a solvent partner bond fide, and for a valuable consideration, have been at all times held valid, notwithstanding a previous secret act of bankruptcy committed by his copartner. On this principle, it was held, in Fox v. Hanbury (c), that consignments made by a solvent partner, after a secret act of bankruptcy committed by his copartner, for monies advanced to the firm by the consignee, were good, supposing such consignments to have been made without the least colour or mixture of fraud. In delivering the judgment of the Court in this case, Lord Mansfield said, that, though the statutes then relating to bankrupts made an entire, not a partial, avoidance of the bankrupt's acts, as well in respect of his partner's moiety, as his own, yet no case had been cited, where a secret act of bankruptcy by one partner had been held to avoid an honest conveyance of partnership effects by the other. Each had a power, singly, to dispose of the whole of the partnership effects.

In more modern cases it has been held, that the solvent partner, even with notice of an act of bankruptcy committed by his copartner, may satisfy the partnership creditor out of the joint funds in his hands, provided the claim were consummate at the time of the bankruptcy. For in this case the solvent partner is in the situation of one winding up the partnership affairs. In Harvey v. Crickett (d), one of the partners, bankers, having become bankrupt, the defendants, who were holders of their notes, obtained part payment of them out of the funds of the partners which were in the hands of their London agents. For the remainder of the debt, the defendants

(a) 6 Geo. 4, c. 16, s. 121; Ex parte Bolton, Buck, 13; Heath v. Hall, 4 Taunt. 326.

(b) Sleech's case, 1 Mer. 570. See

Browne v. Carr, 7 Bing. 508.

(c) Cowp. 445. See De Tastet v. Carroll, 1 Stark. 85.

(d) 5 Mau. & Sel. 336.

took from the solvent partner, who had full notice of the bankruptcy, and had communicated that fact to the defendants, a bill drawn by W., a debtor of the firm, upon third persons, payable to the solvent partner, or order, and by him indorsed and delivered to the defendants. The solvent partner having afterwards become bankrupt, the assignees under a joint commission against the two brought their action against the defendants for the proceeds of the notes paid off, and of the bill; but the plaintiffs failed in their suit. Lord Ellenborough said, that, for future purposes, the bankruptcy of one partner might operate as a dissolution, so as to prevent the solvent partner from dealing with the partnership property as if it continued; but most certainly he had a lien on the joint funds in his hands, in respect of all claims which were consummate at the time of the bankruptcy. In this case the solvent partner had applied part of those proceeds in satisfaction of such a claim; and to take the money out of his hands, or those of the defendants, might be to his prejudice, before the account was taken between the partners. Bayley, J., likewise observed, that if this action was maintainable, the consequence would be, that after an act of bankruptcy committed by one partner, the partnership house must immediately be closed. "If," said the learned Judge, "several persons enter into partnership, either for a definite or an indefinite time, each partner is at liberty to apply the joint funds in payment of the partnership debts; and each has a lien on those funds for his own indemnity, limited to their being applied to the payment of partnership debts. When one of several partners becomes bankrupt, he puts himself by that act out of the partnership, and ceases to have any further control over the partnership property; the whole of his rights pass to his assignees. But this does not prevent the remaining partners from exercising the control which rests with them over the partnership property, to take care that it is duly applied in liquidation of the partnership debts." Abbott, J., likewise observed, that if a solvent partner is not at liberty, after the bankruptcy of one partner, to apply the partnership funds to the discharge of partnership debts, he may be ruined in the midst of abundance of property capable of paying all the debts; and the creditors also must wait until such time as assignees are chosen, and it is their pleasure to make distribution.

The case of Harvey v. Crickett has been recognised and confirmed by more recent cases. In that of Woodbridge v. Swann (a), one of two partners having become bankrupt, the solvent partner thinking the firm capable of paying its debts, continued the business, and paid partnership money into a banker's, to be applied in discharge of running bills of the firm, payable at the bank. Afterwards, the solvent partner became bankrupt, and his assignees, together with those of the other partner, brought an action of assumpsit against the bankers to recover the money so paid. In support of this action, it was contended that the case of Harvey v. Crickett had been in effect overruled by Wait's case (b), in which Lord Eldon decided, that joint creditors who had taken joint effects in execution, subsequent to an act of bankruptcy committed by one of the partners, could not retain those effects against the assignees under a separate commission. But the Court of King's Bench, per Denman, C. J., overruled this argument, and decided in favour of the defendants, at the same time expressing an opinion, that the authority of Harvey v. Crickett, and that class of cases, was left untouched by Lord Eldon's judgment in re Wait; and upon reference to the lastmentioned case, it will be seen that it depended on artificial considerations, which seem inapplicable to Harvey v. Crickett.

In the case of Smith v. Oriel (c), which long preceded that of Harvey v. Crickett, the creditor of a firm was allowed to retain against the assignees of a bankrupt partner goods which had been delivered to him by the solvent partner in discharge of the debt, after the bankruptcy of the copartner. Even there, as Abbott, J., observed, it is not stated negatively, that the solvent partner had not notice; on the contrary, it is rather to be inferred that he had, as the case states that the commission against the bankrupt partner had issued before the transfer was made. But it seems clear, that the solvent partner's knowledge of the fact makes no difference: the legal right cannot result from the absence of knowledge.

Neither can notice to the creditor of the bankruptcy of one partner affect transactions of this nature, where it is clear that no fraudulent preference was intended. In Harvey v. Crickett,

(a) 4 B. & Ad. 633; and see Ex parte Robinson, 1 Mont. & Ayr. 18; infra, p. 585.

(b) Post, p. 592.
(c) 1 East, 368.

one of the partners became bankrupt on the 17th May. Before the 22nd the defendants had notice that a considerable number of the bankrupt's notes had been refused payment, and on that day they were informed by a son of K., the solvent partner, that H., the other partner, had absconded, but that his father was perfectly solvent, unless transactions of which he was ignorant came to light. The arrangement respecting the bill (a) was entered into on the same day; and K.'s son, who acted for him on this occasion, dictated the form of the bill. But the reason for making it payable to K. alone was, because he thought that every thing devolved on him upon H.'s absconding. Upon these facts the Judges held that there was a bond fide payment, and no fraud; Abbott, J., said, that if this power had been exercised with a view of giving a fraudulent preference, it would have led to a different conclusion; but fraud was not stated and could not be intended. As far as any intendment could be made, he should infer the contrary; for it seemed that K., supposing he was of ability to discharge all the partnership debts, went on as long as he could, until he found his hopes disappointed. And Holroyd, J., observed, that it was not stated that it was in the contemplation of K., or of the defendants, that K. would become a bankrupt, which would have been a material fact to distinguish this from the other cases.

And in Ex parte Robinson (b), which was decided in a great measure on the authority of Harvey v. Crickett, both the creditor and the solvent partner had knowledge of the bankruptcy of the copartner. There the creditor, who was under acceptances for the firm of H. & W., as a security for their acceptances, drew three bills of exchange on the firm, which were accepted by W., the solvent partner, and delivered by him to the creditor, who indorsed them over for value to a person who had no notice of the bankruptcy. Upon the subsequent bankruptcy of the solvent partner, the indorsee petitioned for liberty to prove against the joint estate, and Lord Brougham, C., allowed the proof. Now in this case it was not absolutely necessary to adopt the decision in Harvey v. Crickett, because the indorsee, under the circumstances before stated, had a title of

(a) Ante, p. 583.

(b) 1 Mont. & Ayrt. 18; overruling Ex parte Ellis, Mont. & B. 249.