CASES

ARGUED AND DETERMINED

IN THE

COURT OF KING'S BENCH,

IN

Bilary Cerm,

IN THE THIRD YEAR OF THE REIGN OF WILLIAM IV.

CARVALHO and Others, Assignees of the Estate and Effects of A. P. FORTUNATO, a Bankrupt, v. BURN and Another.

A., who resided at Liverpool, was in the habit of making consignments of goods to B., his agent in South America, for sale, on the faith of and against which consignments, A. drew bills proportioned to their amount, to be paid by the agent out of the proceeds; and the bills were negotiated by the indorsements of C., A.'s correspondent in London. Some of the bills so indorsed were refused acceptance by the agent. C., on receiving information that they had been so dishonoured, requested that A. would order his agent, in case he did not pay his, A.'s drafts, immediately to hand over to C.'s agent such property as he had of A.'s, of an equivalent value to the bills that should not be paid by him. A. agreed to do so, but became bankrupt before his order to transfer the goods reached South America:

Held, that the bargain between A. and C. did not operate as a legal or equitable assignment of the property in A.'s goods, held by B., his agent, but that they remained the property of A. at the time of his bankruptcy, and passed to his assignees.

TROVER. Plea, not guilty. At the trial before Parke, J., at the Lancaster Spring assizes, 1831, the jury found a verdict for the plaintiff, with 20497. damages, subject to the opinion of this Court on the following case:

*A. P. Fortunato, in the year 1829, and for some time previously, was a merchant in Liverpool.. He committed an act of bankruptcy on the [383 20th of May, 1829, upon which a commission of bankruptcy was duly issued against him, bearing date the 23d of June, 1829; and under which the plaintiffs were duly appointed assignees. The bankrupt, for some years before his bankruptcy, had been in the habit of making large consignments of cotton goods, belonging to himself, to one Rego, his agent at Bahia in South America, for sale there on his, the bankrupt's, account. The course of business was, and had been, for many years, for the bankrupt to consign goods to Rego, on the faith of, and against which consignments the bankrupt drew bills proportioned to the amount of those consignments, to be paid by Rego out of the proceeds. The bankrupt was in the habit of procuring the bills so drawn to be negociated in London by the indorsement of the defendants, his correspondents in London, who were merchants, and who received for so doing the customary brokerage.

In the years, 1828 and 1829, the bankrupt had made such consignments to Rego at Bahia by eight different vessels. Between the 29th of November 1828, and the 16th of March 1829 inclusive, the bankrupt drew and negociated bills so drawn, and indorsed as above stated, to the amount of 38007., and received the value from the defendants. All those bills were dishonoured by Rego, and were afterwards accepted and taken up by Vogeler, the defendants' agent at Bahia, for their honour. Goods had been consigned by the bankrupt to Rego at Bahia to an amount which authorized the bankrupt to draw to the extent of 38007., *and insurances were effected on such goods by the defendants under the directions of the bankrupt. The bankrupt received due notice of the dishonor of all the bills.

*3841

On the 23d of March, 1829, the defendants received notice of the dishonour of the bills drawn in November, and, on the same day, wrote to the bankrupt the letter following:-"It is with the greatest concern we have to inform you, that we have this day received advices from Bahia, that Mr. A. D. C. Rego had refused to accept your draft on him on the 29th of November for 5007., which intelligence, as you may well conceive, has caused us no small degree of surprise and mortification, and particularly as we cannot but be apprehensive that the same unlooked for fate may likewise await your subsequent drafts on him. We have, therefore, most earnestly to request that you will not lose one moment in putting Mr. Rego in such a situation as to enable him to pay your drafts ; and that you will also resort to the necessary means to furnish us with funds sufficient to reimburse us for the amount of any of your drafts that may come back to us protested for non-payment, whenever you are aware of such being the case." On the 27th of March, 1829, the defendants received from the bankrupt the following letter, dated the 25th of March, 1829:-"The subject of your favour of the 23d grieves me most bitterly, especially at the present time, when I am quite unprepared to act as it is both my wish and my duty; therefore I request you to send back the protested drafts to your agent in Bahia to have them accepted by Mr. Rego, allowing him an extension of the time to liquidate, as, by this mode, you only will incur the inconvenience of delay, and I will give instructions to Mr. Rego to settle with your agent as the demands arise from the said bills."

*385]

On the 4th of April, 1829, the defendants wrote to the bankrupt the letter following:-"We are duly favoured with your letter of the 23d ultimo, and in reply thereto, we beg to observe, that the bills Mr. Rego refused to accept have not yet been returned to us, as it would have been quite irregular to have returned them merely for want of acceptance; but in case of non-payment on the days on which they became due, they are sure to be sent back with the necessary protests; and it is quite impossible for us or our agents to grant any extension of time, as we are not the holders of the bills, with whom alone rests the power of granting such accommodation. As indorsers of the bills, they will of course come back upon us first; however, we most fervently hope that such an unpleasant even will not take place, and that Mr. Rego will pay them. We have too high an opinion of your honour to suppose for a moment that you would have drawn these bills without having the means necessary for their discharge in the hands of Mr. Rego, and therefore we most earnestly request that you will write to Mr. Rego by the first vessel with orders that in case he does not pay your drafts, he will immediately hand over such property as he may have of yours, of an equivalent value to the bills not paid by him, to our agent Mr. Vogeler of Bahia, whom we have requested to pay the bills for our house." On the 11th of April, 1829 the defendants received from the bankrupt the letter following, dated the 9th:-"Agreeably to your injunctions, I will write to Mr. Rego, per brig Wavertree, to sail on the 12th of this month, directing him to *386] hand over to Mr. Vogeler *property of mine in his hands to cover the amount of bills that eventually may not be paid; I say eventually, because I do still hope that some of them will be accepted; for the cause of Mr.

Rego not having done so, was the impossibility of realizing and collecting debts. I beg to assure you that I will do all that is due of me to secure your property, and you shall not be sufferers in the least by this unfortunate transaction beyond some delay." On the 11th of April, 1829, the bankrupt wrote to the said Rego at Bahia the letter following:-"I have engaged and made promise to Burn and Co. that you shall pass into the hands of their agent in your city, Mr. Vogeler, all the property which might exist in your hands for my account. You will arrange with that gentleman the mode in which this order may be carried into effect, with this understanding, that it is essential that the whole be done under perfect secrecy, for which I shall consider myself as very much obliged by you. It appears to me that the best plan would be to pay him the liquidated amounts as fast as the same are received." This letter reached Rego in June, 1829, and he on the 11th of that month wrote to the defendants as follows:"The reason which obliged me to refuse acceptance to the bills which Mr. Fortunato drew upon me on the 29th of November last and subsequent months, was the stagnation of a great part of the goods which he consigned to me, and of which there still exists a great part in my possession, which I will deliver to Mr. Vogeler in consequence of the order to do so which I have received from him (Mr. Fortunato), which delivery I intend effecting by the end of the current month." On the 15th of July, 1829, Rego wrote and sent to the *defendants a letter containing the following statement:-"The present has [387 for its sole object the informing you that on the 30th ultimo I placed at the disposal of Mr. Vogeler 36251. 2d. in goods belonging to Mr. Fortunato." On the 30th of June 1829, Rego did in fact hand over to the agent of the defendants at Bahia the goods mentioned in the declaration, being part of the goods consigned for sale by the bankrupt to Rego as before mentioned, and the agent afterwards, and before the commencement of this action, sold the same by the direction of, and for the defendants, and paid them the proceeds.

The question for the opinion of the Court was, whether the plaintiffs were entitled to recover the value of the goods sold by the agent of the defendants? The case was argued in last Trinity term.

Crompton for the plaintiffs. The assinees of Fortunato are entitled to recover the value of the goods which were transferred by his agent to the defendants after he had committed an act of bankruptcy. The onus of shewing that they do not vest in the assignees lies on the defendants, to whom they were transferred after an act of bankruptcy; prima facie they passed by the assignment to the plaintiffs. It will be said that there was an equitable transfer of the property to the defendants before the bankruptcy, and that the letters are evidence of such transfer; they, however, contain nothing more than a promise by the bankrupt to pawn, not any specific property, but some undefined portion of goods to be afterwards selected. Now it has been held in equity, that a general covenant to settle lands on a wife of the value of 607. per annum, without mentioning any lands in certain, does not create a specific lien, Freemoult v. Dedire, 1 Peere W. 429. So where A., having borrowed 3007. of J. L., by his [*388 note of hand promised to pay to J. L. the sum on demand and to give him a security by mortgage of lands for the same when required, and A., at the time, had no lands nor any real estate, except an advowson and some tithes, and died about a month afterwards; J. L. insisted that this debt was by the said note made a charge on the only real estate which A. had the power of charging, viz. the advowson and tithes but it was held this case could not be distinguished from Freemoult v. Dedire, and that J. L. was only a simple contract creditor, Williams v. Lucas, Ibid. 430, note (1). In the letter of the 11th of April, containing the order to Rego to transfer the goods, the bankrupt suggests a plan which, if carried into effect before the bankruptcy, might have barred the rights of the assigness; but it did not reach Rego till after the bankruptcy, and never having been communicated to the defendants, cannot constitute any contract between them and the bankrupt. That contract is contained in the letters of

the 4th and 9th of April; but in them there is nothing like an assignment of any specific goods, as in Lempriere v. Pasley, 2 T. R. 485. It is a contract executory to pawn some property, and the amount is contingent on the amount of bills unpaid, and of goods in Rego's hands, at the time when the order should arrive. Even if, it were a contract to sell a quantity of chattles out of others, no property would have passed by it to the defendant till they were selected and separated from the rest. The rule is the same as to this, both at law and in equity. *389] *It would be very dangerous to say that a trader could, by such a contract as is alleged here, mortgage property without any transfer of possession. Assuming that there had been a contract to pawn a specific chattel, in the hands of an agent of the pawnor, it would be very questionable whether that property would pass by it. If the chattel remained in the hands of the party himself, it would clearly pass to his assignees, as being in his apparent possession. If they were in the hands of an agent, that party would continue to be the agent of the pawnor till he received notice and consented to become the agent of the pawnee; till such consent was given, the goods would be considered in the possession of the pawnor, Hunt v. Mortimer, 10 B. & C. 44, Vacher v. Cocks, 1 B. & Ad. 145. In Lempriere v. Pasley, 2 T. R. 485, there was an assignment of specific goods at sea, before the bankruptcy, though the bill of lading was not delivered over till after. But if a contract be sufficient where a chattel is in the hands of the agent, what distance would suffice? Would it transfer the property if the principal lived in London and the agent in Yorkshire? But at all events there is no contract as to any specific property.

Starkie contrà. The bankrupt would have been bound by the order given by him to Rego, and the consequent delivery of the property to the defendants. Now it is a general rule, that the assignees are bound by any contract which would affect the bankrupt, except in cases of reputed ownership and fraudulent preference. If any legal or equitable interest in the goods in question was given

to the defendants, the property in them would *not pass by the assign*390] ment to the assignees, for they take only what the bankrupt could assign. Now here the defendants took at least an equitable interest in the goods. It is clearly established, that where under the circumstances an actual and immediate delivery is impossible, an agreement to deliver is sufficient to pass the property; as in the case of a ship at sea, or goods at a distance in the hands of a third person; otherwise the right would depend on the mere local situation of the property; and a party, although solvent, would be unable to transfer. But in Lempriere v. Pasley, 2 T. R. 485, an assignment of goods at sea, as a collateral security for a debt, and a subsequent indorsement of a bill of lading, were held good as against the assignees of the assignor, who committed an act of bankruptcy after the assignment of the goods and before the indorsement of the bill of lading. In Bailey &. Čulverwell, 8 B. & C. 449, the brokers of B. sold goods in their possession to C., taking in payment a bill accepted by D., and retaining the goods on C.'s account, with instructions to sell, if at a profit; before the bill was due, D. becoming bankrupt, the brokers of their own accord applied to C. for security, who authorized them to sell the goods and apply the proceeds in payment of the bill; but before they were sold, C. also became bankrupt: it was held that C.'s assignees could not maintain trover against the brokers or against B. for the goods, which after the order from C. to the brokers to sell and apply the proceeds, remained in the brokers' hands subject to that charge, although the brokers in requiring such security acted without instructions from B., he having by his *391] conduct subsequently* ratified their acts, and the brokers being entitled

to act for their employer's benefit.

As to the objection that there was no contract for the delivery of specific goods, they are specified by circumstances. The bills were drawn on the faith of, and against, specific consignments, in proportion to the amount of each, and were to be paid out of the proceeds. The defendants did not know what had been sold. The order given by the bankrupt to his agent corresponded with

the request in the defendant's letter of the 9th to transfer all the property which might exist in his hands. The agent of the bankrupt was bound to hold in his hands goods to the amount necessary to cover the bills, especially after the order and agreement by him to act on it. He was then in the nature of a trustee for the defendants. The letters, therefore, must be taken to apply to the goods of the value of 38007. which were in the hands of Rego at the time. In Row v. Dawson, 1 Ves. sen. 331, A. borrowed money of B. and gave him a draft upon a fund due to A. out of the Exchequer, and became bankrupt; and it was held by Lord Hardwicke that that was an equitable assignment thereof to B. for valuable consideration, and that it should prevail against the bankrupt's assignees. In Yeates v. Groves, 1 Ves. jun. 280, the holder of a note gave it up on receiv ing an order for payment of the amount out of the purchase-money of a house; the purchaser agreed to give notice to attend when the deeds and money were ready, and the holder did so attend, but before the business was over the drawer was arrested, and soon after became bankrupt. The Lord Chancellor held, that the order operated as a transfer of the money. The defendants here had an equitable title to be paid out of the proceeds of particular property, before the act of bankruptcy, and if the general assignment has relation to the act of bankruptcy so as to avoid all mesne assignments, why should not the delivery in this case have relation to the time of the agreement and the order given by the bankrupt to Rego? Cur, adr. vult.

[ *392

LITTLEDALE, J. now delivered the judgment of the Court. This is a special case which was argued in Trinity term last before the late Lord Tenterden, my Brothers Parke, Taunton, and myself. The action was in trover, to recover the value of a quantity of cotton goods, which came to the possession of the defendants on the 30th of June 1829, in the Brazils, and were afterwards sold by them. On the 20th of May, an act of bankruptcy was committed by the bankrupt Fortunato, and a commission issued on the 23d of June, under which the plaintiffs were appointed assignees. The goods in question were part of some consignments made by the bankrupt at different times to a person of the name of Rego at Bahia; against these consignments the bankrupt drew on Rego bills of exchange, which were negotiated by the defendants indorsing them. No goods appear to have been specifically appropriated, by the bankrupt's directions, to the payment of any particular bill; but the bills were drawn generally, though proportioned in amount in a certain degree to the value of the consignments. In March 1829, information was received by the defendants in London, that some of the drafts were refused acceptance, in consequence of which *they [*393 became liable on their indorsement, and being apprehensive that others would meet with the same fate, they called upon the bankrupt to make provision for their re-imbursement; a correspondence followed, and the question in this case turns mainly upon its meaning and effect.

It is quite clear that the assignment vested in the assignees all the personal estate and effects in which the bankrupt was, at the time of the act of bankruptcy, beneficially interested (with the statutory exceptions, 6 G. 4, c. 16, s. 81, 82, 86, 112,); but as the object of the assignment of the bankrupt's property is, that it may be applied to the payment of his debts, it is equally clear that nothing passed by it which the bankrupt then held in trust to others, or in which he had only a mere legal interest, Scott v. Surman, Willis, 400; Winch v. Keeley, 1 T. R. 619; Carpenter v. Marnel, 3 B. & P. 40; Gladstone v. Hadwen, 1 M. & S. 517; but if, at the time of the act of bankruptcy, the bankrupt possessed a possibility of interest, from which a benefit to his creditors might result, (Per Lord Avanley, 3 B. & P. 41,) if he had the legal interest in any property, and it was uncertain whether he would hold any part of that property, or if any, what part, as a trustee for others, the whole would pass by the assignment: it could not remain in the bankrupt subject to be transferred on a future contingency and if it did pass to the assignees, it could not be divested out of them in whole or in part by the happening of events subsequent to the