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FAIR against M'IVER,
Topping and Scarlett, in support of the rule, said there was no fraud in fact or in law in making a person pay a bill which he justly owed, of which Perry and Firmiston (supposing the defendants to have acted as their agents) were in possession before the bankruptcy of Wilson, or his sale of the goods in question. But if the transaction were meant to be impeached as fraudulent, the action should have been trover to disaffirm, and not assumpsit, which affirms it and lets in the set-off: for if the sale were fraudulently procured by the defendants, no doubt trover would have lain. The defendants might have sued Wilson, as the legal indorsees of the bill, if there had been no bankruptcy, and it would not have been competent to Wilson to have set up the defence of fraud to the action. Then neither can his assignees deny the mutual credits between the indorsees and acceptor of a bill, in a form of action which affirms the dealing between the parties. [Le Blanc and Bayley, Justices, asked whether the acceptor of a bill, sued in the name of an indorsee who was a mere trustee for another, might not set off a debt due from the cestuy que trust; and suggested that the title of the legal holder might be examined into, where it went to affect the right of set-off.] The whole argument proceeds on the supposition of a fraud, the fact of which they denied, as well as the mode of raising the question. The transaction was two months before the bankruptcy.
Lord ELLENBOROUGH, C. J. The question is whether the recovery in this action by the assignees upon the sale of the goods by the bankrupt can be sustained without letting in the set-off in question? It is argued that in bringing an action founded upon the contract of sale, the
FAJR against M'IVER.
assignees have affirmed that the transaction was fair throughout; but that is stated with too much latitude: the plaintiffs by suing on the contract of sale only affirm that nothing on the part of the bankrupt was fraudulent; but they do not thereby admit that there was no fraud in the parties against whom they are endeavouring to enforce it: these defendants may have meditated and atchieved fraud, but that will not preclude the plaintiffs from recovering against them upon their contract. Here it appears that the defendants had combined with Perry and Firmiston that a bill of Wilson's held by Perry and Firmiston, which they had considered to be a bill of depreciated credit and not likely to be paid, should be passed off against Wilson the acceptor in exchange for certain goods of his. And to conceal this purpose Perry and Firmiston shift the bill into the hands of the defendants, wko then apply to Wilson as indifferent customers for the purchase of the goods to be paid for by a bill, (not that bill) at 3 months' date, or made equal to cash in 3 months, and which should be satisfactory to him. They held out to him a bill which should be available to him as cash. Wilson contemplated no fraud, and is not estopped or concluded by the medium of fraud of the defendants, nor by the terms of the contract to claim payment for the goods against them. Therefore even if he had continued solvent, and had brought the action in his own name, he would not have been concluded. Then if the bill in question would have been no payment for the goods within the terms of the contract, how can it be a good payment by way of set-off; which involves a more difficult question, how far, supposing it could avail between the parties really interested, it could be set off by these defendants, who took the indorsement of it not for themselves but for Perry and
FAIR against MʻIVER.
Firmiston, and merely for the purpose of getting the bankrupt's goods without paying for them. Wilson was not justly and truly indebted to the defendants at the time of the sale ; and though they might have brought an action against him on the bill, yet upon the statute (u), by way of claim under the commission, they must have sworn that he was then justly and truly indebted to them upon the bill; which they could not have done for that purpose, as they held it merely as trustees for Perry and Firmiston. As to the case of Eland v. Karr (b), where a party upon a sale of goods had stipulated for ready money payment only, which was held to be satisfied by a payment made with his own bill, I defer to the authority, but am not convinced by it.
LE BLANC, J. (c). This was a question of mutual credit between these parties at the time of the bankruptcy; and if there were any fact which ought to have been decided by a jury, the case ought to go to a new trial, because the only reason why the defendants' counsel did not go to the jury was upon the opinion expressed by me at the trial. The only question I could have put to the jury was whether Wilson was in insolvent circumstances. at the time of this transaction, and whether the defendants were the bonâ fide holders of the bill on their own account. But on reading the examination of one of the defendants there could be no doubt upon these facts, because that examination and the whole transaction itself shewed that the parties acted upon a firm persuasion that Wilson's circumstances were bad, and that the defendants were not the bonâ fide holders of the bill for them
(6) 1 East, 375.
(a) Vide stat. 8 Geo. 2. c. 24. s. 5.
selves, but that it was put into their hands by Perry and Firmiston, not in the ordinary course of trade, but for the specific purpose of being set off in payment against these goods. I am not therefore removed from the opinion which I entertained at the trial.
FAIR against M'IVER.
BAYLEY, J. The case is not free from difficulties, but upon the whole I think the verdict is right. As between Wilson and the defendants, the defendants cannot say that they were not the real buyers of these goods; for they held themselves out as such to him: but the plaintiffs, as the assignees of Wilson, are not precluded from shewing that the defendants were not the real owners of the bill, but that they combined with Perry and Firmiston, who were the real owners, to set it off as payment for these goods, which were to be paid for in another mode which should be available to Wilson as cash. We ought not therefore to give assistance to the defendants in carrying their meditated fraud into execution. The question comes to this, whether the defendants were entitled to pay Wilson for the goods with this bill? And I think they were not, because I do not think that they were the real bona fide holders of it as purchasers, but merely held it as trustees for Perry and Firmiston ; and as such trustees I do not think that they could set it off against a demand upon them in their own right. It is true that a banker, who is the legal holder of such securities, may prove the debt under the acceptor's commission; but if he held them as trustees merely for another, he could not prove the debt, if the cestuy que trust were indebted to the bankrupt's estate. And here I do not think that the defendants could have proved the amount of the bill under the commission as a debt due to them ; for they could
FAIR against MIVER.
not have sworn that Wilson was justly and truly indebted to them
it. The case of Smith v. Hodson was different from this, because that went upon a contract between the bankrupt and the defendant, that there should be a sale of the bankrupt's goods upon the eve of his bankruptcy to the defendant; and if that were a bonâ fide sale, and not intended to give an undue preference, there could be no action sustained to recover back the value, because the defendant was entitled to hold the goods by the contract of sale. It therefore became necessary for the assignees, in order to give themselves any right of action for the value, to say that there had been no sale, and to disaffirm it by their action ; because if they affirmed the sale, they affirmed the whole transaction with all its consequences of set-off, &c. But here it is admitted by the plaintiffs that there was a sale of the goods by the bankrupt to the defendants, and they only seek to recover payment for them ; but it does not follow that because there was a sale the defendants can pay for the goods by a bill of the bankrupt's, of which they were not the bonâ fide holders in their own right, and therefore cannot set it off.