Effect of purchasing Goods by Persons who know themselves to be Insolvent.
Sir John Inglis of Cramond v. Royal Bank
Date: 16 June 1736 Case No. No 41.
All transactions of a bankrupt within three days of bankruptcy were presumed to be fraudulent.
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In October 1734, a bargain was made betwixt Sir John Inglis of Cramond and Joseph Cave, for Sir John's barley of that crop; in pursuance of which bargain, Sir John sent his barley to Mr Cave by parcels, in the months of November and December, and beginning of January thereafter. Mr Cave's circumstances going into disorder, he made a disposition of his effects to his creditors, upon the 21st January 1735; whereupon Sir John insisted in a process, claiming the subject upon this medium, That the contract was fraudulent upon the part of the purchaser, who was at the time insolvent, and incapable to pay the price, and therefore was null quia dolus dedit causam contractui, and the property was never transferred. Appearance being made for the creditors, it was answered for them, Fraud is not to be presumed; and a merchant, though at many periods his debts may exceed his effects, yet his continuing to trade is not eo ipso fraudulent, because he may entertain reasonable hopes by carrying on a profitable business, to emerge out of his difficulties, and to do justice to every one of his creditors. The Lords found it not relevant to reduce the bargain for the purchase of the barley in October 1734; that it appeared by the common debtor's books, that, at the time of the bargain he was insolvent, since he continued his trade till the 21st January, and his bankruptcy was not discovered till that time.
1736. December 8. —The pursuer thereafter insisted, That the date of the delivery is the only period that is to be considered as to this question; for, supposing the contract fair, yet if, at the time of the delivery by which the property is transferred, the bankrupt is thinking cedere foro, and of giving up his effects to his creditors, it is fraudulent in him to receive the subject sold when he has no prospect of doing justice by paying the price. The Lords found the time of delivery must be the rule.
The question next occurred, What period ought to be fixed before the cessio, at which it may be presumed, the bankrupt was meditating cedere foro, after which all purchases made, or delivery accepted by him, must be understood fraudulent? The pursuer insisted, That it ought to be sixty days by analogy of the act 1696. The defender insisted, that it could not go beyond the bounds of three days, building upon the authority of several foreign lawyers, particularly Simon Van. Lewen in the following words: E contra tamen nec fides de prætio habita venditori obstat, quo minus rei suæ dominus maneat, et adbuo rei suæ vindicationem instituere possit; si scilicet emptor dolose, biduo aut triduo antequam foro cedat, emendo merces, cum venditore contraxit, ut eum fallet. The Lords found, that the presumptive fraud must be confined to three days before the cessio bonorum, and therefore found the pursuer preferable as to any barley delivered during that period. See Appendix. See Bankrupt.
