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CHAPTER VI.

Transfer of a bankrupt's property to trustee in

THE EFFECT OF BANKRUPTCY UPON THE PROPERTY OF MARRIED

PERSONS AND UPON CONVENTIONAL PROVISIONS FOR MAR

RIED PERSONS AND THEIR CHILDREN.

171. By the Act and Warrant of Confirmation, the whole of the estates and effects-so far as attachable for debt1— sequestration. heritable and moveable, and real and personal, wherever situated, of one who has been sequestrated, under the bankruptcy statutes, is transferred and belongs to the trustee, for behoof of the creditors, and the trustee has full right and power to sue for and recover all estates, effects, debts,

1 These words, which are of much importance, are not repeated in the act and warrant, but are in the statute itself (19 and 20 Vict. c. 79, § 102). Speaking of the previous statute, Lord Deas says, "The enactment transferring the estate to the trustee 'so far as attachable for debt,' I have always looked upon as descriptive of the estate transferred, and not, as my brother Lord Curriehill seems to hold, descriptive of the consequences or effects of that transference. The bankrupt may be proprietor (so we term him) of an entailed estate, and of heir-loom moveables entailed along with it. He may be in possession (which usually presumes property) of corporeal moveables, of which he is truly only a liferenter. He may have body clothes which no creditor would be entitled to strip from his back. In short, the trustee is to take only the estate which a creditor could attach." Littlejohn v. Black, 13 Dec. 1855, 18 D. at p. 227. See also per Inglis, L.P., in Kirkland v. Kirkland's Trustee, 18 March, 1886, 13 R. 798; and Lord Westbury in Fleeming v. Howden, 1868, L.R. 1 Sc. App. 372.

and moneys belonging to the bankrupt.'

There is thus

vested in the trustee not only all the property but all the rights of the bankrupt, accrued at the date of the sequestration, or which may accrue to him before his discharge.2

deeds.

certain

The right to revoke a deed or a gift, therefore, passes to the Revocation of trustee, and whatever the bankrupt could have revoked, the trustee is bound to revoke in the interest of the creditors.3 In addition, certain transactions are challengeable by the creditors of a bankrupt which he could not himself have challenge of challenged, and the trustee as representing the creditors transactions. is vested with all their rights. While the trustee, then, is general assignee of the bankrupt, and takes all his property and rights, he is not bound by all his deeds or obligations, but is on the contrary entitled to challenge and set them aside, if they infringe certain legal rights of the general body of creditors.

wife's property to husband's creditors

law.

$172. While the jus mariti and right of administration re- Transfer of mained entire, the wife's moveable property, including the income of her heritage during the marriage, passed, as we under the old have seen, to the husband as dominus omnium rerum stante matrimonio.* Upon the sequestration of the husband,5 therefore, this property vested and still vests where the old law applies," in the trustee for behoof of his creditors.

1 Bankruptcy (Scotland) Act, 1856, § 102 and Schedule D.

2 See M'Donald v. M‘Grigor, 10 March, 1874, 1 R. 817.

3 See for instance Kemp v. Napier, 1 Feb. 1842, 4 D. 558.

So

4 See supra, § 7. The phrase occurs as early as 1579, Lenox v. Lovat, M. 5877. See also M. pp. 5802,5804, 10,366. Maxwell v. Maxwell, 1656, Decisions of the English Judges, p. 37. Peter contra

ib.

p. 51.

1657,

5 On the continent a separatio bonorum was and is allowed where the husband's affairs go wrong; but this was never the rule in Scotland. See Turnbull, 1709, M. 5895.

That is, as regards moveables acquired or the rents of heritage vested prior to 18th July, 1881, and as regards moveables or the rents

Child's property never passed to husband's

creditors.

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much was it the practice to look to the wife's property, for payment of the husband's debts, that a clause in a marriage contract attempting to exclude the jus mariti was regarded as a fraudulent contrivance to cut off the husband's creditors. To take away "participation of condition betwixt man and wife is the way to open a door to all fraud, so that none can contract with a married man.' One of the ingenious devices resorted to in order to induce Scotsmen to turn Episcopalians was the Act 1672, c. 9, which provided that any persons married by a minister not episcopally ordained "shall amit and lose any right or interest they may have by that marriage, jure mariti vel jure relictæ." This has the appearance of creating separate estate, but such was not the intention. It was held that the result was to work a forfeiture in favour of the Crown, because if the wife's estate was to belong to her, exclusive of the jus mariti, the husband's creditors might easily be cheated by his marrying irregularly, and so they would have no right to the wife's property.

2

§ 173. A child's property never did, and does not now, become the property of his father. If a child's money is in his father's hands mingled with his own at the date of the sequestration, it will pass to the trustee, but the same thing applies in the case of a third person. Both child and third

of heritage, acquired by the wife after that date, if she was married prior thereto, and the husband has by irrevocable deed made a reasonable provision for her, or the parties have not come under the provisions of the Married Women's Property Act, by deed registered and advertised; see Henderson v. Henderson, 25 Oct. 1889, 17 R. 18.

1 Campbell v. Sandilands, 1682, M. 5836; Gordon v. Gregory, 1658, Decisions of the English Judges, p. 129.

2 1672, c. 9 (c. 20, ed. Thomson); Sir George Mackenzie's Observations, 2 Parl. Chas II. Sess. 3, Act 9.

person will be personal creditors for the amounts so lost, and can rank for them in the sequestration.

creditor of

§ 174. When, under the old law, the husband's jus mariti Wife may be was excluded and the wife had a separate estate, she could enter her husband. into a contract with her husband,' and this power is specially saved by the Married Women's Property Act, although perhaps it does not extend to a contract of a personal character such as partnership.2 She could and can still become his creditor, in the same way as one of her children or a stranger could do, and an action will lie at the instance of a wife against her husband, or of a husband against his wife. If he sells corporeal moveables belonging to her as separate estate, as being paraphernalia or shares from which his jus mariti is excluded, she can rank for the price along with his other creditors.1 If his stock in trade has been enhanced in value by her exertions, she can claim on his estate for the amount thereof.5

wife's pro

perty under

Married
Women's Pro-

perty Act.

§ 175. Since the passing of the Married Women's Property Protection of Act no part of the moveable estate of a wife-provided it is kept separate and distinguishable—is affected by the bankruptcy of her husband if she was married after 18th June, 1881; and only what was acquired prior to that date if she was married earlier, and has not come under the Act 1Davidson v. Davidson, 28 March, 1867, 5 M. 710; Montgomery v. Hart, 17 July, 1845, 7 D. 1081.

2 Macara v. Wilson, 15 Feb. 1848, 10 D. 708. Supra, § 101.

3 Williams v. Williams, 15 Nov. 1844, 7 D. 110; Laidlaw v. Laidlaw's Tr., 16 Dec. 1882, 10 R. 374; Shaw's Trustees v. Shaw, 19 Jan. 1870, 8 M. 419; Robertson v. Robertson, 10 Feb. 1835, 13 S. 442, affirmed H.L. 7 W. and S. 526

4 Montgomery v. Hart, supra; Meldrum v. Wilson, 7 Dec. 1842, 15 Sc. Jur. 90.

5 Per Lord Shand in Ferguson's Trustee v. Willis, Nelson, & Co., 11 Dec. 1883, 11 R. at p. 272.

New regula

tion if when

wife has lent

her property

to husband

he becomes bankrupt.

by deed, unless she has lent or entrusted it to him or commixed it with his funds. If she has done so it is to be treated as assets of the husband's estate in bankruptcy, but with right to her to claim the value thereof as a creditor after the other onerous creditors have been paid. This is a novel principle in Scotland, as hitherto a wife, although she cannot vote in the election of a trustee upon her husband's sequestrated estate, has been allowed to claim and rank with the other creditors for any proper debt due by her husband to her-e.g. a loan of money from her separate estate.1 The new rule seems to be founded upon the English bankrupt law, and places the wife very much in the position of a partner with her husband as under the law of England;5

1

3

1 Supra, § 95; or unless the husband has by irrevocable deed, executed prior to 18 July, 1881, made a reasonable provision for his wife in the event of her surviving him.

2 See, in reference to similar words in Bovill's Act, Ex parte District Bank, L.R. 16 Q. B. D. 700; Ex parte Taylor re Grason, L.R. 12 Ch. D. 366. As to the clause in the Married Women's Property Act, see Hunter v. Crawford, 25 March, 1885 (Sheriff Court of Glasgow), 1 Sh. Co. Rep. 241; the English Act does not oust any common law remedies the wife may have. In re May, Crawford v. May, 63 L.T. 375; 6 The Times, L.R. 461.

3 The Bankruptcy (Scotland) Act, 1856, § 56.

4 It has been held in England that before the Married Women's Property Act, 1882, a wife could prove in competition with other creditors, and that the Act does not apply to a loan made before its date. Ex parte Home, 54 L.T. 301: See Slanning v. Style, 3 P. Wm. 337; Woodward v. Woodward, 3 De G. J. and S. 672; re Childs L.R. 9 Ch. 508; re Beale L.R. 4 Ch. D. 246.

5 The principle is the same as in the Partnership Law Amendment Act, 28 and 29 Vict. c. 86, § 5 (Bovill's Act), and in the Partnership Act, 1890, 53 and 54 Vict. c. 39, § 53. The rule of the common law of England is that a debtor cannot prove in competition with his own creditors, and hence a partner who has a demand against his co-partner cannot prove in respect thereof against the separate estate of the latter whilst any of the joint creditors are unpaid, because by so doing he would diminish any surplus of the separate estate, which, after satisfying the various creditors, might be coming to the joint estate.

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