presumed to be closed, a resulting trust has been found to be vested in the bankrupt by the lapse of a long period and other circumstances.1

It was held in one case that where the bankrupt had made a voluntary settlement of furniture, and his assignees had assumed that the settlement was valid, and permitted his possession to be undisturbed for three years, an execution creditor for a debt incurred after the bankruptcy might hold against the assignees, the trustees of the settlement having withdrawn their claim. This case was assumed by the chief judge in bankruptcy to come within the law of estoppel above considered.2

§ 351. Assignees may prosecute pending Suits. —If a creditor's bill (authorized by statute) to reach and apply to the payment of the single creditor's debt property of the debtor fraudulently conveyed by him, or to which he has an equitable title, is pending at the date of the bankruptcy, it has been held that if the assignees do not intervene after notice, the suit may be prosecuted by the plaintiffs, whether for their own benefit or that of the assignees does not clearly appear.3 The assignees having the sole title to property however situated and in whatever court to be recovered, and the sole right to set aside frauds, may, it is said, have such a suit dismissed. They may, on the other hand, be permitted to prosecute any suit which is brought for the benefit of creditors generally, and in some courts those in behalf of any one or more creditors, the decree in all such cases being for creditors generally through the assignees.5

§ 352. Fraudulent Sale. When a trader fails, all dealers who have lately sold him goods endeavor to recover them in specie. Hence the question often arises whether the purchase was made in good faith. In England and several states it is the

1 Ross v. McJunkin, 14 S. & R. 364; Power v. Hollman, 2 Watts, 218; Sailor v. Hertzog, 4 Wharton, 259.

959.

4 Squire v. Lincoln, 137 Mass. 399; Powers v. Raymond, 137 Mass. 483.

Bate v. Graham, 11 N. Y. 237;

2 Ex parte Hannington, 18 W. R. Crouse v. Frothingham, 97 N. Y. 105;

3 See Squire v. Lincoln, 137 Mass. 399; Powers v. Raymond, 137 Mass. 483.

Goldsmith v. Russell, 5 De G. M. & G. 547; Crossley v. Elworthy, L. R. 12 Eq.

158.

law that one who buys goods with a distinct intent not to pay for them is guilty of a fraud which avoids the sale at the election of the seller. But the mere insolvency of the buyer, however desperate, is, of itself, but evidence, more or less forcible according to the circumstances, that this fraud was intended. Taken by itself it is not very strong, because it is well known that insolvent traders often delude themselves with the hope of some lucky change in their situation.2 If, however, the buyer has in terms misrepresented his situation, or if he can be proved to have bought the goods in order to swell the volume of his assets, or to sell at a sacrifice with intent to prepare for bankruptcy, the sale is voidable.

§ 353. Stoppage in Transitu. The right of a seller to retain or to stop goods in transitu is a subject intimately connected with bankruptcy; but the writers on "sales" have so thoroughly examined it, that notes on a few points will here suffice.4

§354. Detainer. The seller of goods for credit, which have not gone out of his possession and have not been paid for, may detain them, though the general property has passed, if the buyer becomes insolvent. The negotiable note or acceptance of the insolvent himself is not considered payment unless distinctly agreed to be received as such.5

§ 355. Insolvency of Buyer. The right of stoppage in transitu of goods which have been forwarded on the credit of the buyer is considered a sort of extension of the seller's lien, and can be exercised only upon the insolvency or bankruptcy of the buyer. A notorious insolvency is not necessary to the exercise of this right; but a stoppage of payment, or inability

1 Benjamin, Sales, 4th ed. p. 431; Tiffany, Sales, p. 114.

2 Conyers v. Ennis, 2 Mason, 236, Fed. Cas. No. 3149; Biggs v. Barry, 2 Curtis C. C. 259, Fed. Cas. No. 1402; Ex parte Whittaker, L. R. 10 Ch. 446.

8 Legrand v. Eufaula Bank, 81 Ala. 123; Wilson v. White, 80 N. C. 280.

* See Lyons v. Hoffnung, 15 Ap. Cas. 391; Re Gurney, 67 L. T. 598. 5 Bloxam v. Sanders, 4 B. & C. 941,

949, per Bayley, J., citing Hanson v. Meyer, 6 East, 614; Miles v. Gorton, 2 C. & M. 504; McEwan v. Smith, 2 H. of L. 309; Valpy v. Oakeley, 16 Q. B. 941; Arnold v. Delano, 4 Cush. 33; Roget v. Merritt, 2 Caines, 117; Benedict v. Field, 16 N. Y. 595; Griffiths v. Perry, 1 El. & El. 680; Townley v. Crump, 4 A. & E. 58; Bloxam v. Morley, 4 B. & C. 951; Ex parte Chalmers, L. R. 8 Ch. 289.

to pay in the ordinary course of business, that is, insolvency in the mercantile sense, is sufficient.1

§ 356. Assignees taking Possession after Goods are stopped. -If the goods are stopped before the title of the assignees accrues, and they nevertheless obtain possession, they will be liable in trover or other appropriate form of action, or if the remedy at law is inadequate in the particular case the vendor may maintain a suit in equity.2

The seller may give notice to stop, notwithstanding valid sales or pledges by the original purchaser, and though he cannot hold the goods, he can recover of the trustee in bankruptcy of the original purchaser any money which may afterwards come to him as such trustee from such sub-purchasers or as a surplus beyond the pledgee's debt.3

§ 357. Right to stop not defeated by Attachment. The right of the seller to stop the goods while in transit cannot be defeated by attachment or other legal diligence on the part of creditors of the buyer, and therefore not by a deed or decree vesting his property in trustees."

§ 358. End of Transit. — Actual possession by the buyer or his trustees before notice to stop puts an end to the transit; for bankruptcy does not rescind the contract nor give rise to a trust, nor require the bankrupt or his assignees not to receive the goods.

1 See Durgy Cement Co. v. O'Brien, 123 Mass. 12; Naylor v. Dennie, 8 Pick. 198; Reynolds v. Boston & Maine R. R. Co., 43 N. H. 580; Re Phoenix Bessemer Steel Co., 4 Ch. D. 108; Smith v. Barker, 102 Ala. 679. See Gayden v. Tufts, 68 Miss. 691.

2 Litt v. Cowley, 7 Taunt. 169; Hause v. Judson, 4 Dana, 7; Spalding v. Ruding, 6 Beav. 376; Berndtson v. Strang, L. R. 4 Eq. 481; Schotsmans v. Lancashire Ry. Co., L. R. 2 Ch. 332, per Cairns, L. J.

3 Re Westzinthus, 5 B. & Ad. 817; Spalding v. Ruding, 6 Beav. 376; Berndtson v. Strang, L. R. 4 Eq. 481; Ex parte Falk, 14 Ch. D. 446, affirmed Kemp v. Falk, 7 App. Cas. 573; Ex parte Golding, 13 Ch. D. 628.

Naylor . Dennie, 8 Pick. 198; Seymour v. Newton, 105 Mass. 272; Mohr v. Boston & Albany R. R. Co., 106 Mass. 67; Durgy Cement Co. v. O'Brien, 123 Mass. 12; Atkins v. Colby, 20 N. H. 154; Hause v. Judson, 4 Dana, 7; Buckley v. Furniss, 15 Wend. 137; 17 Wend. 504; Sturtevant v. Orser, 24 N. Y. 538; Schuster v. Carson, 28 Neb. 612; Bayonne Knife Co. v. Umbenhauer, 107 Ala. 496.

5 Stanton v. Eager, 16 Pick. 467; Rodger v. Comptoir d'Escompte, L. R. 3 P. C. 393; Harris v. Pratt, 17 N. Y. 249; Hodgson v. Loy, 7 T. R. 440.

Scott v. Pettit, 3 B. & P. 469; Ellis v. Hunt, 3 T. R. 464; Conyers v. Ennis, 2 Mason, 236, Fed. Cas. No. 3149; Van Casteel v. Booker, 2 Ex.

The strong

§ 359. Insolvent Buyer may refuse the Goods. equitable objection to the appropriation of the goods of an innocent seller to pay the debts of a buyer who has become insolvent, has induced the courts to extend the right of stoppage in transitu to its utmost limits. Among other things, it is held, very justly, that a buyer who discovers his insolvency before the transit is ended may refuse to receive the goods and notify the seller of this determination, and this will work an effectual stoppage, though given after the buyer has committed an act of bankruptcy to which the title of the assignees will eventually relate, or after a creditor has attached. The assent of the seller, if necessary at all, may be given after the trustees have become actually vested with the assets.1 It would seem to follow that if the trustees decline to receive goods coming to them after the bankruptcy, and bought on credit, they will not be guilty of a breach of trust; but I have seen no decision upon this point.

2

§ 360. Buyer cannot return after Transit is ended. -It is often said that a stoppage in transitu must be "adverse," " but the cases just cited show that this dictum only means that the consignor cannot, as against a trustee in bankruptcy, acquire a title by agreement with the consignee after his own right is lost. Therefore, if there is a bankrupt law in force, a buyer cannot, when the transit has fully ended, return the goods to the seller in satisfaction or rescission after the time to which the title of the assignees relates; nor under circumstances which would make payment or security of the price a fraudulent preference. Atkin v. Barwick,5 as reported, seems opposed to

691; Heinekey v. Earle, 8 E. & B. 410; Haswell v. Hunt, stated 5 T. R. 231; Milward v. Forbes, 4 Esp. 172.

1 Mills v. Ball, 2 B. & P. 457; Richardson v. Goss, 3 B. & P. 119; Naylor v. Dennie, 8 Pick. 198; Bartram v. Farebrother, 4 Bing. 579; Stanton v. Eager, 16 Pick. 467; Ash v. Putnam, 1 Hill, 302; Grout v. Hill, 4 Gray, 361; James v. Griffin, 1 M. & W. 20; 2 M. & W. 623; Sturtevant v. Orser, 24 N. Y. 538; Re Foot, 11 Blatch. 530; Fed. Cas. No. 4907; Re O'Sullivan, 67 L. T. 464; Kloes v. Wurmser, 34 Mo. Ap.

453; Jenks v. Fulmer, 160 Pa. St. 527; Weber v. Baessler, 3 Col. Ap. 459.

2 Siffken v. Wray, 6 East, 371; Robson, 7th ed., 433. See remarks of the court in Naylor v. Dennie, 8 Pick. 198. 8 Siffken v. Wray, 6 East, 371.

4 Barnes . Freeland, 6 T. R., 80; Van Casteel v. Booker, 2 Ex. 691; Mills v. Ball, 2 B. & P. 457, per Heath, J.; Benjamin, 2nd Am. ed., § 499; Robson, 7th ed., 434; Ex parte Topham, L. R. 8 Ch. 614; Ex parte Blackburn, L. R. 12 Eq. 358; Re Aspinwall, 11 Fed. Rep. 136. 51 Strange, 165.

this conclusion. That case was decided before the law of preference was fully developed, and has been understood by many learned judges to have been a case of return of goods before the transit was ended.1 If not so it is not now good law.2

But a preference can only be avoided by the trustees, and therefore, if the buyer does not become bankrupt, or if the circumstances do not show a case of fraudulent preference, and there are no intervening liens, creditors cannot object to a return of the goods.3

§ 361. Stoppage in Transitu does not Rescind Sale. A retention or stoppage in transitu is not a rescission of the sale; but the seller becomes a secured creditor, who must apply to the court of bankruptcy for leave to sell the goods if he desires to prove for a deficiency. Upon such application, he will be permitted to sell and account to the assignees for whatever they may have brought beyond the agreed price, or prove for the deficiency, as the case may be.1

It follows from the nature of this right that if the seller proves his debt, without first crediting the value of the goods, or if he accepts a composition for their price, he loses his right of stopping them.5

§ 362. Order and Disposition. A very remarkable exception to the rule that the assignees of a bankrupt take only the property which is actually and beneficially his own is found in the statute of James I. which enacts that if any bankrupt have in his possession, order, and disposition, with the consent

1 See remarks in Harman v. Fishar, Cowp. 117; James v. Griffin, 2 M. & W. 623; Grout v. Hill, 4 Gray, 361; Barnes v. Freeland, 6 T. R. 80; Neate v. Ball, 2 East, 117.

2 See note 4, page 255.

8 Clemson v. Davidson, 5 Binney, 392; Greaner v. Mullen, 15 Penn. St. 200: Sturtevant v. Orser, 24 N. Y. 538; Ash v. Putnam, 1 Hill, 302; Dean v. Compton, 2 N. B. R. 607.

4 Wentworth v. Outhwaite, 10 M. & W. 436, per Parke, Alderson, and Rolfe, B. B., against Abinger, C. B.; Stanton

v. Eager, 16 Pick. 467, per Shaw, C.J.; Hause v. Judson, 4 Dana, 7; Newhall v. Vargas, 13 Maine, 93; Re Foot, 11 Blatch. 530, Fed. Cas. No. 4907; Schotsmans v. Lancashire Ry. Co., L. R. 2 Ch. 332, per Cairns, L. J.; Ex parte Middleton, 3 De G. J. & S. 201; Ex parte Chalmers, L. R. 8 Ch. 289; Ex parte Stapleton, 10 Ch. D. 586. But see Diem v. Koblitz, 49 Ohio St. 41; Tiffany, Sales, pp. 226 et seq.

5 Nichols v. Hart, 5 C. & P. 179. See § 422.