Richard Bulmer and Joseph Bulmer, Bankrupts ex parte Johnson
| Jurisdiction | England & Wales |
| Judgment Date | 07 May 1853 |
| Date | 07 May 1853 |
| Court | High Court of Chancery |
English Reports Citation: 43 E.R. 86
BEFORE THE LORD CHANCELLOR LORD CRANWORTH.
S. C. 22 L. J. Bk. 65.
1218] In the Matter of richard bulmer and joseph bulmer, Bankrupts. Ex parte johnson. Before the Lord Chancellor Lord Cranworth. Feb. 26, March 16, May 7, 1853. [S. C. 22 L. J. Bk. 65.] Messrs. B., shipowners at South Shields, had dealings with K. & Co., bankers in London : the course of dealing was, that Messrs. B. drew bills on K. & Co. which K. & Co. accepted for the accommodation of Messrs. B., and in order to provide for the payment of these acceptances Messrs. B. remitted to K. & Co. cash and deposited with them bills payable to Messrs. B., and the amount of these bills was received by K. & Co. and placed by them to the credit of Messrs. B.'s cash account: both firms became bankrupt, K. & Co. in July 1812, and Messrs. B. in August of the same year : there was then a large balance owing by Messrs. B. to K. & Co. on the cash account, K. & Co. being also liable to a large amount upon bills accepted by them for the accommodation of Messrs. B. and having in their hands bills, also to a large amount, deposited with them by Messrs. B. to provide for the payment of such acceptances : before any dividend was declared upon the estate of K. & Co. their assignees realized from the deposited bills more than sufficient to liquidate the cash balance due from Messrs. B. : the holders of the accommodation bills 3 DE O. M. & Q. 219. EX PARTE JOHNSON 87 proved against both estates and were fully paid, receiving from each estate at different times dividends to the amount of ten shillings in the pound: the sum thus paid in dividends by the estate of K. & Co. exceeded by above 6000 the total sum realized from the deposited bills: no debt was proved or attempted to be proved by the estate of K. & Co. against the estate of Messrs. B. until 1847, when a further portion of the outstanding estate of Messrs. B. was realized but to an amount insufficient to complete a payment of twenty shillings in the pound to their creditors exclusively of K. & Co. Held, on a claim being made on behalf of the estate of K. & Co. for that purpose, that the assignees of K. & Co. were entitled to prove as a debt due from the estate of Messrs. B. the amount of the cash balance and also the 6000, and that in respect of the 6000 and until thereby the same was repaid, they were entitled to the benefit as to any future dividends of the proofs made against the estate of Messrs. B. by the accommodation bill-holders. Held, also, that the cash balance was not liquidated by the receipt of the larger sum from the deposited securities by the assignees of K. & Co. previously to the declaration of the first dividend, they being entitled under the circumstances of the case to appropriate the sum so received in the way they considered most beneficial to their estate ; and that as to the right of the assignees of K. & Co. to stand in the place of the bill-holders, the case fell within the provisions of the Statute 49 Geo. III. c. 121. The general doctrine is, that a creditor holding a security is entitled to apply it in discharge of whatever liability of the bankrupt debtor he may think fit. Where two firms deal together, one making payments for and accepting bills for the accommodation of the other arid receiving cash and bills from the accommodated firm by way of payment of and security for the outlay and liabilities made and incurred, the question how the proceeds of the bills so remitted are to be applied must depend on the contract of the parties express or implied. In a case where in the absence of express contract the course of dealing might have led to the presumption that the agreement between the parties was that the proceeds of each bill as it was paid should be applied as far as it would go in discharge of the cash balance, this presumption was not held to extend to the event of bankruptcy, or to establish any agreement which prevented the party who was in the position of a surety from insisting against the bankrupt principal on the same rights on which he might have insisted in the absence of contract. This was an appeal in the form of a special case in bankruptcy, by the assignees of Messrs. Bulmer, from an order made on the 1st February 1850, by the [219] Vice-Chancellor Knight Bruce, sitting in bankruptcy. The following statement of facts is taken from the special case. Messrs. Kensington & Co. carried on business in London as bankers, and on the 22d July 1812 became bankrupt: on the 6th August of the same year Messrs, Richard & Joseph Bulmer, who carried on business at South Shields as shipowners and who had dealt with Messrs. Kensington & Co. as their bankers in London, also became bankrupt. In the course of the dealings between the two firms and in pursuance of an arrangement in that behalf, Messrs. Bulmer from time to time drew bills of exchange on Messrs. Kensington & Co. to a very large amount, which bills were accepted by Messrs. Kensington & Co. for the accommodation of Messrs. Bulmer. To enable Messrs. Kensington & Co. to take up and pay the said bills when at maturity or to reimburse themselves for what they paid on account thereof, Messrs. Bulmer from time to time remitted to Messrs. Kensington & Co. cash, and deposited with them bills of exchange payable to Messrs. Bulmer or their order and indorsed by them, which last-mentioned bills were held by Messrs. Kensington & Co. until the same respectively arrived at maturity, when they received the amounts thereof; and according to the course of dealing between the two [220] firms, the said remittances of cash and the proceeds of such last-mentioned bills were, on the same being received respectively, from time to time placed to the credit of Messrs. Bulmer in their cash account with Messrs. Kensington & Co. An account was kept between the two firms of all their dealings and transactions, and Messrs. Kensington & Co. from time to time forwarded to Messrs. Bulmer a 88 EX PAETE JOHNSON 3 DE 0. M.-* O. MX. statement of such account made up to the 30th June and the 31st December in each year, and such half-yearly statement of account was divided into two portions; in one of these (being the caah account) Messrs. Kensington & Co. debited themselves witi the amount of all cash received by them and all matured bills paid to them on account of Messrs. Bulmer, and took credit for all payments made by Messrs. Kensington & Co. on account of Messrs. Bulmer, and upon such account a balance was struck; and in the other portion of the account a statement was made of all the bills deposited with Messrs. Kensington & Co. for the purposes aforesaid which had not arrived at maturity, and per contrh a statement of all the bills accepted by Messrs. Kensington & Co. for the accommodation of Messrs. Bulmer then outstanding, but no balance was struck on such last-mentioned portion of the said account. The last of such cash and bill accounts was rendered on the 30th June 1812. At the time of the bankruptcy of Messrs. Kensington & Co. the sum of .7511, 14s. Id. was due to that firm from Messrs. Bulmer upon the cash account between them, and at the same time Messrs. Kensington & Co. were liable to a large amount upon bills accepted by them as aforesaid for or on account of Messrs. Bulmer which had not arrived at maturity, and Messrs. Kensington & Co. held in their hands bills to a large amount deposited [221] with them by Messrs. Bulmer for or towards enabling Messrs. Kensington & Co. to provide for the payment of such acceptances. Between the 22d July 1812 and the 6th August 1812 (the date of the bankruptcy of Messrs. Bulmer) the assignees of Messrs. Kensington & Co. received on account of Messrs. Bulmer divers sums amounting together to ,5016, lls. Id., thereby reducing the cash balance due from Messrs. Bulmer at the date of their bankruptcy to ,-2495, 3s. Among the bills which Messrs. Kensington & Co. had before their bankruptcy accepted for the accommodation of Messrs. Bulmer, were four bills for several sums amounting together to ,3921, Is. 7d., which at the bankruptcy of Messrs. Kensington & Co. were held by debtors of that firm and which arrived at maturity in August and September 1812, and which were under the proceedings in the bankruptcy allowed in full on account by way of set-off to such debtors. The amount of the accommodation bills accepted as aforesaid, which were immatured at the bankruptcy of Messrs. Kensington & Co. but arrived at maturity before the 5th September 1812 was...
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