CHAP. XXIII. Cf. Paget. authorising you to sell and convey the property comprised in the deeds, you cannot recover the amount by an action against the guarantor, and he cannot compel you to give up his deeds; you, however, can sell his property, and apply the proceeds in satisfying the guarantee, accounting to him for any balance that remains over. If you are fairly acquainted with the terms of the agreements which your own bank enters into, it is not very necessary to know the effect of the general law upon guarantees whose stipulations differ from yours; you do not require to know every loophole by which a surety may escape from a guarantee other than that which your bank uses; but it would indeed be well to remember the general rule and advice expressed in the following paragraph: "The acts or defaults which would release the surety outside those generally provided for in a well-drawn guarantee, are such as a bank can readily avoid, if it bear in mind the salutary rule that there must be no variation of the contract, no dealing with the principal debtor, or a co-surety, or with the securities for the debt, behind the back of the surety or without his consent, either given by anticipation in the guarantee, or prior to such dealing." CHAPTER XXIV. BANKRUPTCY. and CHAP. XXIV. A man who is unable to pay his debts, as they be. come due, from his own moneys is insolvent; but insolvency is not bankruptcy in a strict and legal sense, no Bankruptcy matter how much alike the two words may be in literary insolvency. usage. The term bankruptcy expresses the condition in law of an insolvent, who has come under the operation of the bankruptcy laws, that is to say, of a man who has committed an act of bankruptcy, been made bankrupt, and whose affairs are subject to the bankruptcy jurisdiction of the Supreme Court. It is important to notice the distinction between these terms; for all insolvents are not bankrupts. The commercial wreckage in England, for example, in the year 1895, amounted to 7,858 insolvencies. Of these a little over 4,000 were administered in bankruptcy, and the balance, not much less than half, under private deeds of arrangement. Thus there is no law which prevents a debtor from settling privately with his creditors, if he can. Private assign- Private assignments. ments of this kind have no place in the Acts regulating bankruptcy procedure, and can, therefore, only operate at common law; as a result they will only be effectual to give the debtor a release when they are signed by all the creditors. To make a proposal for such a composition is in itself an act of bankruptcy, and as creditors can thereupon drive the party making such an offer into formal bankruptcy, they have, in such a case, a handle whereby to compel the debtor to open and fair dealing. CHAP. XXIV. Assignment to trustees with adminis If in such a case the debtor makes a bona fide compromise with his creditors for the benefit of all of them, and to that end assigns his estate to trustees, he is, for all practical purposes, safe against the claims of any creditor who stands out unreasonably; for, though that creditor could sue and obtain judgment, he would find no goods to levy upon, for the Court would not set aside the assignment. Again, the assignment of his property to trustees for creditors is another act of bankruptcy, but the statute provides that this act cannot be made available for a petition, unless the petitioning creditor or creditors represent one-fifth in value of all the creditors; and even then the Judge will not make a sequestration order if it appears to him that it will be for the advantage of the creditors that the estate should be administered under the deed. In practice among business men it is becoming more common to settle an insolvent's affairs by means of private deeds of arrangement, and of late less recourse than formerly is had to the Bankruptcy Courts. But another course, sometimes more convenient, is administration by trustees under the Bankruptcy Court; tration sub- this is a mixture of the ordinary bankruptcy practice ject to Court. with the advantages of private arrangement and management of the bankrupt's affairs. In such cases the usual bankruptcy petition is filed, the order for sequestration made, and the official assignee appointed; but creditors are allowed by the statute at the first meeting of creditors, in some cases at a later meeting, to appoint one or two persons, who need not themselves be creditors, to be trustees of the estate, either in place of or conjointly with the official assignee. The creditors may require the trustees to give security. The election of a trustee or trustees must be confirmed by the Judge, who will require to be satisfied; (1) that the trustee has, in writing, accepted the office; (2) that he has given the required XXIV. security, if any. Any creditor may object to the con- CHAP. firmation of a trustee upon certain very general grounds, such as, that the appointment was not made in good faith, that the person chosen is unfit to be a trustee, or not likely to be impartial, &c. So that here again creditors have a handle wherewith to secure honest and efficient administration of the estate. The effect of the order of confirmation, when made, is at once to divest the bankrupt's estate from the official assignee and invest it in the trustees, who thereupon become joint tenants of the bankrupt's property, and in their administration of the estate are subject to the control of the court. If the creditors require an additional safeguard to their interests, they may at any meeting, by an ordinary resolution appoint a committee of inspection. Such a committee, if appointed, acts by majority, and must meet at least once a month; it may fix the remuneration of the trustee; may fill a vacancy in the office of trustee; and may control and authorise the trustee or the official assignee in the doing of certain acts, such as carrying on the business of the bankrupt so far as may be necessary to advantageously wind up same, carrying on an action relative to property of bankrupt, employing a solicitor, referring disputes to arbitration, mortgaging property of bankrupt, dividing in its existing form property which cannot be advantageously sold, making allowance to bankrupt for support of his family, &c., &c. A committee of this kind may be appointed at any time during the administration, and may be used, whether the administration is by trustees, or by trustees and the official assignee conjointly, or by official assignee alone. A resolution of creditors passed at a general meeting will override a direction of the committee. As it is the object of the present chapter to indicate the consequences of bankruptcy, as it may affect bankers CHAP XXIV. Bankruptcy as a peculiar legal status. Development law. in particular, it will be sufficient to have noticed the fact that insolvencies may be dealt with in various ways, which must not be confused. In what follows, the administration of the bankrupt's estate will be supposed in all cases to be in the hands of the official assignee; but it will be proper in the first place to see how a man becomes legally bankrupt, and what is the status and authority of the official assignee. Bankruptcy as a peculiar legal status is quite a modern idea. No doubt the problem of insolvency is one which has presented itself in all countries, in all ages. In communities in an early stage of development the strict law of debtor and creditor is left to take its course, and the debtor who could not pay used in many countries to be at the mercy of his creditor, to the extent of paying with his person, or selling himself into slavery. Early Teutonic codes show a similar severity; the insolvent debtor falls into the hands of his creditor, and is subject to personal fetters and chastisement. It has been pointed out as worthy of remark, that our common law knew no process whereby a man could pledge his body or liberty for payment of a debt; neither, at common law was the body of the debtor liable to execution for debt, except in the case of the king's debtor. The story of debtors' prisons, however, would be a thing apart from the scope of this chapter. In Rome in the time of Julius Cæsar a debtor of bankruptcy became entitled to his discharge on ceding his goods to his creditors. The introduction of this principle marks the commencement of the true doctrine of bankruptcy. In English law it was not until late in the reign of Henry VIII. that the first rude foundation of bankruptcy law was laid, by a statute "against such as do make bankrupt." This statute, 34 and 35 Henry VIII., c. 4, recites that "divers and sundry persons, craftily obtaining into their hands great substance of other |