"Preferences through Legal Proceedings."

A warrant of attorney to confess judgment in contemplation of bankruptcy is not an act of bankruptcy unless the debtor procures judgment to be entered and an execution to be issued. Barnes v. Bellington, 1 Wash. C. C. 29; 2 Fed. Cas. 858 (1803).

It is not an act of bankruptcy to give a warrant of attorney for a consideration of equal value to the amount of the judgment confessed. In re Blabon et al. v. Hunt et al., 2 N. J. L. J. 179; 3 Fed. Cas. 493. It was decided under the Act of 1841 that the giving of a power of attorney is not an act of bankruptcy unless done fraudulently, and that it was not fraudulent if given to a bona fide creditor, unless the debtor at the time contemplated an act of bankruptcy, or an application by himself to be declared a bankrupt. Buckingham v. McLean, 13 How. 151.

A warrant of attorney given to enable the debtor to continue his business, and without intent to defeat the operation of the Bankrupt Act, will not support a petition for an adjudication in bankruptcy. In re Leeds, 1 N. B. R. 521; 15 Fed. Cas. 239.

A confession of judgment for a present consideration followed by the issuance of an execution is not an act of bankruptcy unless the creditor has the assistance of the debtor. Clark v. Iselin, 21 Wall. 360.

To avoid "suffering his property to be taken on legal process," under the Act of 1867, it was necessary for a debtor when he was sued to defend the action, or file his petition in bankruptcy. Fitch et al. v. McGie, 2 Biss. 163; 9 Fed. Cas. 180.

There must be active co-operation on the part of the debtor in aiding another to obtain a judgment and levy an execution to make it an act of bankruptcy. Jones v. Sleeper, 2 N. Y. Leg. Obs. 131; 13 Fed. Cas.

1030 (1843).

Mere inactivity of a debtor in permitting judgment on an honest debt to be recovered, without having encouraged the suit, is not an act of bankruptcy. Order of adjudication reversed. Wright v. Filley, 1 Dill. 171; 4 N. B. R. 610; 30 Fed. Cas. 672 (1870).

It was held to be an act of bankruptcy for an insolvent firm to permit one of the partners to secure a judgment by default, though the firm was lawfully indebted to him. In re Black et al., 2 Ben. 195; 3 Fed. Cas. 495.

A. had secured a judgment in a state court against J., after which the latter conveyed all his real estate, of a value greater than the debt, to his sons. The court dismissed the petition of A. for an adjudication of bankruptcy against J., and held that A.'s remedy was to have the conveyance set aside in a court of equity. Avery v. Johann, 3 N. B. R. 144; 2 Fed. Cas. 251.

It was an act of bankruptcy under the Act of 1841 for a trader to procure himself to be arrested, or his goods to be attached. Wakeman v. Hoyt, 5 Law Rep. 309; 28 Fed. Cas. 1350 (1842).

Under the Act of 1841 it was held not to be an act of bankruptcy to permit a judgment to be entered in favor of a particular creditor, and an execution to be issued thereon, unless it was shown that the debtor was insolvent at the time. In re Bonnet, 1 N. Y. Leg. Obs. 310; 3 Fed. Cas. 854 (1843).

Where the execution on a fictitious judgment rendered before the passage of the bankrupt law was, after the passage of the Act, levied on property of the alleged debtor, it was held that the debtor by failing to take steps to have the judgment set aside, was guilty, being insolvent, of suffering his property to be taken on legal process with intent to defeat or delay the operation of the Act, and had thus committed an act of bankruptcy. It was stated, however, that the plaintiff in the fictitious judgment could assert his rights, if any he had, in defending a suit to be instituted by the assignee in behalf of the bankrupt's estate. In re Schick, 1 N. B. R. 177; 21 Fed. Cas. 689 (1867).

A debtor who voluntarily aids a creditor in perfecting an attachment of his goods which was previously incomplete, committed an act of bankruptcy within the terms of the Act of 1841. Fisher et al. v. Currier et al., 5 Law Rep. 217; 0 Fed. Cas. 127 (1842).

A debtor, being insolvent, or contemplating insolvency, who fails to file a petition in voluntary bankruptcy, and whose property is levied upon, was held to have "suffered his property to be taken on legal process" within the meaning of the Act of 1867. In re Dibblee et al., 3 Ben. 283; 7 Fed. Cas. 651.

A creditor levied on the property of the bankrupt in such a manner as to give himself a preference over other creditors. He then set up these facts in a petition for involuntary bankruptcy, on the ground that the debtor had "suffered his property to be taken on legal process." It was held that the petition could be entertained. Coxe et al. v. Hale et al., 10 Blatchf. 56; 6 Fed. Cas. 689.

A debtor who procures the appointment of a receiver in a state court is chargeable with defeating and delaying the operations of the Bankrupt Act. In re Bininger et al., 7 Blatchf. 262; 3 Fed. Cas. 412.

The property of a debtor had been attached without his knowledge, and he had failed to have himself adjudged a bankrupt by voluntary proceedings. The court held that this omission could have no retroactive effect to supply the intent necessary to make the attachment an act of bankruptcy. In re Belden et al., 2 N. B. R. 42; 3 Fed. Cas. 82. Proceedings to wind up the affairs of an insurance company under the laws of Illinois, and the appointment of a receiver, were held to be an act of bankruptcy as constituting a taking on legal process. The failure of the company to file a voluntary petition in bankruptcy was itself an act of bankruptcy, and the fact that the state court had first obtained jurisdiction of the parties and the property did not affect the jurisdiction of the court in bankruptcy. In re Merchants' Ins. Co., 3 Biss. 162; 17 Fed. Cas. 41.

When a debtor finds himself insolvent, it is his duty to file a petition in voluntary proceedings. Failing in that, if some of his creditors take

his property by attachment or execution, he may be adjudged a bankrupt for having suffered his property to be taken under legal process. In re Wells, 3 N. B. R. 371; 29 Fed. Cas. 637.

Proceedings were commenced under the laws of the state dissolving a corporation and appointing a receiver, who took possession of its property. It was held that this constituted an act of bankruptcy on the part of the company in suffering its property to be taken on legal process. In re Washingon Marine Ins. Co., 2 Ben. 292; 29 Fed. Cas. 365. It was held not to be a suffering to take property under legal process for a debtor to remain passive during proceedings to collect a claim which was due, and to which there was no defense. National Bank v. Warren, 96 U. S. 539.

The district court of California decided that the decision of the supreme court in Wilson v. City Bank of St. Paul, 17 Wall. 84, did not apply to the case where a debtor, hopelessly insolvent, fails to apply for the benefit of the Bankrupt Act, and suffers certain creditors to appropriate all of his assets. Hyde v. Corrigan, 9 N. B. R. 466; 12 Fed. Cas. 1106.

Held, under the Act of 1867, that the entering of a judgment in pursuance of a warrant of attorney within two months before the filing of a creditor's petition is not an act of bankruptcy within the provision of the statute, Balfour v. Wheeler, 18 Fed. Rep. 893.

It was held to raise a presumption of fraudulent intent where a debtor gave a judgment note payable in one day with the right to issue execution therewith. Clarion Bank v. Jones, 21 Wall. 325.

The alleged bankrupt had made a confession of judgment to one of his creditors with intent to give him a preference. He was insolvent at the time, but did not know that there was such a thing as the bankruptcy law. This was held to come within section 39 of the Act of 1867 in that "he suffered his property to be taken on legal process." In re Craft, 2 Ben. 214; 6 Fed. Cas. 698.

Miscellaneous.

The giving of a chattel mortgage by an infant is not an act of bankruptcy, being subject to his election to confirm or disaffirm when he comes of age. In re Derby, 6 Ben. 232; 7 Fed. Cas. 513.

Judge Dillon held that a person who is so unsound in mind as to be wholly incapable of managing his affairs cannot in that condition commit an act for which he can be forced into bankruptcy by his creditors against the objection of the guardian. Whether such person on the petition of himself or his guardian may, if insolvent, go into voluntary bankruptcy, the court gives no opinion." In re Marvin, 1 Dill. 178; 16 Fed. Cas. 927.

A corporation cannot commit an act of bankruptcy after being dissolved, and a receiver appointed. The collection, under legal process, of an asset of a corporation by such receiver, more than six months after the dissolution of the corporation, does not constitute an act of bankruptcy; and cannot be the cause of proceedings in bankruptcy. The

thirty-ninth section of the Act of 1867 required that the petition shall be brought within six months after the act of bankruptcy has been committed. In re New Amsterdam Fire Ins. Co., 6 Ben. 368; 18 Fed. Cas. 34. An act which is not a fraud in itself may be a violation of the bankrupt law, because it seeks to evade or avoid its provisions. Webb v. Sachs, 4 Saw. 158; 29 Fed. Cas. 523.

Upon the service of process in involuntary proceedings the alleged bankrupt indorsed on a copy of the petition an admission of the truth of the averments contained therein, except as to those charging fraud. Before the hearing, he filed his voluntary petition in the same court, and an adjudication was had. Subsequently the court held that the adjudication was of no effect, and entertained the proceedings in involuntary bankruptcy. In re Stewart, 3 N. B. R. 108; 23 Fed. Cas. 51

Where one partner procures another to leave the state, the latter, but not the former, commits an act of bankruptcy. In re Terry, 5 Biss. 110; 23 Fed. Cas. 852.

When a deposition is relied upon to prove an act of bankruptcy it must show the fraudulent intent of the debtor in making the conveyance complained of, but the omission can be supplied by a supplemental deposition. Cunningham v. Cady, 13 N. B. R. 525; 6 Fed. Cas. 966.

Effect will be given to the admission of a fact from which a fraudulent intent may be inferred, though the admission be qualified with a denial of such fraudulent intent. In re Sutherland, Deady, 344; 23 Fed. Cas. 454.

Held, under the Act of 1841, that it was not necessary that a preference should have been spontaneous to make it an act of bankruptcy. Van Kleeck et al. v. Thurber, 28 Fed. Cas. 1031 (1842).

Justice Hunt said that acts or omissions that might be evidence of insolvency or fraud in a strictly commercial community may possess less significance in the rural districts. Lakin v. First Nat. Bank, 13 Blatchf. 83; 14 Fed. Cas. 959.

A debtor who files a petition in voluntary bankruptcy thereby commits an act of bankruptcy, and a creditor cannot oppose the adjudication on the ground that he is really able to pay his debts. In re Fowler, 1 Low. 161; 9 Fed. Cas. 614.

Concealment of the debtor from creditors is not an act of bankruptcy, if it does not prevent the service of process. Barnes v. Bellington, 1 Wash. C. C. 29; 2 Fed. Cas. 858 (1803).

Only acts of bankruptcy which are set up in the petition can be proved on the hearing. Ex parte Shouse, Crabbe, 482; 22 Fed. Cas. 27 (1842). Creditors are not protected by ignorance of the law when they have knowledge of facts showing that their debtor is insolvent. Martin v. Toof et al., 1 Dill. 203; 16 Fed. Cas. 907.

Under the Act of 1867 there could be a constructive fraud, consisting of a violation of the terms of the law, without an actual fraud under section 12. In re Riorden, 14 N. B. R. 332; 20 Fed. Cas. 820.

A mere omission by accident or mistake was held not to constitute a concealment within section 5021, R. S. In re Scott, 11 Fed. Rep. 133.

Insolvency alone is never an act of bankruptcy, and when an act of bankruptcy has been once committed, a debtor cannot be relieved from the legal consequences thereof except by lapse of time, or by arrangement with the creditors who have the right to sue on account of it. In re Ryan, 5 Leg. Gaz. 263; 21 Fed. Cas. 105.

(a.-2.) A large number of notes on the question what acts constitute a preference will be found under section 60.

(d.) For notes on the examination of bankrupts, see section 21.

[See notes to § 8.]

§ 4. Who May Become Bankrupts.- (a.) Any person who owes debts, except a corporation, shall be entitled to the benefits of this Act as a voluntary bankrupt.

(b.) Any natural person, except a wage-earner or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any corporation engaged principally in manufacturing, trading, printing, publishing, or mercantile pursuits, owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default of an impartial trial, and shall be subject to the provisions and entitled to the benefits of this Act. Private bankers, but not national banks or banks incorporated under State or Territorial laws, may be adjudged involuntary bankrupts.

(a.) Aliens residing in the United States were held to be entitled to the benefit of the Bankrupt Act of 1867. In re Boynton, 10 Fed. Rep. 277. So held also by Judge Lowell. In re Goodfellow, 1 Low. 510; 11 Fed. Cas. 594.

An infant is entitled to the benefit of a bankrupt act, and the petition may be filed in his own name. In re Book, 3 McLean, 307; 3 Fed. Cas. (1843).

Under the Law of 1867, a married woman might become a voluntary or involuntary bankrupt. In re Collins, 3 Biss. 415; 6 Fed. Cas. 113.

A debtor against whom involuntary proceedings had been commenced made a composition with his creditors, but was unable to carry it out, and it was set aside. Thereupon, he filed his voluntary petition, and a decree of adjudication was had. The court stayed the former, and proceeded with the voluntary proceedings. In re Flannigan, 5 Saw. 312; 9 Fed. Cas. 239.

A court of bankruptcy has no jurisdiction over a petition filed by an infant, or to confirm an adjudication of bankruptcy previously made on a petition filed after the infant comes of age. In re Derby, 6 Ben. 232; 7 Fed. Cas. 513.

(b.) It is generally true that proceedings in involuntary bankruptcy are proceedings in rem, and this is especially true where the bankrupt is a corporation. Platt v. Archer, 9 Blatchf. 559; 19 Fed. Cas. 822.