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not in fraud of creditors (In re Cornwell, 6 N. B. R. 305; 6 Amer. Law Rev. 365; Fed. Cas. 3250); also a sale by a debtor, three months prior to being adjudged a bankrupt, of a portion of his property, made in good faith to raise money to discharge a debt, and where the vendee has neither knowledge nor reasonable cause to believe that the sale is made with fraudulent intent, is not in violation of the Bankrupt Act. (Tiffany v. Lucas, 8 N. B. R. 49; 15 Wall. 410.) A conveyance by an insolvent debtor to his creditor, of property upon which said creditor has a lien to a greater amount than the value thereof, is not void (Catlin v. Hoffman, 9 N. B. R. 342; 2 Sawy. 486; 21 Pittsb. Leg. J. 159; Fed. Cas. 2521); and where there is no fraudulent intention, a dealer may, although insolvent, continue to sell his stock at retail, and endeavor to effect, if possible, a compromise with his creditors. (In re Munger & Champlin, 4 N. B. R. 90; Fed. Cas. 9923.) Barring fraud in the transaction and an intent to defeat the act, there is nothing in the bankrupt law forbidding a loan of money to a man pecuniarily embarrassed, even though the lender had reason to believe the borrower insolvent. (Tiffany v. Boatman's Saving Institution, 9 N. B. R. 245; 18 Wall. 375.)

A debtor transferred his stock of goods to a creditor by bill of sale. Later other creditors attached the goods, and after the attachment the debtor became a voluntary bankrupt and the goods were transferred by proper proceedings to the assignee. The first transferee brought an action against the attaching creditors for unlawful seizure and conversion. It was held that he was entitled to recover the full value of the property. (Bromley v. Goodrich et al., 15 N. B. R. 289.) Although an assignment be not duly acknowledged or recorded, yet it is valid as against a party who takes title from the bankrupt, after the commencement of the proceedings in bankruptcy, with full notice thereof. (Brady v. Otis et al., 14 N. B. R. 345.) The fact that a bankrupt is adjudicated upon a petition charging him with making a fraudulent conveyance does not estop his grantee from claiming that as to him the conveyance is valid. (In re Marter, 12 N. B. R. 185; Fed. Cas. 9143.) The power to execute a deed in a mortgagor's name and as his attorney is not affected by his bankruptcy, although the sale, under the power contained in the mortgage, took place after the commencement of the proceedings in bankruptcy. (Hall v. Bliss et al., 14 N. B. R. 329.) A conveyance, even though fraudulent, is not made "in contemplation of bankruptcy or insolvency," where there are no other creditors and the debt is well secured. (In re Johann. 4 N. B. R. 143; 2 Biss. 139; Fed. Cas. 7331.) A check given by A., who be comes bankrupt before presentation, nevertheless entitles the payee to so much of the money of the bankrupt as the check calls for. (Fourth Nat. Bank of Chicago v. City Nat. Bank of Grand Rapids, 10 N. B. R. 44.)

Evidence of fraudulent intent.- In an action to set aside a conveyance by an insolvent debtor, on the ground of fraud, such fraud must be proved, not assumed. (Campbell, Ass., v. Waite et al., 16 N. B. R. 93; 9

Ben. 166; Fed. Cas. 2374.) If, after deducting the property which is the subject of the voluntary settlement, sufficient available assets are not left for the payment of the settlor's debts, then the law infers intent to defraud (Sedgwick, Ass., v. Place et al., 5 N. B. R. 168; 5 Ben. 184; 3 Chi. Leg. News, 409; 4 Amer. Law T. Rep. (U. S. Cts.) 179; 6 Amer. Law Rev. 181; Fed. Cas. 12620); and a sale of property by a bankrupt out of the usual and ordinary course of business is presumptively fraudulent, but this presumption may be rebutted by evidence aliunde to be produced by the vendee. (Babbitt v. Walbrun & Co., 4 N. B. R. 30; 2 Chi. Leg. News, 285; 1 Dill. 19; Fed. Cas. 694.) A sale was made of a stock in trade and so forth when the vendor was insolvent. Vendor was afterwards adjudicated bankrupt. The sale was attacked on the ground that it was made by an insolvent, and that the vendee had reasonable cause to believe him insolvent. The court held that the bill must allege that the defendant knew the fraud and such knowledge must be proved. (Crump, Ass., v. Chapman, 15 N. B. R. 571; 1 Hughes, 183; 1 Va. Law J. 309; 24 Pittsb. Leg. J. 169; Fed. Cas. 3455; secs. 5128, 5129, R. S.)

Conveyances not made in the usual and ordinary course of business of debtors are prima facie fraudulent and void (Rison v. Knapp, 4 N. B. R. 114; Fed. Cas. 11861; Collins & Ferrington, Ass., v. Bell et al., 3 N. B. R. 146; Fed. Cas. 3010; United States v. Bayer, 13 N. B. R. 88; Fed. Cas. 14584; In re Sims, 19 N. B. R. 57; Fed. Cas. 12889; Webb, Ass., v. Sachs et al., 15 N. B. R. 168; 4 Sawy. 158; 9 Chi. Leg. News, 156; Fed. Cas. 17325; In re Deane & Garrett, 2 N. B. R. 29; 15 Pittsb. Leg. J. 581; Fed. Cas. 3700; Walburn et al. v. Babbitt, Ass., 2 N. B. R. 1; 16 Wall. 577; In re Langley, 1 N. B. R. 155); and in determining whether a given transaction is made in the ordinary and usual course of business of a party, the question is not whether such transactions are usual in the general conduct of business throughout the community, but whether they are according to the usual course of business of the particular person whose conveyance is the subject of investigation. (Rison v. Knapp, 4 N. B. R. 114; Fed. Cas. 11861.)

To defeat a conveyance for a present consideration, the proof must show that the party to whom or for whose benefit it was made knew or had reasonable cause to believe the grantor was insolvent and that a fraud upon the Bankrupt Act was intended. The knowledge of a fraud may be established by circumstantial evidence. (Gattman & Co. v. Honea, Ass., 12 N. B. R. 493; 7 Chi. Leg. News, 395; Fed. Cas. 5271.) A voluntary conveyance, where there are no existing debts, may be void as to subsequent creditors if it be shown by facts and circumstances that the deed was made with an actual intent to defraud subsequent creditors. (Smith v. Keher, 7 N. B. R. 97; 2 Dill. 50; 6 West. Jur. 451; Fed. Cas. 13071; Beecher, Ass., v. Clark et al., 10 N. B. R. 385; Fed. Cas. 1223.) An allegation that defendant, in contemplation of bankruptcy, consigned goods to a consignee residing beyond the jurisdiction of the

court, is a sufficient charge that the removal was to defraud creditors, if it was in fact done with intent to keep the property from coming into the hands of the assignee. (In re Hammond v. Coolidge, 3 N. B. R. 71; 1 Lowell, 381; Fed. Cas. 5999.)

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Notice to transferee. If a mortgagor conveys in fraud of the Bankrupt Act, actual notice must be brought home to the mortgagee who has taken the conveyance under circumstances promising material relief to the debtor and apparently for that purpose (Boothe, Ass., etc. v. Brooke, Neely & Co., 12 N. B. R, 398; 1 N. Y. Wkly. Dig. 125; Fed. Cas. 1650; Campbell, Ass., v. Waite et al., 16 N. B. R. 93: 9 Ben. 166; Fed. Cas. 2374); and it is a question of fact for the jury to decide whether or not, at the time a creditor took an assignment of property from the debtor, the creditor knew or had reason to know the debtor was insolvent. (Ecker v. McAllister, 17 N. B. R. 42.)

A creditor has reasonable cause to believe that his debtor is insolvent when such a state of facts is brought to his notice respecting the affairs and pecuniary condition of his debtor as would lead a prudent man to the conclusion that the debtor is unable to meet his obligations as they mature, in the ordinary course of his business (Dutcher v. Wright, Ass., etc., 16 N. B. R. 331; 94 U. S. 553); and the filing of the petition praying the adjudication in bankruptcy is notice to all the world and all persons dealing with the person so charged do so at their peril. A purchaser of negotiable paper, after such filing, is not a bona fide holder without notice. (In re Lake, 6 N. B. R. 542; 6 West. Jur. 360; 4 Chi. Leg. News, 281; 3 Biss. 204; Fed. Cas. 7992.) To be a bona fide purchaser without notice, a person must be without notice of the rights and equities sought to be enforced at the time of payment of the consideration (Marsh and Palmer, Ex'r, v. Armstrong, 11 N. B. R. 125); and a mortgagee who knows that the mortgagor is unable to pay his debts, and that there are other creditors for amounts larger than his whose debts are unsecured, a mortgage executed to secure his debt within the time prescribed by the Bankrupt Act is made in fraud of that act, and such mortgage will be set aside (In re Armstrong, 16 N. B. R. 275; 9 Ben. 22; Fed. Cas. 539); but notice to a creditor of an act of bankruptcy does not affect a transfer to him, otherwise than as it tends to show that he had reason to believe that such transfer was made in fraud of the Bankrupt Act. (Catlin v. Hoffman, 9 N. B. R. 342; 2 Sawy. 486; 21 Pittsb. Leg. J. 159; Fed. Cas. 2521.) A second purchaser who had knowledge of the bankrupt's failure and that the seller held the goods under mortgage from the bankrupt does not get a good title. To constitute a bona fide purchaser for value, he must not only show that he had no notice, but he must have paid a consideration at the time of the transfer either in money or other property, or by a surrender of existing debts or securities. (Rison v. Knapp, 4 N. B. R. 114; Fed. Cas. 11861.)

f. That all levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition in bankruptcy against him, shall be deemed. null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, unless the court shall, on due notice, order that the right under such levy, judgment, attachment, or other lien shall be preserved for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid. And the court may order such conveyance as shall be necessary to carry the purposes of this section into effect: Provided, That nothing herein contained shall have the effect to destroy or impair the title obtained by such levy, judgment, attachment, or other lien, of a bona fide purchaser for value who shall have acquired the same without notice or reasonable cause for inquiry.

Assignee's title and right of recovery. See sec. 70.

Sec. 68. Set-offs and counter-claims.-a. In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid.

[Act of 1867. SEC. 20. That, in all cases of mutual debts or mutual credits between the parties, the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed or paid, but no set-off shall be allowed of a claim in its nature not provable against the estate: When a creditor has a mortgage or pledge of real or personal property of the bankrupt, or a líen thereon for securing the payment of a debt owing to him from the bankrupt, he shall be admitted as a creditor only for the balance of the debt after deducting the value of such property, to be ascertained by agree

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ment between him and the assignee, or by a sale thereof, to be made in such a manner as the court shall direct; or the creditor may release or convey his claim to the assignee upon such property; and be admitted to prove his whole debt. If the value of the property exceeds the sum for which it is so held as security, the assignee may release to the creditor the bankrupt's right of redemption therein on receiving such excess; or he may sell the property, subject to the claim of the creditor thereon; and in either case the assignee and creditor, respectively, shall execute all deeds and writings necessary or proper to consummate the transaction. If the property is not so sold or released and delivered up, the creditor shall not be allowed to prove any part

of his debt.]

A debt is defined to include any debt, demand or claim provable in bankruptcy. (Sec. 1-11.)

Mutual debts.-"Mutual debts " and "mutual credits" are correlative terms. The term "mutual credits" in the act (1867) meant only such as must in their nature terminate in debts. What is a debt on one side is a credit on the other, so that "credits" can have no broader meaning than "debts," and cannot be extended so as to include trusts. (Libby v. Hopkins, 104 U. S. 303.)

To constitute mutual demands, within the meaning of the act, they should be due from the same persons in the same capacity. (Rollins, Ass., v. Twitchell & Co., 14 N. B. R. 201; 2 Hask. 66; 5 Amer. Law Rec. 247; Fed. Cas. 12027; In re Purcell, 18 N. B. R. 447; Fed. Cas. 11470.)

Set-off or counter-claim.— Upon an attempted set-off of a debt due before bankruptcy and one not due till afterwards, both being due at the time of attempted set-off, it was held that these accounts could be set off against each other. (In re City Bank, etc., 6 N. B. R. 71; 4 Chi. Leg. News, 81; 6 West. Jur. 65; Fed. Cas. 2742.)

Under the former act it was held that where the alleged bankrupt had a counter-claim against the petitioning creditor, being provable in bankruptcy, and such amount would reduce his claim below $250, the petition would be dismissed. (1 (In re Osage Valley & S. Kan. R. R. Co., 9 N. B. R. 281; 1 Cent. Law J. 33; Fed. Cas. 10592.) In a composition in which no assignee had been appointed, bankrupt had claims against a creditor which he offered to set off against the debt. It was held that a bankrupt has the same rights as to set-off as an assignee, if one had been appointed. (Ex parte Howard Nat. Bank, 16 N. B. R. 420; 2 Lowell, 487; Fed. Cas. 6764.)

Where the assignee of an insolvent bank sues the maker of a promissory note held by the bank, and the maker, after the execution and recording of the deed of assignment to the assignee, and with knowl

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