§ 341. Attachment of Exempted Property. When the bankrupt law exempts or excludes from the operation of the adjudication property which is not exempted from attachment by the state law, an attachment of such property will not be dissolved, because the assignees have no interest in it; and it is only for their benefit as trustees for the creditors that the dissolution is to take effect.1 Some decisions to the contrary may be found;2 but they are unsatisfactory, not only upon general reasoning, but because the bankrupt law of 1867, under which they were made, expressly declared that the exempted property should not vest in the assignees, and it was the vesting order which dissolved attachments.

§ 342. Attachments before Statute. Whether attachments and similar liens already laid upon the debtor's property when the bankrupt law is passed will be dissolved, must depend on the words of the statute. It is not unusual to reserve expressly existing rights, liens, or securities, and such a reservation will include liens, rights, and securities created by process of law, although similar securities if obtained after the passage of the act would be dissolved.3

§ 343. Costs of Attaching Creditor. - If the statute dissolves attachments which were valid when they were made, it ought to provide for the payment in full of the costs of the process. This is recognized in the law of Massachusetts, which makes the costs a privileged debt, if the creditor proves his claim.1 The late Act of Congress failed to provide for such payment, but the courts were able in some cases to authorize it, as a sort of equitable charge upon the attached property.5 No provision was made in either jurisdiction for the costs of a plaintiff who had a claim not in its nature provable.

1 Robinson v. Wilson, 14 N. B. R. 565, Jackson v. Allen, 30 Ark. 110; Bush v. Lester, 55 Ga. 579.

2 Re Ellis, 1 N. B. R. 555, Fed. Cas. No. 4400; Re Hambright, 2 N. B. R. 498, Fed. Cas. No. 5073; Re Stevens, 5 N. B. R. 298, Fed. Cas. No. 13,392.

3 Ingraham v. Phillips, 1 Day, 117; Kilborn v. Lyman, 6 Met. 299. 4 Pub. £ts. Ch. 157, § 139.

5 See Ex parte Foster, 2 Story, 131, Fed. Cas. No. 4960; Re Fortune, 1 Lowell, 306 Fed. Cas. No. 4955; Re Ward, 9 N. B. R. 349, Fed. Cas. No. 17,145; Re Houseberger, 2 N. B. R. 92, Fed. Cas. No. 6734; Ex parte Hadfield, 2 Dea. 113; Ex parte Ralph, 3 M. D. & De G. 331; Ex parte Shaw, 1 De G. 242. Act of 1898, § 63 (3). Infra, § 526.

6 Re Foye, 2 Lowell, 399 Fed. Cas. No. 5021.

§ 344. Distress for Rent. The landlord is peculiarly favored by the common law in being permitted to distrain for his rent upon all goods and chattels found on the demised premises. If this right is exercised before bankruptcy, the landlord is a secured creditor, and holds his security unless he makes the mistake of proving his debt in full. After the bankruptcy, he may still seize the goods of the assignees on the premises whether they have elected to assume the lease or not.2 But in England his right as against creditors is limited to one year's

arrears.3

In New England there has never been a distress for rent, and it has been abolished in some other States. Where it still exists it is regulated by statute. In some of the States there is a lien or privilege within the limits before mentioned without the necessity of a distress; in others there is a distress for one year's rent, as in England; in still a third class the distress must be executed before the title of the assignees accrues, or the privilege will be lost."

§ 345. Creditors bound by Assignees' Neglect. -The creditors will be bound by the neglect of the assignees to assert title to the bankrupt's property when equities of third persons have intervened, sufficient to work an estoppel.8 An instructive example of this in England respects the property acquired by an undischarged bankrupt. Such property may be usually taken by the trustees; but if they have permitted him to carry on trade and to contract debts in procuring this property, their title will, by estoppel, be postponed to that of the newer credi

1 Marshall v. Knox, 16 Wall. 551. 2 Anon. 1 Atk. 102; Ex parte l'lummer, 1 Atk. 103; Buckley v. Taylor, 2 T. R. 600; Briggs v. Sowry, 8 M. & W. 729; Ex parte Hale, 1 Ch. D. 285.

8 Robson, 7th ed., p. 295.

62 Taylor, Landlord and Tenant, 8th ed., § 558.

Re Joslyn, 2 Biss. 235, Fed. Cas. No. 7550; Morgan v. Campbell, 22 Wall. 381.

8 Lawrence v. Knowles, 5 Bing. N. C.

4 See Taylor, Landlord and Tenant, 399; Ex parte Douglas, 3 Dea. & Ch. Title Distress.

5 Austin v. O'Reilly, 2 Woods, 670, Fed. Cas. No. 665; Re Wynne, Chase, 227, Fed. Cas. No. 18,117; Re Trim, 5 N. B. R. 23, Fed. Cas. No. 14,174.

310; Ex parte Davis & Denton, L. R. 2 Ch.363; Taylor v. Irwin, 20 Fed. Rep. 615; Re Lond. & Prov. Tel. Co., L. R. 9 Eq. 653; Sessions v. Romadka, 145 U. S. 20; Kip v. Hirsh, 103 N. Y. 565; Stainback v. Junk, 98 Tenn. 306.

tors. If property has been concealed from the knowledge of the assignees, or if for any reason they are in no fault, their title will be superior to that even of innocent third persons. As against the bankrupt and volunteers under him, or persons not injured by delay, time works no injury to the rights of his trustees unless some statute of limitations applies.3

§ 346. Assignees succeed to the Title which is displaced. — When the bankrupt law makes certain acts or things voidable which would otherwise be valid, and the assignees avoid them, they succeed, by a sort of subrogation, to the title which is displaced. Thus, if an attachment is dissolved, the assignees have a claim upon the property to the extent of the debts secured by the attachment, in preference to subsequent incumbrancers.4

If conveyances good at common law are set aside as being against the bankrupt act, the assignees hold the property against intermediate attachments, seizures, or creditors' bills.5 If security is waived by a creditor proving his debt as if unsecured, a subsequent incumbrancer obtains no advantage, but only the assignees.

This principle, though recognized in some of the earlier

1 Troughton v. Gitley, Ambl. 630; Tucker v. Hernaman, 1 Sm & Giff. 394, 4 De G. M. & G. 395; Ex parte Butler, 2 M. D. & De G. 731; Butler v. Hobson, 4 Bing. N. C. 290; Ex parte Jungmichel, 2 M. D. & De G. 471; Engleback v. Nixon, L. R. 10 C. P. 645; Ex parte Bolland, 9 Ch. D. 312.

2 Gay v. Kingsley, 11 Allen, 345; Ex parte Ford, 1 Ch. D. 521; Meggy v. Imp. Disc. Co., 3 Q. B. D. 711; Cole v. Coles, 6 Hare, 517; Hall v. Whiston, 5 Allen, 126.

3 Re Lond. & Prov. Tel. Co., L. R. 9 Eq. 653. See decree p. 657: Penny v. Pickwick, 16 Beav. 246; Roseboom v. Mosher, 2 Denio, 61.

4 Re Nelson, 9 Ben. 238, Fed. Cas. No. 10,100; Re Klancke, 4 N. B. R. 648, Fed. Cas. No. 7864; Re Badenheim, 15 N. B. R. 370, Fed. Cas. No. 716; Re Steele, 16 N. B. R. 105, Fed. Cas. No.

13,345. See Act of 1898, § 67 f. Infra, § 530.

5 Oswald v. Thompson, 2 Ex. 215; Fawcett v. Fearne, 6 Q. B. 20; Congreve v. Evetts, 10 Ex. 298; Everett v. Stone, 3 Story, 446, Fed. Cas. No. 4577; Dodge v. Sheldon, 6 Hill, 9; Penniman v. Cole, 8 Met. 496; Seaman v. Stoughton, 3 Barb. Ch. 344; Carr v. Acraman, 11 Ex. 566; Read v. McIntyre, 98 U. S. 507; Johnson v. Rogers, 15 N. B. R. 1, Fed. Cas. No. 7408; Re Beisenthal, 14 Blatch. 146, Fed. Cas. No. 1236; Anshutz v. Hoerr, 1 Fed. Rep. 592; Seal v. Duffy, 4 Penn. St. 274; Re Croughwell, 9 Ben. 360, Fed. Cas. No. 3440; Linder v. Lewis, 10 Ben. 49, Fed. Cas. No. 8362.

6 Wallace v. Conrad, 3 N. B. R. 41, Hiscock v. Jaycox, 12 N. B. R. 507, Fed. Cas. No. 6531; Cracknall v. Jan6 Ch. D. 735.

son,

English cases, has lately been denied, and a subsequent incumbrancer has been permitted to hold, though, excepting for the bankruptcy, he would have been subordinate to the one whose title is displaced.1 The judges in one case remarked that their decision was singular, and not in accordance with the intent of the legislature; but held that the words of the statute required it,2 not observing that the word "void," in this connection, means voidable by the trustees for the benefit of the general creditors. The true alternative is that if the first incumbrance cannot be avoided except for the benefit of one which is subordinate to it, it should remain valid.3

The latest English statute corrects this mistake, so far as it affects money received from a sale on execution.4

§ 347. Assignees may condone a Fraud. As the assignees may avoid a fraud, so they may condone it, for they have all the rights as well of the bankrupt as of his creditors.5

§ 348. Assignees may transfer the Right to avoid a Fraud. The trustees have the extraordinary power of transferring to a purchaser their right to avoid a fraudulent conveyance. But since they may not choose to grant this right, it must appear by a fair construction of their transfer that they intend to do so. A mere release of their title will not have this effect, and a sale subject to a mortgage affirms the mortgage so far as the buyer is concerned.7

§ 349. Rights belonging to some Creditors only do not vest in the Assignee. - Frauds, representations, acts, or neglects of a third person by reason of which certain but not all of the

1 Graham v. Witherby, 7 Q. B. 491; Re Barrand, 3 Ch. D. 324; 4 Ch. D. 23; Ex parte Payne, 11 Ch. D. 539; Re Artistic Colour Co., 21 Ch. D. 510; Sanguinetti . Stuckey's Banking Co. [1895], 1 Ch. 176.

2 Ex parte Blaiberg, 23 Ch. D. 254. 3 See Wilcocks v. Waln, 10 S. & R. 380; Manuf. & M. Bank v. Bank of Pa., 7 Watts & S. 335; Shulze's App. 1 Penn. St. 251; Tomb's App. 9 Penn. St. 61. See per Cave, J., Re Pearce, 2 Morrell, 105.

4 Re Pearce, 2 Morrell, 105.

5 Butler ". Hildreth, 5 Met. 49; Snow v. Lang, 2 Allen, 18; Harvey r. Varney, 98 Mass. 118.

6 Dwinel v. Perley, 32 Maine, 197; Freeland v. Freeland, 102 Mass. 475; Traer v. Clews, 115 U. S. 528; Seear r. Lawson, 15 Ch. D. 426, 434, per James, L. J.

7 Brewer v. Hyndman, 18 N. H. 9; Bean v. Brackett, 34 N. H. 102; Tuite v. Stevens, 98 Mass. 305.

creditors of the bankrupt may have a remedy against him or his property for the bankrupt's debts to them, do not vest in the assignees. As where A has held himself out to some creditors as a partner of the bankrupt; or has deceived some of them by leaving his goods in the bankrupt's hands, etc. The reason is obvious, that these rights of action are in the nature of estoppels in favor of those persons who have been deceived rather than property which can justly be applied for the general benefit. Therefore, where a statute gave an action against the directors of a corporation for debts contracted at a certain time or in a certain way, and all were not so contracted, the assignees of the corporation could maintain no action against the directors.2

§ 350. Creditors bound by Assignees' Estoppel. The assignees, representing the creditors, may bind them by their laches. Thus, though in England all property of an undischarged bankrupt vests in his trustees, yet if they permit the bankrupt to trade, they will be estopped to set up as against creditors of that trade, a title to property which he may have acquired therein.3 So if the bankrupt has onerous property which required him and his assignees in his right to take active measures, such as to pay instalments or assessments, and they have failed to make them, their abandonment of the property will be presumed as against a third person who has been misled, or who would suffer by holding the title good.4 Where a creditor's bill was filed before the bankruptcy to charge property alleged to have been fraudulently conveyed by the bankrupt, and the assignees were notified and neglected for a long time to come in, and when they applied for leave did not offer to contribute to the expenses, their title was held to have been abandoned.5 So if the proceedings are or may be

1 See 1 Bates, Partnership, § 91; Audenried v. Betteley, 5 Allen, 382; Sawyer v. Turpin, 91 U. S. 114, 121. 2 See § 333.

3 Troughton v. Gitley, Ambl. 630; Engleback v. Nixon, L. R. 10 C. P. 645; Butler v. Hobson, 4 Bing. N. C. 290; and cases cited ante, § 345.

4 Lawrence v. Knowles, 5 Bing. N. C. 399; Re Lond. & Prov. Tel. Co., L. R. 9 Eq. 653; Ex parte Hannington, 18 W. R. 959; Penny v. Pickwick, 16 Beav. 246.

5 Smith v. Gordon, 6 Law Reporter, 313; Fed. Cas. No. 13,052; Rugely v. Robinson, 19 Ala. 404.