course of business of the debtor, shall be prima facie evidence of fraud.

§ 47. The Power to Assign not Suspended by Bankrupt Laws.-Before discussing these provisions more in detail, it is important to observe that, while the existence of a bankrupt law established by Congress under its constitutional powers ipso facto suspends and supersedes the operation of State insolvent laws,1 in so far at least as they are in conflict with such laws, yet this principle has no application to general voluntary assignments for the benefit of creditors. The right to make such assignments exists independent of any statute,* and the various State statutes regulating the execution of such assignments, and the procedure under them are in no sense insolvent laws. There is no proper analogy between

1

Sturgis v. Crowninshield, 4 Wheat. 122; Ogden v. Saunders, 12 Wheat. 213; Hyde v. Zacharie, 6 Pet. 638; Ex parte Eames, 2 Story, 322; In re Reynolds, 9 N. B. R. 50; Day v. Bardwell, 97 Mass. 246; see Boedefeld v. Reed, 55 Cal. 299; Lewis v. County Clerk, Id. 604; Seatle Coal Co. v. Thomas, 57 Id. 197; Rowe v. Page, 54 N. H. 190; Sadler v. Immel, 15 Nev. 265. In Lyman v. Bond (130 Mass. 291), it was held that if the effect of the New Hampshire statute of 1867, c. 126, was to bar an action upon a creditor's claim, it was an insolvent law, the operation of which was suspended by the bankrupt act; and in Lothrop v. Highland Foundry Co. (128 Mass. 120), it was held that a conveyance by way of preference, made contrary to the insolvent law, while the bankrupt act was in force, is a sufficient cause for instituting proceedings in insolvency after the repeal of the bankrupt act.

2

Ex parte John Zergenfuss, 24 N. Ca. 463; Shryock v. Bashore, 13 N. B. R. 481; reversed on error, 15 Id. 283; s. c. 82 Penn. St. 159; Maltbie v. Hotchkiss, 38 Conn. 80; Geery's Appeal, 43 Id. 289; s. c. 17 N. B. R. 196; Beck v. Barker, 65 Penn. St. 262; Barber v. Rogers, 71 Id. 362.

'Cook v. Rogers, 31 Mich. 391; 13 N. B. R. 97; Thrasher v. Bentley, 59 N. Y. 649; s. c. below, 2 Sup. Ct. R. 399; Ebersole v. Adams, 13 N. B. R. 141; Hawkins' Appeal, 34 Conn. 548; s. c. 2 N. B. R. 378; Maltbie v. Hotchkiss, 38 Conn. 80; Barnes v. Rettew, 8 Phila. 133; Mayer v. Hellman, 13 N. B. R. 440; see Re Kimball, 16 N. B. R. 188; Dolson v. Kerr, Id. 405. Voluntary assignments under the State laws are valid, unless proceedings in bankruptcy are instituted within six months thereafter. Geery's Appeal, 43 Conn. 289; s. c. 17 N. B. R. 196. But an assignment, under a law of New Jersey, which " imposes restraint upon the rights to participate in the distribution of an assigned estate," inconsistent with the bankrupt act, and changing the course of administration under the act, is a conveyance in violation thereof, within the scope of section 5129. Matter of Troth, 1 Fed. Reptr. 405. Where all the creditors of a bankrupt are secured to the same extent, and in the same manner, so that no one has a preference over the others-as by an assignment, the provisions of the Bankrupt Act, discriminating between secured and unsecured creditors have no application. Matter of Backer, 2 Abb. N. C. 379.

Cook v. Rogers, supra; Thrasher v. Bentley, supra; sec Sadler v. Immel, 15 Nev. 265; Boese v. King, 78 N. Y. 471.

insolvent law, correctly so called, and those principles of the common law which allow and sanction the conveyance of his property by a debtor for the equal benefit of all his creditors, and no such resemblance or relation as to warrant the conclusion that, if the existence of a bankrupt law suspends the first, it must also suspend the last.1

§ 48. Assignments fraudulent at Common Law, or under 13 Eliz., or giving Preferences.-Where an assignment is fraudulent at common law, or under the statutes of the State where it is made, or where it attempts to create a preference among creditors, it is clearly repugnant to the bank

1

4

1 Mr. Ch. Justice Graves, in Cook v. Ropers, 31 Mich. 396. In the case of Globe Ins. Co. v. Cleveland Ins. Co. 14 N. B. R. 316, 320, Mr. Justice Emmons has expressed a contrary view of the law. This point was however necessarily before the Supreme Court of the United States in the case of Mayer v. Hellman, supra, and was there distinctly ruled upon. Mr. Justice Field, after considering the Ohio statute regulating voluntary assignments, which does not vary in its character materially from statutes of other States on the same subject, remarked: "There is nothing in the act resembling an insolvent law," and it was held that the assignment, irrespective of the statute, was valid and binding at common law, although the bankrupt act was in force. In Boese v. King (78 N. Y. 471), it was held that although part of a State statute (N. J.) is in the nature of a bankrupt law, and consequently suspended by the U. S. bankrupt act, yet that fact does not affect the validity of the remainder of the law, or its effect upon the assignment; and it was further held that even if the whole of the State statute was suspended by the bankrupt act, the right of a debtor to make an equal distribution of his property among his creditors by means of a voluntary assignment still existed.

1 Farrin v. Crawford, 2 N. B. R, 602.

3

Hyde v. Sontag, 8 N. B. R. 225; Bean v. Amsink, Blatchford, J., Id. 235; In re Randall & Sunderland, 3 N. B. R. 26.

'Jackson v. McCullough, 13 N. B. R. 283; Stobaugh v. Mills, 8 N. B. R. 361; see Harris v. Exchange Nat. Bank, 4 Dillon, 133. An assignment being valid until proceedings in bankruptcy are instituted, it is not void as against a subsequent execution creditor, although it give preferences. Bostwick v. Burnett, 74 N. Y. 317. More than two months before the filing of a creditor's petition, the bankrupt transferred parts of his property to several creditors in satisfaction of their claims, he being then insolvent to the knowledge of said creditors, and he and they knowing that the transfers were intended for the purpose of preferring them over other creditors, to whom he was indebted, as indorser for his son, who was also insolvent.-Held, that the transfers could not be impeached as preferences under section 5128. Van Kleeck v. Miller, 19 N. B. R. 484; see also Matthews v. Stewart, 44 Mich. 209.

The assignee in bankruptcy, though he represents all the creditors of the bankrupts, acquires only the title of the bankrupts, except as he is also invested with the right of creditors to assail fraudulent transfers, and with title to property conveyed by the bankrupts contrary to the provisions of the bankrupt act. With these exceptions, his title is subject to all liens existing upon the property, legal or equitable, at the time of the commencement of the proceedings in equity. Where an assignment, fraudulent at common law, because

rupt act. The execution of such an assignment is unquestionably an act of bankruptcy, and it may be avoided by the assignee in bankruptcy.

49. Is the Making of a bona fide Assignment for Creditors ratably an Act of Bankruptcy?-Among the earliest cases in which the question whether the execution of an assignment honestly made for the equal benefit of all creditors is an act of bankruptcy, was that of In re Wm. H. Langley,1 in the Southern District of Ohio. The facts were, that Langley being in failing circumstances, and judgments being about to be recovered against him, executed an assignment of all his estate for the equal benefit of his creditors, in compliance with the various statutory requirements of the Ohio statute in reference to such assignments. Within a month thereafter, Perry filed a petition against him in the District Court, setting forth the assignment, and claiming that it was made with the intent to

made with the intent to hinder and delay creditors, was set aside at the suit of the assignee in baukruptcy, it was held that the latter took the assigned property subject to the liens of judgment creditors which had attached subsequent to the assignment. Johnson v. Rogers, 15 N. B. R. 1. If, however, a creditor, by reason of exceptional circumstances, is precluded from assailing the assignment, as to him it is as valid as it is to the assignors and to the assignees who have accepted it. Thus when creditors have concurred in the execution of the assignment, they cannot be heard to allege that it was fraudulent because of facts of which they were fully informed when they gave assent; they cannot impeach a transaction for fraud in which they participated as parties. Steel v. Brown, 1 Taunt. 381; Philips v. Wooster, 36 N. Y. 412; Johnson v. Rogers, supra.

Where the assignment was held void as against an assignee in bankruptcy, because regarded as repugnant to the bankrupt law, although otherwise validheld that an execution creditor, under a judgment obtained after the assignment took effect and before the filing of the petition in bankruptcy, secured a preference over the title of the assignee in bankruptcy. Macdonald v. Moore, 1 Abb. N. Cas. 53; s. c. 15 N. B. R. 26; see Dolson v. Kerr, 16 Id. 405; Re Beadle, 5 Sawyer, 351.

It is said, however, that Johnson v. Rogers, and Macdonald v. Moore, are in conflict (Re Beisenthal, 14 Blatch. 146; s. c. 15 N. B. R. 228) where the former of the two cases followed. A voluntary assignment was made, and the assignee accepted and qualified. Afterward a creditor recovered judgment, and the sheriff seized the property. After that an assignee in bankruptcy was appointed. -Held, that the judgment creditors had no lien upon, or right in the assigned property, so as to be let in to intercept, and take precedence of, the right of the assignee in bankruptcy to the property when he exercised his right to avoid the assignment, and to recover the property. Re Beisenthal, supra; Linder v. Lewis, 19 N. B. R. 455; Re Walker, 18 Id. 56; Belden v. Smith, 16 N. B. R. 302; Reed v. McIntyre, 98 U. S. 507.

11 N. B. R. 559; s. c. on appeal, 2 N. B. R. 596.

hinder and delay him in the collection of his debt, and also with intent, by such disposition, to defeat and delay the operation of the bankrupt law, and that it was therefore an act of bankruptcy.

The District Court (Mr. Justice Leavitt) regarded the assignment as in contravention of the spirit and policy of the bankrupt law, although admitted to be made in good faith, and rested its decisions on the English cases and upon the decisions in McLean v. Meline, McLean v. Johnson,2 and Shawhan v. Wherritt, and upon the further ground that the particular creditor was hindered and delayed in the collection of his debt. The case was taken to the Circuit Court, where Mr. Justice Swayne delivered an opinion which unfortunately is not reported in full. From the abstract given he appears to have decided:

"That where a creditor is about to recover a judgment against his debtor in Ohio, and the debtor makes a general assignment of all his property for the benefit of all his creditors before the judgment is rendered, such conveyance is not necessarily a conveyance with the intent to hinder, defraud or delay creditors. And where such assignment is made under like circumstances, with intent to secure an equal distribution of all the debtor's property among all his creditors, it is not necessarily a conveyance of property with intent to defeat or delay the operation of the bankrupt act. To make such assignment an act of bankruptcy, it must be made with intent to delay, defraud or hinder creditors within the meaning of 13 Elizabeth, or with intent to defeat or delay the operation of the bankrupt act. It becomes a question of fact. The innocence or guilt of the act depends upon the mind of him who did it, and it is not a fraud within the meaning of the bankrupt law, unless it was meant to be so.'

3 McLean, 190.

4

* Reported sub. nom. Langley v. Perry, 2 N. B. R. 596.

37 How. 627.

" This opinion has been criticised as not having been necessary to the determination of the case (see Emmons, J., in Globe Ins. Co. v. Cleveland Ins. Co. 14

The opinion thus expressed was subsequently reviewed and approved by the same learned judge, in the case of Farrin v. Crawford, where he said: "Now, while I have held, and still emphatically hold, that an assignment, such as this purports to be (made for the equal benefit of all creditors), is valid and proper when made in good faith, it is yet to be subjected to the sharpest scrutiny, and any badge of fraud that attaches itself in the light of extraneous circumstances will, unless fully and satisfactorily explained, be fatal to its validity, and the arm of the bankrupt law will sweep it away and subject the person and estate to its own. provisions." It was consequently held in that case that, where the assignor had reserved to himself a sum of money largely in excess of the amount exempt, this fact, taken in connection with other suspicious circumstances, was such a badge of fraud as to render the assignment fraudulent and create an act of bankruptcy. In harmony with these opinions is that expressed by Mr. Justice Nelson, in the case of Sedgwick v. Place, in the Circuit Court for the Southern District of New York. In that case, where an assignment untainted with fraud has been duly executed, and the requirements of the statute of the State of New York regulat ing such assignments had been complied with, and the assignees in bankruptcy, under a subsequent voluntary assignment, filed their bill in equity seeking to have such assignment set aside, and, in the meantime, applied for an injunc tion restraining the voluntary assignees from proceeding with the administration of the trust, the circuit judge, in denying the application for an injunction, said: "Assuming the assignment in question to be untainted with fraud, either against creditors or against the bankrupt act, which is the present position of the case, we find nothing in the provisions of the

N. B. R. 314; Cadwalader, J., in Barnes v. Rettew, 8 Phila. 141). The assignment under which the question arose appears to have been recorded under the laws of Ohio five days before the bankrupt act took effect, and the opinion of the court below, that the statute was retroactive, might have been a sufficient ground of reversal.

12 N. B. R. 602.

21 N. B. R. 673.