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. Analogous provisions: In U. S.: As to fraudulent transfers, Act of 1867, § 35, R. S., § 5129; As to liens which are unaffected, Act of 1867, § 20, R. S., 5075; Act of 1841, § 2; Act of 1800, § 63; As to dissolution of attachment liens, Act of 1867, § 14, R. S., § 5044. In Eng.: None. In Can.: Act of 1919, §§ 11, 29, 30, 32, 34. Cross-references: To the law: Definition of transfer, §. 1 (25). Insolvency; what includes; when person deemed insolvent, § 1 (15). Fraudulent transfer as act of bankruptcy, § 3-a (1); preferential transfer, Power of trustee to avoid fraudulent transfer, § 70-e. To the General Orders: Redemption by trustee of property mortgaged.or pledged, XXVIII. To the Forms: Official Forms: (Vol. III, post.) Petition and order for redemption of property from lien, No. 43. Supplementary Forms: (Vol. III, post.) Affidavit to dissolve lien of attachment, No. 376; Nature of motion thereon, No. 377; Order dissolving lien of attachment, No. 378; Order dissolving lien of execution, No. 379; Petition to dissolve lien of garnishee order upon bankrupt's earnings and directing sheriff to pay, No. 380; Notice of motion thereon, No. 381; Order dissolving lien of garnishment, modifying stay and directing sheriff to pay over to trustee, No. 382. II. Claims Void for Want of Record or Other Reasons, 1507. a. In general, 1507. b. State law controls, 1507. c. Want of record, 1510. (1) IN GENERAL, 1510. (2) EFFECT OF AMENDMENT OF § 47-a (2), 1511. (3) CHATTEL MORTGAGES, 1511. (I) In general, 1511. (II) Withholding from record to preserve mortgagor's credit, 1517 (III) Failure to refile mortgage, 1518. (IV) Mortgagee taking possession, 1519. (V) Place of filing or recording, 1519. (4) CONDITIONAL SALES, 1520. (I) In general, 1520. (II) Lease with privilege of purchase, 1525. (III) Time of filing petition in bankruptcy controls, 1525. (IV) Sufficiency of recording or filing, 1526. (V) Goods intended for re-sale, 1526. (5) TRUST RECEIPTS, 1527. d. Invalid for other reasons, 1528. III. Subrogation of Trustee to Rights of Creditors, 1530. a. In general, 1530. b. Is the trustee a "judgment creditor?" 1531. (1) RULE UNDER FORMER ACT, 1531. (2) RULE UNDER PRESENT ACT, 1532. IV. Valid Liens, 1533. a. In general, 1533. b. Good faith of transaction, 1533. c. Consideration, 1534. d. Jurisdiction to determine validity of lien, 1535. e. Miscellaneous valid liens, 1535. (2) ATTORNEY'S LIEN, 1536. (8) MARITIME LIENS, 1542. (9) MECHANICS' LIENS, 1543. (10) MORTGAGES, 1545. (I) In general, 1545. (II) To secure further advances, 1546. (III) On after acquired property, 1546. (IV) Mortgagor in possession with power of sale, 1547. (11) PLEDGE, 1550. (12) SPECIAL STATUTORY LIENS, 1553. (13) TRUST AND OTHER TRANSFERS, 1553. (15) WAGE LIENS, 1556. f. Effect of valid liens on distribution, 1557. V. Fraudulent Transfers and Liens, 1557. a. In general, 1557. b. Scope of subsection, 1557. c. Necessity for insolvency, 1558. d. Within four months prior to filing the petition, 1558. e. Intent to hinder, delay or defraud, 1559. (1) IN GENERAL, 1559. (2) NECESSITY FOR INTENT TO DEFRAUD, 1560. (3) ACTUAL FRAUD NECESSARY, 1561. (4) EVIDENCE OF INTENT, 1561. (I) In general, 1561. (II) Defendant as witness for plaintiff, 1563. (III) Burden of proof, 1563. f. Purchasers in good faith and for present fair considera tion, 1563. g. Suits to recover property, 1566. (1) IN GENERAL, 1566. (2) JURISDICTION, 1566. (3) NATURE OF ACTION, 1567. V. Fraudulent Transfers and Liens— Continued g. Suits to recover property (4) PARTIES, 1567. Continued (5) PLEADING AND PRACTICE, 1569. (6) JUDGMENT, 1670. h. Miscellaneous invalid transfers or incumbrances, 1571. (2) REVIVAL OF OUTLAWED DEBT, 1571. (3) TRANSFERS EFFECTING PREFERENCES, 1571. (4) TRANSFER TO SECURE MONEY TO PAY EXISTING DEBTS, 1572. (5) CHATTEL MORTGAGES AND BILLS OF SALE, 1574. (6) TRANSFERS TO RELATIVES, 1575. (7) PARTNERSHIP TRANSACTIONS, 1577. (8) USE OF CORPORATE PROPERTY, 1578. (9) SALE OF ACCOUNTS, 1579. (10) CONSIGNMENT FOR SALE, 1580. (11) GENERAL ASSIGNMENTS, 1580. i. Transfers and incumbrances void under state laws, 1581. VI. Liens Through Legal Proceedings, 1581. a. In general, 1076. 1581. b. Comparative legislation, 1582. c. Confusion concerning subs. c. and subs. f., 1583. d. When subs. c. applies, 1584. e. Insolvency essential, 1584. f. Four months prior to the filing of the petition, 1585.. g. Reasonable cause to believe, 1586. h. Miscellaneous invalid liens through legal proceedings, 1587. (II) Judgment enforcing lien, 1590. (2) GARNISHMENT PROCEEDINGS, 1591. (3) BY ATTACHMENT, 1592. (I) In general, 1592. (II) Effect upon attachment bond, 1594. (III) Inchoate liens, 1595. (4) BY CREDITOR'S BILL, 1596. i. Practice on suits to annul liens, 1597. j. Preserving liens, 1597. k. Bona fide purchasers, 1599. I. LIENS IN GENERAL a. Comparative legislation. The act of 1898 is much more explicit in respect to liens than any previous bankruptcy law. In England, while a fraudulent transfer is an act of bankruptcy,' there is no statutory provision that sueh a transfer is void. Nor is that statute any more explicit as to liens, save those available as acts of bankruptcy. The only lien through legal proceedings in terms dissolved by bankruptcy under our law of 1867, was that of an attachment on mesne process. Fraudulent transfers, on the other hand, were interdicted," but were made up of elements more numerous and difficult of proof than those specified in the present law. Much of the section under discussion is new. Indeed, the law of 1898 is, in this particular, far more favorable to the creditor than was that of 1867. b. Scope of section.- Starting with the well-recognized doctrine that a trustee in bankruptcy merely steps into the bankrupt's shoes and, therefore, takes his property subject to all valid liens, the statute proceeds to declare what liens are not to be considered valid, as, in substance, (1) those which are invalid under the laws of a State, and, provided they are less than four months old, (2) those which were not recorded or are invalid "for other reasons, (3) those which were given with intent to hinder, delay, or defraud creditors, and (4) those which were obtained through legal proceedings; with the further proviso that even liens so declared invalid shall not be so as to bona fide purchasers without notice. somewhat out of place in this section, the allied subject of fraudulent transfers is here interdicted in much the same way; they are null and void as to creditors, if made by an insolvent with intent to hinder, delay, or defraud and within four months of the bankruptcy. The section also phrases the doctrine of subrogation with regard to liens which, because declared void, a mere creditor cannot enforce. Read 6 1. English Act of 1914, § 1. 2. Act of 1867, § 35, R. S., § 5129. 3. Compare discussion under this section, post, subtitle "Valid Liens." See Continental Bank v. Katz (Super. Ct., Ill.), 1 Am. B. R. 19; In re Moore (D. C., Vt.), 6 Am. B. R. 175, 107 Fed. 234; Ex parte Christy, 3 Hów. 292; Yeatman v. Savings Inst., 95 U. S. 764; Stewart v. Platt, 101 U. S. 731; In re Stuyvesant Bank, 49 How. Pr. 133. 4. In re Davis, Fed. Cas. 3,618; Peck v. Jenness, 7 How. 612; Downer v. Brackett, 21 Vt. 599. 5. See discussion under this section, post, subtitle "Claims Void for Want of Record, or other Reasons." 6. See discussion under this section, post, subtitle 'Fraudulent Transfers and Liens." 7. See discussion under this section, post, subtitle "Liens Through Legal Proceedings." |