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to enact national bankruptcy legislation is derived from the provision of the Constitution to the effect that "Congress shall have power to establish uniform laws on the subject of bankruptcies throughout the United States." This grant of power to the federal government is a plenary grant, subject only to the provision that the bankruptcy legislation shall be uniform as to all the States. Except so far as Congress shall exercise the power vested by the Constitution, and subject to the restriction that no State may pass a law impairing the obligation of contracts, each State may pass laws in the nature of bankruptcy acts, operative within its own territorial limits. The State laws have been generally called insolvency laws, while the federal acts have been known as bankruptcy laws. The main object and purpose of the Bankruptcy Act is to secure an equal distribution among the creditors of an insolvent, of all the property which he owned at any time within four months prior to the filing of the petition upon which he might be adjudicated bankrupt, and, for that purpose to avoid all transfers thereof made by him in due course for value,

used and applied in construing the act of 1898. The act is supplemented by rules established by the United States Supreme Court, as to matters of practice, called General Orders, and also by official forms for use in such practice. See Collier on Bankruptcy, 6th ed., p. 633, et seq.

7. U. S. Const., art. i, § 8, cl. 4. 8. Hanover Bank v. Moyses, 186 U. S. 181, 22 S. Ct. 857, 46 L. Ed. 1113; Mitchell v. Great Works Milling, etc., Co., 2 Story (U. S.), 648, 17 Fed. Cas. No. 9,662; Silverman's Case, 2 Abb. (U. S.) 243, 1 Sawy. (U. S.) 410, 22 Fed. Cas. No. 12,855.

The uniformity required is geographical and not personal; and no limitation is imposed on Congress as to the classification of persons who are to be affected by such laws, provided only the laws shall have uni

form operation throughout the United States. Leidigh Carriage Co. v. Stengel, 2 Am. B. R. 383, 95 Fed. 637, 37 C. C. A. 210.

9. Ogden v. Saunders, 12 Wheat. (U. S.) 213, 6 L. Ed. 606, the power of the separate States to pass bankruptcy laws is undoubted, but they cannot, in the exercise of that power, act upon the rights of citizens of other States or countries; Sturges v. Crowninshield, 4 Wheat. (U. S.) 122, 4 L. Ed. 529; Adams v. Storey, 1 Paine (U. S.), 79, Fed. Cas. No. 66; Pettit V. Seaman, 2 Root (Conn.), 178; Pannebaker v. Bitting, 11 Pa. Dist. 537; Zacharins v. Paint, etc., Co., 11 Pa. Dist. 171; In re Hull, 10 Pa. Dist. 661, 25 Pa. Co. Ct. 353; Pugh v. Bussell, 2 Blackf. (Ind.) 394; Fisk v. Montgomery, 21 La. Ann. 446.

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although but for the intervening of the bankruptcy proceeding, they would not otherwise be morally or legally wrong; and while such transfers have been said by the courts to be in fraud of the Bankruptcy Act, such phrase does not denominate them frauds in fact. As to other conveyances which were fraudulent by the common law, or under the statutes of the States, a right of action is expressly conferred upon a trustee in bankruptcy under the Act of 1898, which also expressly vests him with the ownership of the property so conveyed.1 And by the amendments of 1903 to the Bankrupt Act of 1898, jurisdiction is given to the bankruptcy courts, by plenary action or summary proceedings, as the nature of the case may call for, to adjudge recovery by the trustee of property transferred as a voidable preference, or made to hinder and delay creditors, as defined by the Act, or which may have been transferred by fraudulent conveyances strictly so called.11 The application of these principles is discussed under the appropriate subjects in subsequent sections. Another object of the Bank

ruptcy Act has been said to be to enable those who were unfortunate in business "to emerge from a questionable and undignified seclusion and face the vicissitudes of the business world openly and honestly.11

§ 2. Effect of bankruptcy law upon insolvency laws.— When Congress has exercised its constitutional powers to enact a uniform bankruptcy law, all existing State insolvency laws applying to the same persons are suspended,12 but, this power not being exclusive, State laws are valid and continue operative

10. Bankr. Act, 1898, section 70. 11. Bankr. Act, 1898, sections 23, 60a, 60b, 67e, 70e; In re John J. Coffey, 19 Am. B. R. 148; In re Blount, 16 Am. B. R. 97, 142 Fed. 263; Pirie v. Chicago Title & Trust Co., 182 U. S. 438, 5 Am. B. R. 814.

11a. In re Fitchard, 4 Am. B. R.

so far as they do not con

609, 103 Fed. 742. An assignment of stock by a bankrupt to his wife and acting as agent for his wife under an unrecorded power of attorney, held not to be a fraudulent transfer. In re Hedley, 19 Am. B. R. 409.

12. Sturges v. Crowninshield, 4 Wheat. (U. S.) 122, 4 L. Ed. 529.

flict with the paramount federal law.13 The State law is merely suspended during the life of the bankruptcy law, not repealed.11 The Act of 1898 expressly provides that "proceedings commenced under State insolvent laws before the passage of this Act shall not be affected by it." 15 Laws regulating general assignments for the benefit of creditors 16 not being insolvency laws, are not suspended. Likewise as to laws concerning the punishment of fraudulent debtors, 17 or for the settlement of the estates of deceased insolvents. 18 A general assignment for the benefit of creditors by the debtor's voluntary common-law deed of assignment, conveying all his property subject to the payment of his debts for the equal benefit of all his creditors, but not providing for the release of the debtor, is valid except as against proceedings seasonably taken under the Bankruptcy Act to set it aside as an act of bankruptcy, even though such an assignment may be regulated and supplemented by legislative safeguards of the State where it is made or operates.19 But where such an assignment has been made and proceedings are not instituted in bankruptcy within the statutory four months thereafter, the State

13. Ogden v. Saunders, 12 Wheat. (U. S.) 213, 6 L. Ed. 606; Singer v. National Bedstead Mfg. Co., 11 Am. B. R. 276, 65 N. J. Eq. 290, 55 Atl. 868.

14. In re Storck Lumber Co., 8 Am. B. R. 86, 114 Fed. 360; Ketchum v. McNamara, 6 Am. B. R. 160; In re Macon Sash & Door Co., 7 Am. B. R. 66; Carling v. Seymour Lumber Co., 8 Am. B. R. 29, 113 Fed. 483; Scheuer v. Book, etc., Co., 7 Am. B. R. 384, 112 Fed. 407; In re Smith, 2 Am. B. R. 9, 92 Fed. 135; In re Sievers, 1 Am. B. R. 117, 91 Fed. 366. That State laws are not suspended: In re Scholtz, 5 Am. B. R. 782, 106 Fed. 834.

15. Bankr. Act, 1898, last clause. Compare In re Mussey, 3 Am. B. R. 592, 99 Fed. 71.

16. In re Sievers, 1 Am. B. R. 117, 91 Fed. 366; Duryea v. Guthrie (Wis.), 11 Am. B. R. 234. Contra, In re Smith, 2 Am. B. R. 9, 92 Fed. 135. But see Mayer v. Hellman, 91 U. S. 496. And compare Thrasher v. Bentley, 1 Abb. N. C. (N. Y.) 39; Beck v. Parker, 65 Pa. St. 262.

17. Berthelon v. Betts, 4 Hill (N. Y.), 577; Scully v. Kirkpatrick, 79 Pa. St. 324.

18. Hawkins v. Larned, 54 N. H. 333.

19. Patty-Joiner, etc., Co. v. Cummins, 4 Am. B. R. 269, 93 Tex. 598, 57 S. W. 566; Boese v. King, 108 U. S. 379, 2 S. Ct. 765, 27 L. Ed. 760; In re Scholtz, 5 Am. R. Rep. 782, 106 Fed. 834; Mayer v. Hellman, 91 U. S. 496, 23 L. Ed. 377.

Court may proceed to administer the estate under local statutes and a trustee appointed in bankruptcy subsequent to the four months cannot attack such proceedings.20

§ 3. Interpretation or construction of statute. The National Bankruptcy Act of 1898 establishes a uniform system, and regulates, in all their details, the relations, rights, and duties of debtor and creditor. It is a remedial statute and should be interpreted reasonably and according to the fair import of its terms, with a view to effect its objects and promote justice.2 21 But while the purpose of the act as a whole is remedial and the act in its entirety is liberally construed, section 3, which prescribes what constitutes an act of bankruptcy, while not penal, is in derogation of common law rights, and should therefore be considered penal in its operation and effect and should not be construed to include within its provisions any act not therein specified as an act of bankruptcy.22

20. West Co. v. Lea, 2 Am. B. R. 463, 174 U. S. 590, 19 Sup. Ct. 836, 43 L. Ed. 1098; Matter of Gray, 3 Am. B. R. 647, 47 App. Div. (N. Y.) 554, 62 N. Y. Supp. 618.

21. Paper Co. v. Morse, 127 Fed. 643, 62 C. C. A. 369; Norcross v. Nathan, 3 Am. B. R. 613, 99 Fed. 414; In re New York, etc., Water Co., 3 Am. B. R. 508, 98 Fed. 711; Southern L. & T. Co. v. Benbow, 3 Am. B. R. 9, 96 Fed. 514, citing Houston v. New Orleans City Bank, 6 How. (U. S.) 486, 12 L. Ed. 526; In re Kirtland, 10 Blatchf. (U. S.) 515, 14 Fed. Cas. No. 7,851; Blake v. Francis-Valentine Co., 1 Am. B. R. 372, 89 Fed. 691. See also Ripon Knitting Works v. Schreiber, 4 Am. B. R. 299, 101 Fed. 810; In re Terrill, 4 Am. B. R. 145, 100 Fed. 778; Costello v. Harbaugh, 83 Ill. App. 29, aff'd 184 Ill. 110, 56 N. E. 363, 75 Am. St. Rep. 147; Silverman's Case, 2 Abb. (U. S.) 243, 1 Sawy.

(U. S.) 410, 22 Fed. Cas. No. 12, 855, 13 Int. Rev. Rec. 52, 4 Nat. B. R. 522; In re Muller, Deady (U. S.), 513, 17 Fed. Cas. No. 9,912, 2 Am. L. T. B. R. 33, 3 Nat. B. R. 329; In re Locke, 1 Lowell (U. S.), 293, 15 Fed. Cas. No. 8,439, 2 Nat. B. R. 382.

22. In re Empire Metallic Bedstead Co., 3 Am. B. R. 575, 98 Fed. 581; Wilson v. St. Paul City Bank, 17 Wall. (U. S.) 473, 21 L. Ed. 723; Jones v. Sleeper, 13 Fed. Cas. No. 7,496.

When acts of bankruptcy are classified, as they are in the statute of 1898, it is not the province of a court to enlarge the classification because the omitted class seems to partake of the sin of the named class. In re Metallic Bedstead Co.,supra.

Under act Feb. 5, 1903, the appointment of a receiver because of insolvency, is an act of bankruptcy. In re Burrell, 123 Fed. 414, 59 C. C.

While a strict construction of this section is generally held to be the rule, there are some authorities which tend to support the view that, being limitations on the operation of a statute that is highly remedial, a broader construction would be more equitable.23

§ 4. Important statutory definitions: insolvency. The Bankruptcy Act provides that "a person shall be deemed insolvent within the provisions of this act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, with intcnt to defraud, hinder or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts." 24 In all foreign bankruptcy laws, cessation of payments is the essential of insolvency,25 and this was the test in the United States until the passage of the present law. Thus, it was held that "the amount of the trader's property was of no consequence, if he was unable to pay his debts in lawful money as they matured." "26 Under the law of 1898 the value of that property is the essential element. Insolvency turns on what is a "fair valuation" of the property.27 Property may include any asset of value. Fair valuation has been held to be the present market value, and not the amount which the bankrupt might realize from the forced sale of his property, 28 nor what the property brought

A. 508, 119 Fed. 991; Lowenstein v. Mfg. Co., 130 Fed. 1007; Iron, etc., Co. v. Portner, 131 Fed. 57, 65 C. C. A. 295; In re Coal, etc., Co., 131 Fed. 769; In re Atkin, 133 Fed. 813; In re Spaulding, 134 Fed. 507. But the appointment of a receiver, in a State court, is held not to be such an act. In re Spalding, 139 Fed. 244, 71 C. C. A. 370.

23. Southern Loan & Trust Co. v. Benbow, 3 Am. B. R. 9, 96 Fed. 514; In re Adams, 1 Am. B. R. 94; In re Gutwillig, 1 Am. B. R. 78, 90 Fed. 475; In re Mueller, Fed. Cas. 9,912;

Silverman's Case, Fed. Cas. 12,855;
Collier, Bankr., 6th ed., p. 39.

24. Bankr. Act, 1898, section 1 (15).

25. Collier, Bankr., 6th ed., p. 4.

26. In re Wells, Fed. Cas. No. 17,388; Morgan v. Mastick, Fed. Cas. No. 9,803; Ex parte Hull, Fed. Cas. No. 6,856; In re Dibblee, Fed. Cas. No. 3,884.

27. In re Gilbert, 8 Am. B. R. 101, 112 Fed. 951.

28. In re Hines, 16 Am. B. R. 295, 144 Fed. 142; Duncan v. Landis, 5 Am. B. R. 649, 106 Fed. 839.

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