section 4b, even though without preferences, is now, if made within four months of the filing of the petition, a constructive fraud on the act, and, in itself, without either insolvency or intent, an available act of bankruptcy.78 A general common-law 77 assignment for the benefit of creditors, directing an equal distribution among them, without any attempt to defraud or embarrass persons to whom the assignor is under liability, is, however, not contrary to the policy of the bankruptcy law.79 § 24. What is a general assignment.-The general assignment contemplated by section 3a (4) is to be taken in its generic sense, and embraces any conveyance at common law or by statute by which the parties intend to make an absolute and unconditional appropriation of the property conveyed to raise funds to pay the debts of the vendor, share and share alike.80 Such a conveyance inevitably thwarts operation of the Bankruptcy Act.81 The following assignments have been held to be acts of bankruptcy: A general assignment for the benefit of creditors, under a statute regulating this common-law right;82 a general assignment by a corporation made by direction of a majority of the directors and stockholders;83 a confession of judgment to a trustee for the benefit of all creditors.8 84 An assignment for the benefit of creditors which purports to transfer all the property of the partnership is an act of bankruptcy, even though the assignment itself may be void or voidable as against the firm because made by only 77. In re Gray, 3 Am. B. R. 647, 47 App. Div. (N. Y.) 554, 62 N. Y. Supp. 618; In re Gutwillig, 1 Am. B. R. 388, 92 Fed. 337. 78. Day v. Beck, etc., Co., 8 Am. B. R. 175, 114 Fed. 834; West Co. v. Lea Bros., 2 Am. B. R. 463, 174 U. S. 594. 79. In re Chase, 10 Am. B. R. 677, 124 Fed. 753, 59 C. C. A. 629. 80. In re Tomlinson Co. (C. C. A.), 18 Am. B. R. 691; Davis v. Bohle, 1 Am. B. R. 412, 92 Fed. 325; Appolos v. Brady, 1 C. C. A. 299, 49 Fed. 401; Bartlet v. Teah (C. C.), 1 Fed. 768. 81. In re Tomlinson Co., supra. 82. In re Gutwillig, 1 Am. B. R. 78. 90 Fed. 425, 1 Am. B. R. 388, 92 Fed. 337; In re Sievers, 1 Am. B. R. 117, 91 Fed. 366. 83. Clark v. Am. Mfg. & Enameling Co., 4 Am. B. R. 351, 101 Fed. 962. 84. In re Green & Rogers, 5 Am. B. R. 848. one partner. There is no distinction in this respect between valid and invalid instruments.85 While a bill of sale or a deed of trust in the nature of a mortgage containing a power of sale, but reserving an equity to the mortgagor or pledgor, is not, technically speaking, an assignment, because the entire title to the property does not pass to the trustee,86 where there is an absolute conveyance of the title to the trustee for the benefit of all the creditors, the instrument is none the less an assignment because it provides that a possible surplus shall revert to the grantor, inasmuch as that is implied in law.87 It has been held, however, that a deed of trust which contained a condition of defeasance and an equity reserved to the grantor after satisfaction of claims of creditors was not a voluntary general assignment.88 § 25. What is not a general assignment. It was long thought to be settled that the voluntary application of an insolvent corporation for a receivership under State laws is not a general assignment within the meaning of the act, and, therefore, not an act of bankruptcy under section 3a(4),89 although there is now authority that such an act is in effect the equivalent of a general assignment and an act of bankruptcy under section 3a (1).90 It followed that a suit by one partner against the other for an accounting of their insolvent partnership, resulting in the appointment of a receiver, was not an act of bankruptcy under section 85. In re Meyer, 3 Am. B. R. 559, 98 Fed. 976, aff'g Chemical Nat. Bank v. Meyer, 1 Am. B. R. 565, 98 Fed. 976. 86. Dunham v. Whitehead, 21 N. Y. 131; Bishop, Insol. Deb., 3d ed., p. 110, et seq. 87. Rumsey v. Novelty, etc., Co., 3 Am. B. R. 704, note. 88. Rumsey v. Novelty, etc., Co., 3 Am. B. R. 704, 99 Fed. 699. 89. In re Gilbert, 8 Am. B. R. 101, 112 Fed. 951; In re Baker-Ricketson Co., 4 Am. B. R. 605, 97 Fed. 489; Vaccaro v. The Security Bank, 4 Am. 90. Scheuer v. Smith, 7 Am. B. R. 384, 112 Fed. 407; In re Macon Sash, etc., Co., 7 Am. B. R. 66, 112 Fed. 323, reversed as Carling v. Seymour Lumber Co.. 8 Am. B. R. 29, 113 Fed. 483; In re Harper, 3 Am. B. R. 804, 100 Fed. 266; In re Metallic Bedstead Co., supra. See also Intent, sec. 13, supra, and cases cited in note 80, to that section. 3a (4).91 A direct transfer to creditors, after the intervention of a trustee duly appointed, is not an assignment for the benefit of creditors.92 94 § 26. Amendment of 1903; receiver or trustee in charge of property. By the amendment of 1903 a person, being insolvent, having applied for a receiver or trustee for his property, or because of insolvency a receiver or trustee having been put in charge of his property under the laws of a State, of a Territory, or of the United States, constitutes an act of bankruptcy.93 Now, a co-partnership or a corporation, which is insolvent and applies for, or because of insolvency,95 has been put in charge of a receiver or trustee, under the laws of a State, or of a Territory, or of the United States, thereby commits an act of bankruptcy. An agreement to wind up the affairs of a corporation and make an assignment of all its property to its directors as trustees to close up its business is an act of bankruptcy.96 The amendment was intended to place all co-partnerships and such corporations as may be adjudged involuntary bankrupts97 on the same footing as individual insolvents who attempt an equivalent fraud on the act.98 The receiver must have been appointed because of the 91. But see Mather v. Coe, 1 Am. B. R. 504, 92 Fed. 333. Compare also In re Storck Lumber Co., 8 Am. B. R. 86, 114 Fed. 860; In re Storm, 4 Am. B. R. 601, 103 Fed. 618. 92. Anniston Iron, etc., Co. v. Anniston Rolling Mill Co., 11 Am. B. R. 200, 125 Fed. 974. 93. Section 3a (4). 94. Section 1(19). 95. As to necessity of insolvency, see Zugalla v. International Merc. Agency, 16 Am. B. R. 67, 142 Fed. 927, rev'g 13 Am. B. R. 725; In re Douglas Coal, etc., Co., 12 Am. B. R. 539, 131 Fed. 769. 96. In re Bennett Shoe Co., 15 Am. B. R. 497, 140 Fed. 687; In re 97. Section 4b. See Lowenstein v. McShane Mfg. Co., 12 Am. B. R. 601. 98. Some of the reasons for the change have been stated thus: (1) It is one of the general purposes of the bankruptcy law to provide a uniform national law by which insolvent traders can make a pro 99 debtor's insolvency, but insolvency being in fact the basis for the receivership, it is immaterial that the appointment was made under a statute which contained no provision for alleging insolvency co nomine as the cause, or that insolvency was not the sole reason. Insolvency, either as a distinct ground or as coupled with others is sufficient.2 The amendment of 1903 is not retroactive, and a petition filed after such amendment took effect alleging the appointment of a receiver for an insolvent corporation within the four months period, but prior to the passage of the rata distribution of their assets among creditors, and there is no reason apparent why trading corpora tions as well as trading copartnerships should not be permitted to avail themselves of this statute. (2) In the more important commercial States, small corporations, with their limited liability, have practically superseded partnerships. As the law now stands, short of the commission of an act of bankruptcy, these corporations must wind up their affairs under the procedure of the State which created them, a procedure which is everywhere less favorable to creditors. (3) Owing to the lack of comity between the States, a receiver of an insolvent corporation in one State is rarely recognized in another, with the result that the creditors in that other State, by garnishee process or otherwise, may, unless the corporation commits an act of bankruptcy, secure preference. (4) If a corporation seeks to wind up its affairs and distribute its assets by means of a receivership, such a proceeding does not constitute an act of bankruptcy, and, consequently, creditors are entirely deprived of the valuable rights and safeguards provided by the bankruptcy law. (5) As the law now stands, a corporation which wishes to be administered in bankruptcy is compelled to go through the motions of committing an act of bankruptcy that involuntary bankruptcy may be alleged against it, and it be brought into court apparently against its will. This circumlocution is bad in principle and worse in practice. (Report of Ex. Com. of Nat. Assn. of Referees in Bankruptcy, of March, 1900.) 99. Hooks v. Aldridge (C. C. A.), 16 Am. B. R. 658. The appointment of a temporary receiver in a stockholder's suit to restrain the corpora tion from the further exercise of its corporate franchises is not an act of bankruptcy. Zugalla V. International Merc. Agency, supra. A receiver appointed under Rev. St. Ohio, 1906, sections 3167, 3169, on petition of surviving partner and administrator of a dead partner, is not appointed because of insolvency, and is not an act of bankruptcy. Moss Nat. Bank v. Arend (C. C. A.), 16 Am. B. R. 867, 146 Fed. 351. 1. In re Belfast Mesh Underwear Co., 18 Am. B. R. 620, 153 Fed. 224. 2. Beatty v. Anderson Coal Min. Co. (C. C. A.), 17 Am. B. R. 738, 150 Fed. 293. amendment, must be dismissed; the fact that the receivership continues after the taking effect of the amendment, is not of itself sufficient to constitute an act of bankruptcy.3 Since the passage of the amendment a State court cannot by appointing a receiver of an insolvent debtor obtain priority of jurisdiction to administer the assets of such debtor.4 It is immaterial that a proceeding for the dissolution of a corporation was instituted prior to the taking effect of the amendment, if the application for an order appointing a permanent receiver in such proceedings was made subsequent to such amendment." § 27. Meaning of words; precedents." Insolvent " has the same meaning here as elsewhere in the statute. The amendment thus makes insolvency an essential element of proof in receivership cases. "Applied for" manifestly means the voluntary application of the co-partnership or of a corporation under a resolution of its board of directors or other governing body, as regulated and prescribed by the State law of which the corporation is the creature. "Been put in charge of" clearly indicates every other means of securing the appointment of a receiver, as when the State or a creditor proceeds against a corporation for its dissolution.7 "Trustee," of course, means the same as "receiver," the nomenclature being different in different States. The intention of this amendment appears to be that any act, procedure, or process for the winding up of insolvent corporations, which substantially abridges or deprives creditors of the right to a trustee of their own choosing, or of the greater right to compel prorating between all creditors of the same class, or any other right given by the bankruptcy law, will, provided the alleged bankrupt is insolvent at the time of the commission of the act complained of and that act be within the four months period, amount to an act of 3. Seaboard Steel Casting Co. v. Trigg Co., 10 Am. B. R. 594, 124 Fed. 75. 4. In re Knight, 11 Am. B. R. 1, 125 Fed. 35. 5. Matter of Milbury Co., 11 Am. B. R. 523. 6. See section 1(15). 7. In re Spalding (C. C. A.), 14 Am. B. R. 129, 132, 139 Fed. 243. |