bankruptcy. The corresponding acts of bankruptcy under the former law were not sufficiently analogous to furnish reliable precedents." 28. Fifth act of bankruptcy; a confession of bankruptcy; subs. a(5). The value of this act of bankruptcy did not appear until the doctrine that corporations might through it in effect become voluntary bankrupts was generally recognized.10 Three things seem to be necessary to this act: (1) a writing signed by the debtor or some officer or agent duly authorized; (2) a distinct admission therein of his inability to pay his debts; and (3) an unqualified expression of willingness to be adjudged a bankrupt on that ground. Thus, where the officer of a corporation was deputized to execute such a writing, provided a petition should be filed against it, this is not an act of bankruptcy.11 If the writing is sufficient, the fact that the debtor requested certain creditors to file a petition against him does not affect the character of the act.12 It is sufficient in legal effect if the board of directors of a corporation who were charged with the conduct of its business, declare the inability of the corporation to pay its debts, and its willingness to be adjudged a bankrupt, in accordance with the legal requirements specified.13 While a writing in 8. Collier, Bankr., 6th ed., p. 52. 9. See In re Merchants' Ins. Co., Fed. Cas. No. 9,441; Thornhill v. Bank of Louisiana, Fed. Cas. No. 13,992, aff'g Fed Cas. No. 13.990. 10. In re Kelly Dry Goods Co., 4 Am. B. R. 528, 102 Fed. 747; In re Marine Machine Co., 1 Am. B. R. 421, 100 Fed. 439. Contra, In re Bates Machine Co., 1 Am. B. R. 129, 91 Fed. 625. 11. In re Baker-Ricketson Co., 4 Am. B. R. 605, 97 Fed. 489. 12. Matter of Duplex Radiator Co., 15 Am. B. R. 324, 142 Fed. 906. 13. In re Moench & Sons Co., 10 Am. B. R. 656, 123 Fed. 965, aff'd 12 Am. B. R. 240, 130 Fed. 685, in which case it was held that petitioning creditors are not estopped from alleging a resolution adopted by a board of directors an act of bankruptcy, on the ground of collusion, charged by an answering creditor, who would obtain a preference by attachment if the petition were dismissed. Directors holding over may admit inability to pay debts. Matter of Talbot. 16 Am. B. R. 159. Directors may admit insolvency and willingness, although proceedings have been instituted to sell franchise and property of the corporation and distribute the proceeds thereof. Cresson Coal & Coke Co. v. Stauffer (C. C. A.), 17 Am. B. R. 573, 148 Fed. 981. the exact words of the statute, if authoritatively signed,14 is surely sufficient, yet it would seem that any writing which substantially covers the three essentials just stated will be enough.15 Suggestive cases are cited in the note below.16 § 29. Solvency and the first act of bankruptcy. The bankruptcy law provides that it shall be a complete defense to any proceedings in bankruptcy under the first subdivision of section three to allege and prove that the party proceeded against was not insolvent as defined in the act at the time of the filing of the petition against him, and if solvency at such date is proved by the alleged bankrupt the proceedings shall be dismissed, and under said subdivision one the burden of proving solvency shall be on the alleged bankrupt.17 Insolvency of the debtor is not an element of subdivision one, where the act of bankruptcy consists of hindering, delaying or defrauding creditors, other than as evidence of intent.18 It seems, therefore, that where this act of bankruptcy is relied on, it is not necessary that the petitioning creditors either allege or prove insolvency either at the time of the act of bankruptcy or at the time of filing the petition.19 On the other hand, it is clear that proof of solvency by the debtor at the time the petition is filed is a complete defense. Solvency may 14. In re Mutual Mercantile Agency, 6 Am. B. R. 607, 111 Fed. 152. 15. In the case of Brinkly v. Smithwick, 11 Am. B. R. 500, 126 Fed. 686, it was held that an insolvent debtor's willingness to be adjudged bankrupt on the ground of insolvency may be inferred from the admission in his answer to an involuntary petition. But in the case of In re Wilmington Hosiery Co.. 9 Am. B. R. 579, 120 Fed. 179, it was held that an admission of insolvency by a corporation in its answers to a bill filed against it praying for the appointment of a receiver is not an admis sion in writing of its inability to pay its debts and its willingness to be adjudged a bankrupt on that ground, within the meaning of clause 5 of section 3a. See Collier, Bankr., 6th ed., p. 54. 16. In re Kersten, 6 Am. B. R. 516. 110 Fed. 929; In re Rollins Gold & Silver Min, Co., 4 Am. B. R. 327, 102 Fed. 982. 17. Subs. c, section 3. 18. In re Pease, 12 Am. B. R. 66, 129 Fed. 446. 19. West Co. v. Lea, 174 U. S. 590, 2 Am. B. R. 463; In re West, 1 Am. B. R. 261. be pleaded by a responding creditor as well as by the alleged bankrupt. 20 § 30. Solvency and the second and third acts of bankruptcy. -The bankruptcy law provides that whenever a person against whom a petition has been filed as therein provided, under the second and third subdivisions of section three, takes issue with and denies the allegation of his insolvency, it shall be his duty to appear in court on the hearing, with his books, papers, and accounts, and submit to an examination, and give testimony as to all matters tending to establish solvency or insolvency, and in case of his failure to so attend and submit to examination the burden of proving his solvency shall rest upon him.21 The second and third acts of bankruptcy are constructive or legal frauds. As to neither, therefore, is the burden properly on the party having the affirmative. Where the alleged bankrupt fails to appear, with his books, papers, and accounts and submit to an examination, or on appearing for examination fails to produce such books, papers, and accounts as are material in determining his financial condition, the burden is upon him to prove his solvency.22 The books of the alleged bankrupt are competent, but not conclusive, evidence on the question of insolvency.23 If the alleged bankrupt does put solvency at issue and produces his books and submits to examination, and his insolvency does not appear, the burden is upon the petitioning creditors to make the proof.24 Cases where the meaning of this subsection has been in question are cited in the note below.25 20. In re West, supra. 21. Subs. d, section 3. 22. Matter of Rosenblatt, 16 Am. B. R. 306, 143 Fed. 663; Bogen & Trummell v. Protter (C. C. A.), 12 Am. B. R. 288, 129 Fed. 533; In re Coddington, 9 Am. B. R. 243, 126 Fed. 891; In re Taylor, 4 Am. B. R. 515, 102 Fed. 728. 23. In re Docker-Foster Co.. 10 Am. B. R. 584, 123 Fed. 190. 24. McGowan v. Knittel (C. C. A.), 15 Am. B. R. 1, 137 Fed. 1015, rev'g 14 Am. B. R. 209, 137 Fed. 453; Bogen & Trummell v. Protter, supra. 25. In re Rome Planing Mills, 3 Am. B. R. 766, 99 Fed. 137; Bray v. Cobb, 1 Am. B. R. 153, 91 Fed. 102; Lea Bros. v. West Co., 1 Am. B. R. 261, 91 Fed. 237. 31. Fraudulent transfer as objection to discharge; sec. 14b(4).—Under the bankruptcy law of 1867 the making of both a fraudulent preference and a fraudulent transfer were objections to discharge. Under the definition of transfer,26 it is difficult to conceive of a preference that does not amount to a transfer, and, if fraudulent, either transaction will come within the clause of the present law. The words of subdivision (4) are doubtless a definition or explanation of the words "fraudulent transfer" there used. The words "with intent to hinder, delay, or defraud his creditors" mean for the purpose of defrauding the entire body of the bankrupt's creditors, and not a conversion of property belonging to a single creditor.27 The creditor alleg ing this objection must show, in substance, the commission of the first act of bankruptcy. Any transfer, destruction of, or concealment of property within the inhibition of the statute of Frauds, even if in the four months period, will, if seasonably pleaded and duly proven, bar a discharge. If the transfer be made within the limited period it will be a bar although not knowingly and fraudulently made.28 If made prior to the four months period it is no bar, even if made for the purpose of defeating a just claim.29 A preferential transfer consisting of a payment of money on account of an existing indebtedness, in the absence of evidence that such payment was made in fraud of creditors is not within the meaning of this clause.30 If the trustee failed in his action to set aside a fraudulent transfer, such transfer cannot be 26. See Bankr. Act, 1898, sec. 1(25). 27. Matter of Berry & Co., 15 Am. B. R. 360, a transfer by employees having general authority to make such transfers if made within the four months period and with intent to defraud will bar a discharge. The pledging by a firm of brokers of their customer's stock to secure a loan to themselves is not a transfer with intent to delay or defraud creditors, although the brok ers may have had a lien upon some of the stock pledged. Matter of Berry & Co., supra. 28. In re Gift, 12 Am. B. R. 244, 130 Fed. 230. 29. In re Brumbaugh, 12 Am. B. R. 204, 128 Fed. 971. See In re Dauchy, 11 Am. B. R. 511 (C. C. A.), 130 Fed. 532. 30. Matter of Maher, 16 A. B. R. 340, 144 Fed. 503, aff'g 15 Am. B. R. 786. set up as a bar to a discharge.31 Cases cited in the sections referring to fraudulent transfers as acts of bankruptcy will be found valuable.32 Other cases are collected in the note below.33 Whether a previous general assignment is a bar to a discharge has not been authoritatively determined. That such an assignment is a transfer is elementary; that it amounts to an intent to hinder or delay creditors is now thought well settled.34 It would seem to follow, that if within the interdicted period, a general assignment is a sufficient objection to a discharge.3 31. In re Tiffany, 17 Am. B. R. 296. 32. See sections 12, 13, 14, 15 and 16, this chapter, supra. 33. In re Miller, 14 Am. B. R. 329, 135 Fed. 591; In re Wolfskill, Fed. Cas. No. 17,930; In re Hannahs, Fed. Cas. No. 6,032; In re Freeman, Fed. Cas. No. 5,082; In re Jones, Fed. Cas. No. 7,446; In re Diehl, 15 Fed. 234. 34. In re Milgraum v. Ost, 12 Am. B. R. 306, 129 Fed. 827; In re Macon Sash, etc., Co., 7 Am. B. R. 66, 112 35 Fed. 323; Carling v. Seymour Lum- p. 201. |