the particular case in hand.43 And where the receivership was one for the dissolution of a corporation, but was procured in order to cover preferences suffered by legal proceedings in favor of certain creditors, it was held to be an act of bankruptcy;44 but not where it was for dissolution of a corporation and was not a mere subterfuge.45

However that may be, the difficulty was obviated by the Amendment of 1903, by which the ground of receivership or trusteeship was added.

§ 151. Receivership and Trusteeships as Acts of Bankruptcy.So now, secondly, for a debtor, being insolvent, to apply for a receiver or trustee of his property, or, because of insolvency, to have a receiver or trustee put in charge of it, is an act of bankruptcy.46

Obiter, Lowenstein v. Henry McShane Mfg. Co., 12 A. B. R. 604, 130 Fed. 1007 (D. C. Md.): "I have not considered that question, as I am of opinion that in the creditors' bill in the State court praying the appointment of receivers upon the allegation that the corporation was unable to pay its debts, and was in fact insolvent, and the answer of the corporation admitting the facts alleged in the bill, and consenting to the relief prayed, and the action of the court in granting the relief prayed and appointing receivers, who have been ever since in charge, constitutes the condition of affairs intended to be covered by the Amendment of 1903, the words of which are 'or because of insolvency a receiver or trustee has been put in charge of his property under the laws of a State,' etc."

B. R. 1, 109 Fed. 550 (C. C. A. Ohio).

43. In re Baker-Ricketson Co., 4 A. B. R. 605, 97 Fed. 489 (D. C. Mass.). 44. Scheuer v. Book Co., 7 A. B. R. · 384, 112 Fed. 407 (C. C. A. Ala.). Compare, analogously, In re Storm, 4 A. B. R. 601, 103 Fed. 618 (D. C. N. Y.).

45. In re Empire Metallic Bedstead Co., 3 A. B. R. 575, 98 Fed. 981 (C. C. A. N. Y., affirming 2 A. B. R. 329, and reversing 1 A. B. R. 136). Receiverships, before the Amendment of 1903 made them acts of bankruptcy, were held to be such acts in Scheuer v. Book Co., 7 A. B. R. 384, 112 Fed. 407 (C. C. A. Ala.), in which case, however, the receivership was not squarely held to be the act of bankruptcy, but the act of bankruptcy was the suffering of certain preferential levies and payments, and the subsequent receivership was held to be a mere cover or subterfuge. Held, not to be acts of bankruptcy: In re Empire Metallic Bedstead Co.. 2 A. B. R. 329, 98 Fed. 981 (D. C. N. Y., affirmed in 3 A. B. R. 575); In re Harper & Bros., 3 A. B. R. 804, 100 Fed. 266 (D. C. N. Y.). Collusive receivership with nothing done by the receiver, Blue Mtn., etc. v. Portner, 12 A. B. R. 559, 131 Fed. 57 (C. C. A. Md.). Receivership

amounting to insolvency proceedings, but apparently merely incidental to foreclosure of liens, Singer v. Nat'l Bedstead Mfg. Co., 11 A. B. R. 276 (N. J. Ct. Ch.), wherein also appears an interesting discussion, obiter, couched in a somewhat hostile tone, towards the entire law, however.

Receivership Amendment Not Retroactive. This amendment is not retroactive so as to make an act of bankruptcy out of a receivership created before the amendment, even if the petition in bankruptcy was not filed until afterwards. Seaboard Steel Casting Co. v. Trigg, 10 A. B. R. 594, 124 Fed. 75 (D. C. Va.). But if the receivership were applied for after the amendment, although the suit in which the receiver was appointed was started before the amendment, nevertheless it is an act of bankruptcy. In re Edw. G. Milbury Co., 11 A. B. R. 523 (D. C. N. Y.).

46. Bankr. Act, § 3 (a) (4); In re Bennett Shoe Co., 15 A. B. R. 497, 140 Fed. 687 (D. C. Conn.); In re Hercules Atkin Co., 13 A. B. R. 369, 133 Fed. 813 (D. C. Pa.); In re Spalding, 14 A. B. R. 129, 139 Fed. 244 (C. C. A. N. V). In re Pickens M~ Co 20 A. B. 'R. 158 Fed. 894 (D. C. Ga);

§ 152. As to Receiverships Applied for by Debtor-Debtor Must Have Applied Therefor. When the act alleged is the debtor's application for a receiver, it will be necessary for the petitioning creditors to prove that the debtor himself made the application.47

In cases of corporations, it is not always requisite that there be a formal stockholders' meeting, or a meeting of the board of directors: the application for the receiver may still be substantially the act of the corporation, especially where there is fraud or an attempt to evade the provisions of the bankruptcy law.

Mercantile Co. v. Hardware & Steel Co., 24 A. B. R. 216 (238), 177 Fed. 825 (C. C. A. Nev.): "We are not here dealing with the lawful act of the plaintiff in error acting in a lawful corporate capacity, but with the acts of certain individuals holding all the stock of the corporation and constituting its officers and directors, who, it is alleged, have 'conspired and agreed together to take such measures and do such acts as would hinder, delay and defraud the creditors of said corporation * * and would evade the provisions of the laws of the United States in reference to bankruptcy, and prevent such creditors from obtaining a knowledge of the true condition of said corporation's affairs, and from having or participating in the choice of a person or persons to act as trustee of said corporation or its property.' With respect to the acts of these parties it is alleged: "That in pursuance of said conspiracy and agreement said directors and officers, acting for and on behalf and as the act and deed of said corporation, which was then and there insolvent as aforesaid, on the 6th day of August, 1908, caused to be filed in the District Court of the First Judicial District of the State of Nevada, in and for the county of Esmeralda, an application praying for the appointment of a receiver with a view to the dissolution of said corporation.' The application for a receiver in the name of the stockholder as set forth in the petition is charged to be the act and deed of the corporation; and it is further charged that the directors and officers of the corporation acting for and on behalf and as the act and deed of the corporation accepted the service issued in the case, and thereupon caused to be filed with the court an appearance and application for the appointment of a receiver. We think these allegations are sufficient and charge the corporation with having committed an act of bankruptcy in applying for a receiver of its property. The corporate entity cannot be so disguised that it can successfully masquerade in the name of a stockholder, and, evading the searching eyes of a court of equity, hinder, delay and defraud its creditors and defeat the provisions of the Bankruptcy Act. A court of equity looks through forms to the substance of things, thus preserving the rights of innocent parties against all forms of deception and fraud."

And it is not a defense that the law of the State does not permit the corporation itself to apply for a receiver.

In re Electric Supply Co., 23 A. B. R. 647, 175 Fed. 612 (D. C. Ga.), quoted at § 153; In re Kennedy Tailoring Co., 23 A. B. R. 656, 175 Fed. 871 (D. C. Tenn.), quoted at § 157. See Master's Report, In re Douglass Coal & Coke Co., 12 A. B. R. 543, 131 Fed. 244 (Tenn.). See Master's Report, In re International Mercantile Agency, 13 A. B. R. 725 (D. C. N. J.);

In re Beatty, 17 A. B. R. 739 (C. C. A. Mass.). Instance, In re Edw. G. Milbury Co., L't'd, 11 A. B. R. 523 (D. C. N. Y.), where the receiver was appointed in an action under the State statute to dissolve the corporation.

47. Obiter, In re Spalding, 14 A. B. R. 129, 139 Fed. 244 (C. C. A. N. Y.), quoted, post, § 159.

Mercantile Co. v. Hardware & Steel Co., 24 A. B. R. 216 (238), 177 Fed. 825 (C. C. A. Nev.): "It is further objected that the laws of the State of Nevada do not permit or authorize a corporation to apply for the appointment of a receiver; that the State court did not have jurisdiction over such an application, and that the application for a receiver for a corporation to be an act of bankruptcy under the Bankruptcy Act must be an application made under the laws of the State, that is to say, it must in every respect be a lawful application conforming to the laws of the State. This is not the language of the Bankruptcy Act; nor do we think it was the purpose of Congress to make the act of bankruptcy dependent upon the pretended regularity of the proceedings of the State court. That court may be imposed upon and its jurisdiction invoked to defeat the jurisdiction of the bankruptcy court as charged in this case. It is sufficient that the corporation is insolvent, and, being insolvent, has applied for a receiver whereby the property of the corporation is to be taken possession of and administered and distributed by the State court."

It has been held that mere consent, being passive, is not tantamount to an application;48 but "consent" in form, may amount in fact to an “application."

§ 153. Debtor to Be Insolvent at Time of Application and Insolvent According to Bankruptcy Definition.—And it must be proved that the debtor was insolvent at the time he made the application.49 This insolvency must be insolvency according to the bankruptcy definition; namely, that the debtor's property is not sufficient even at a fair valuation to equal his liabilities; and it will not do simply to prove that he is insolvent within the usual meaning of the term, namely, unable to pay his debts as they mature in the usual course of business.50

In re Ellsworth, 23 A. B. R. 284, 173 Fed. 699 (D. C. N. Y.): "If the company, while insolvent, had voluntarily brought an action to wind up its affairs for the benefit of its creditors, and had applied for the appointment of receivers to take charge of its property, the superior right of the bankruptcy court could not safely be questioned; but the interposition of an answer in an action brought by a contract creditor, admitting therein the truth of the allegations of the bill and joining in the prayer for relief, is not believed to be the equivalent of the term 'being insolvent, applied for a receiver or trustee for its property.' In the equity action, the complainants applied for receivers on the ground that the Edward Ellsworth Company was unable to pay its debts as they matured, and that it would be to the advantage of creditors and stockholders to have its affairs wound up. Nowhere in the bill is it asserted that the corporation is

48. In re Gold Run, etc., Co., 29 A. B. R. 563, 200 Fed. 162 (D. C. Colo.).

49. Obiter, In re Spalding, 14 A. B. R. 129, 139 Fed. 244 (C. C. A. N. Y., reversing 13 A. B. R. 223), quoted post, § 159. Compare, In re Douglass Coal & Coke Co., 12 A. B. R. 545, 546, 131 Fed. 769 (Tenn.).

50. In re Douglass Coal & Coke Co, 12 A. B. R. 545, 546, 131 Fed. 769 (Tenn.); In re Pickens Mfg. Co., 20

A. B. R. 202, 158 Fed. 894 (D. C. Ga.).

Insolvency-A question for jury.The question of insolvency is one for the jury. Blue Mtn., etc., v. Portner, 12 A. B. R. 559, 131 Fed. 57 (C. C. A. Md.). But where the facts are definitely established the question of solvency becomes one of law, on which the court may give binding instructions. In re Iron Clad Mfg. Co., 28 A. B. R. 628, 197 Fed. 280 (C. C. A. N. Y.),

insolvent, as that term is defined by § 1, subd. 15, of the Bankruptcy Act. In fact, the bill contains an affirmative allegation that the defendant is solvent. Such averments, together with the admission by the corporation of their truth and its consent to the appointment of receivers of its property, undoubtedly vested the circuit court, in view of the diversity of citizenship of the parties, with power and authority to act in the premises."

But admissions of the debtor, in his application for the appointment of a receiver, that his financial condition is such that he cannot hope to continue his business, that his credit is seriously impaired if not wholly destroyed, that it is impossible to raise the necessary capital with which to meet his maturing obligations, and that he is being threatened with suits which must. result in levies, may amount to proof of insufficiency of assets to meet obligations, within the meaning of the Bankruptcy Act, notwithstanding that insolvency may have been formally denied.

In re Electric Supply Co., 23 A. B. R. 647, 175 Fed. 612 (D. C. Ga.): "When, therefore, the defendant alleges that, owing to the gross mismanagement of its affairs, its condition is such that it cannot hope to continue its business, that it is impossible to raise the necessary capital to meet its matured and maturing obligations, that its promissory notes, accounts, and other obligations are past due, that it is threatened with suits, which must result in levies and in the depletion of the assets,' it is but an elaborate declaration that it has nothing sufficient to pay its debts. This condition is not amended by its prayer to the State court for leave to surrender its charter and to go out of business, to sell its properties as quickly as possible and turn them into cash, and to stand off through the injunctive power of the State court all persons having claims against it while this process of disintegration is going on. It is true that the alleged bankrupt, with some astucity, is careful to say that it is not insolvent. It is careful also to adopt resolutions expressly denying insolvency. But the denial is unimportant in view of the recitals showing its utter incapacity to pay its debts.

*It is true that in that case insolvency was distinctly alleged. Here, as we have seen, there is an attempt to deny it; but the averments of the Electric Supply Company, made in its petition to the Superior Court, sworn to by its president, and presented as a part of its answer here, so conclusively show insolvency that there can be no doubt that it was the true and substantial basis of the petition, and the court will not shut its eyes to the truth, *** notwithstanding the pleader's art may have been utilized to defeat the operation of the bankruptcy law. *** The court is constrained to make this determination because of consideration of law and the sworn admission of record made by the bankrupt above set forth."

But if the receiver was appointed on the application of the bankrupt, it is not material that insolvency be a ground of receivership under the State. law; much less that such insolvency be established by the record of the State.

court.

Mercantile Co. v. Hardware & Steel Co., 24 A. B. R. 216 (238), 177 Fed. 825 (C. C. A. Nev.): "But our attention has not been called to any case that holls that under the first provision of the statute where the creditors' petition charyes a single act of bankruptcy, viz, ‘being insolvent applied for a receiver or trus ee 1 R B-11

for his property,' the act of bankruptcy is dependent upon the record in the court to which the application for a receiver is made; that is to say, we do not find any case holding that unless the petition to the court for a receiver states that the application is based upon the insolvency no act of bankruptcy has been committed."

§ 154. And Burden of Proof of Insolvency Not Shifted by Debtor's Failure to Produce Books and Appear for Examination at Trial. -Moreover, this proof of insolvency probably must be made affirmatively by the creditors without the aid of the provisions of the later clause of this section prescribing that the burden of proof of solvency shall rest on the debtor in certain cases and in other cases that he must attend court with all his books and papers, on failure to do which the petitioning creditors will be relieved of proof of insolvency and the burden of proving solvency will shift to the debtor. This later clause was not amended to include the amended part of acts of bankruptcy and probably, therefore, the burden of proof of the insolvency will rest on the creditor without aid therefrom.

§ 155. As to Receiverships "Because of Insolvency"-Actual Insolvency Not Requisite.-On the other hand it would seem that where the act complained of as ground of bankruptcy is the putting of a receiver in charge because of insolvency, all that would be necessary would be to prove that a receiver was put in charge of the property on the ground of insolvency, no matter whether the debtor actually be insolvent or not.51

Inferentially, but obiter, In re Pickens Mfg. Co., 2 A. B. R. 202, 158 Fed. 894 (D. C. Ga.): "Counsel for the petitioning creditors claim that insolvency stands adjudicated against the company by the action of the State court and by the company's action in connection with those proceedings, and that it is precluded thereby from a further hearing here. The language of this Amendment of 1903 is peculiar in that it provides that 'being insolvent, applied for a receiver,' etc., and then in the disjunctive 'or because of insolvency a receiver or trustee has been put in charge,' etc. This lends some point to the argument that where insolvency is found as a fact by the state court, and a receiver appointed on that ground, insolvency is adjudicated and will be assumed here. The practice, however, in the courts, so far as there has been a practice established, seems to allow a hearing here on the question of insolvency, notwithstanding the fact of the commission of an act of bankruptcy, under this amendment."

156. Whether "Insolvency" Alleged Need Be Insolvency According to Bankruptcy Definition.-And it would also seem to be immaterial what definition may have been given to the word "insolvency" by the court appointing the receiver.52 Nevertheless, it has been held that the insolvency must have been insolvency according to the Bankruptcy Act's definition.53

51. In re Spalding, 14 A. B. R. 129, 139 Fed. 244 (C. C. A. N. Y.). Also, see Master's Report, In re Douglass Coal & Coke Co., 12 A. B. R. 545, 546, 131 Fed. 769 (Tenn.).

In re

52. See Master's Report, Douglass Coal & Coke Co., 12 A. B. R. 545, 546, 131 Fed. 769.

53. Compare, In re Ellsworth Co., 23 A. B. R. 284, 173 Fed. 699 (D. C. N.