though he knew him to be so at the time of entering judgment, the judgment was held valid (Vogle v. Lathrop, 4 N. B. R. 146; 3 Pittsb. Rep. 269; 18 Pittsb. Leg. J. 106; Fed. Cas. 16985); also a lien obtained by a creditor within four months preceding the commencement of bankruptcy proceedings, the debtor at the time being insolvent, and the creditor cognizant of such fact, is not prohibited, if it affirmatively appears that the bankrupt did not assist the creditor to obtain the same (Britton v. Payen et al., 9 N. B. R. 445; 7 Ben. 219; Fed. Cas. 1906); and it has been held that if a creditor realizes his money under judgment entered in an attachment suit without collusion, he may retain it, although the attachment was issued within four months before the commencement of the proceedings in bankruptcy. (Henkelman, Jackson & Phelps v. Smith, Ass., 12 N. B. R. 121.) When, in accordance with the terms of a lease, a distress is levied within four months prior to bankruptcy, the bankrupt consenting to it, and collusion is not shown, such distress is not fraudulent. (Goodwin et al. v. Sharkey et al., 15 N. B. R. 526.) A sale on execution under a judgment by a creditor within four months of the filing of a petition in bankruptcy does not constitute a fraudulent preference if the debtor is compromising his debts and the creditor has no reason to believe himself to be obtaining a preference over other creditors. (Warren & Rowe, Ass., v. Tenth Nat. Bank et al., 5 N. B. R. 479; 5 Ben. 395; 42 How. Pr. 169; Fed. Cas. 17200.) A sale of the property of a bankrupt under an execution upon a judgment rendered before the adjudication in bankruptcy was held valid, although the judgment creditors knew at the time the execution was issued that the debtor was insolvent. (In re Kerr, 2 N. B. R. 124; 2 Amer. Law T. Rep. Bankr. 39; Fed. Cas. 7728; Coxe v. Hale, 8 N. B. R. 562; 21 Pittsb. Leg. J. 77; Fed. Cas. 3310.)

Collateral attack of judgment.- A judgment is no more liable to collateral impeachment in proceedings under the Bankrupt Act, except to show that the judgment in question was designed as a means of avoid. ing the equal distribution of the debtor's estate among his creditors, than it is to such impeachment in the courts where it was rendered. (Michaels et al. v. Post, Ass., 12 N. B. R. 152; 21 Wall. 198.) A judgment confessed by warrant of attorney on notes executed simultaneously therewith, when the debtor was not insolvent and the creditor was without reasonable cause to believe him to be insolvent, is not a fraudulent preference, and the judgment creditor is entitled to the payment thereof out of the assets of the bankrupt's estate. (In re Wright, 2 N. B. R. 155; Fed. Cas. 18071.)

b. If a bankrupt shall have given a preference within four months before the filing of a petition, or after the filing of the petition and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein,

shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.

[Act of 1867. SEC. 35. That if any person, being insolvent, or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person having a claim against him, or who is under any liability for him, procures any part of his property to be attached, sequestered, or seized on execution, or makes any payment, pledge, assignment, transfer, or conveyance of any part of his property, either directly or indirectly, absolutely or conditionally, the person receiving such payment, pledge, assignment, transfer, or conveyance, or to be benefited thereby, or by such attachment, having reasonable cause to believe such person is insolvent, and that such attachment, payment, pledge, assignment, or conveyance is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it, or so to be benefited; and if any person being insolvent, or in contemplation of insolvency or bankruptcy, within six months before the filing of the petition by or against him, makes any payment, sale, assignment, transfer, conveyance, or other disposition of any part of his property to any person who then has reasonable cause to believe him to be insolvent, or to be acting in contemplation of insolvency, and that such payment, sale, assignment, transfer, or other conveyance is made with a view to prevent his property from coming to his assignee in bankruptcy, or to prevent the same from being distributed under this act, to defeat the object of, or in any way impair, hinder, impede, or delay the operation and effect of, or to evade any of the provisions of this act, the sale, assignment, transfer, or conveyance shall be void, and the assignee may recover the property, or the value thereof, as assets of the bankrupt. And if such sale, assignment, transfer, or conveyance is not made in the usual and ordinary course of business of the debtor, the fact shall be prima facie evidence of fraud. Any contract, covenant, or security made or given by a bankrupt or other person with, or in trust for, any creditor, for securing the payment of any money as a consideration for or with intent to induce the creditor to forbear opposing the application for discharge of the bankrupt, shall be void; and if any creditor shall obtain any sum

of money or other goods, chattels, or security from any person as an inducement for forbearing to oppose, or consenting to such application for discharge, every creditor so offending shall forfeit all right to any share or dividend in the estate of the bankrupt, and shall also forfeit double the value or amount of such money, goods, chattels, or security so obtained to be recovered by the assignee for the benefit of the estate. SEC. 39. And if such person shall be adjudged a bankrupt, the assignee may recover back the money or other property so paid, conveyed, sold, assigned, or transferred contrary to this act, provided the person receiving such payment or conveyance had reasonable cause to believe that a fraud on this act was intended, or that the debtor was insolvent, and such creditor shall not be allowed to prove his debt in bankruptcy.]

A lien created pursuant to suit, including an attachment upon mesne process or a judgment by confession, begun against a person within four months before filing a petition in bankruptcy, shall be dissolved by the adjudication of such person a bankrupt, if it appears that the lien was created through fraud, or while the defendant was insolvent, or the parties to be benefited thereby had knowledge that the defendant was insolvent. (Sec. 67, c.) The act provides that, in computing time, the number of days shall be computed by excluding the first and including the last, unless the last fall on a Sunday or a holiday, in which event the day last included shall be the next day thereafter which is not a Sunday or a holiday. (Sec. 31.)

Effect of giving or taking preference.- Creditors who have obtained a preference by a bill of sale from the debtor are estopped to set up the execution of the same as an act of bankruptcy, or if they have taken possession of the entire property of a debtor under a general assignment or bill of sale, intended to prefer them, cannot set up the non-payment of a note as an act of bankruptcy. (In re Williams, 14 N. B. R. 132; Fed. Cas. 17706.) Certain creditors received preferences from an insolvent debtor, and to prevent other creditors from instituting proceedings in bankruptcy contracted to pay them a sum of money. Suit was brought on this contract, and the question of its validity being raised, the court held that creditors could make such a contract. (Berryman v. Allen, 15 N. B. R. 113.) A stipulation by a creditor for a secret advantage is altogether void. Not only can he take no advantage from it, but he also loses the benefit of a composition (Brookmire & Rankin v. Bean, Ass., 12 N. B. R. 217; 3 Dill. 136; 2 Cent. Law J. 265; Fed. Cas. 1942); and a claim of a creditor for expenses incurred in an effort to obtain a preference will be rejected (In re Archenbrown, 8 N. B. R. 429; Fed. Cas. 503); but mere preferences made without contemplation of proceedings in bank

ruptcy cannot be set up against a discharge. (In re Jones, 13 N. B. R. 286; 2 Lowell, 451; Fed. Cas. 7446; In re Brent, 8 N. B. R. 444; 18 Int. Rev. Rec. 159; Fed. Cas. 1832; In re White et al., 18 N. B. R. 107; Fed. Cas. 17533.)

A debtor who has grounds for fearing and believing that he is insolvent, and, acting on such belief, makes a payment to one creditor two days prior to his failure, is not entitled to a discharge in bankruptcy, such payment being a preference of one creditor over the others. (In re Doyle, 3 N. B. R. 158; Fed. Cas. 4051; In re Gay, 2 N. B. R. 114; 1 Hask. 108; 1 Amer. Law T. Rep. Bankr. 73; 2 Amer. Law T. Rep. Bankr. 52; Fed. Cas. 5279; In re Foster, 2 N. B. R. 81; 1 Amer. Law T. Rep. Bankr. 127; 1 Chi. Leg. News, 103; Fed. Cas. 4961; In re Finn, 8 N. B. R. 525; Fed. Cas. 4795; In re Jones & Hoyt, 12 N. B. R. 48; 7 Chi. Leg. News, 162; Fed. Cas. 7452.) But the fact that a bankrupt paid certain creditors in full shortly before commencement of proceedings is no ground for withholding a discharge where it is not shown that such payments were intended as preferences (In re Burgess, 3 N. B. R. 47; Fed. Cas. 2153); and where, on application for a discharge, it appeared that the bankrupt had given fraudulent preferences, but no creditors appeared in opposition, it was held that the court would not deny a discharge where creditors were not opposed thereto. (In re Clark et al., 19 N. B. R. 301; 36 Leg. Int. 414; Fed. Cas. 2812.)

A bank obtained payment of a dishonored bill of exchange by an acceptance within four months of the bankruptcy of the acceptor. The assignee recovered back the amount paid. In a suit against the indorser by the bank it was held that the holder having taken a preference without the indorser's consent, and so prevented the indorser, for that time. from indemnifying himself, the indorser was discharged. (Northern Bank of Kentucky v. Cooke, 18 N. B. R. 306.) A debtor who was insolv. ent gave certain preferences to creditors who knew of his insolvency. A little more than two months after the preference bankruptcy proceedings were commenced, the debtor accepting service. Thereupon the debtor proposed a composition, and offered one of the preferred creditors as an indorser for deferred payments. The composition was accepted by the requisite number, but objected to by a minority. It was held that the composition would not be confirmed unless the pro rata offered to all of the creditors equaled the amount they would have been entitled to if no preference had been made. (In re Jacobs, 18 N. B. R. 48; Fed. Cas. 7159.)

No creditor who has received a preference, having at the time reasonable cause to believe his debtor insolvent, is authorized to institute proceedings in bankruptcy. (Ecker v. McAllister, 17 N. B. R. 42.) The purpose of the Bankrupt Act being to enforce equal distribution of an insolvent's estate, every act of an insolvent that tends to defeat that purpose should be construed strictly against him (Hall, Ass., v. Wager

& Fales, 5 N. B. R. 181; 3 Biss. 28; 5 West. Jur. 538; 3 Chi. Leg. News, 401; Fed. Cas. 5951); but there is no such collusion as will deprive the parties of rights to which they would otherwise be entitled, where it is only shown that the parties endeavored to obtain all the advantage that the law would afford them. (Whithed et al. v. Pillsbury et al., Ass., 13 N. B. R. 241; Fed. Cas. 17572.)

Nature of fraud.- A mere fraud on the Bankrupt Act by accepting a preference in violation of its provisions is not an actual fraud. (In re Riorden, 14 N. B. R. 332; Fed. Cas. 11852.)

What is notice to creditor.- Any agreement by an insolvent debtor with a creditor to create a preference in favor of that creditor is void if the creditor has cause to believe the debtor insolvent, and he is afterwards proceeded against under the act. (Second Nat. Bank v. Hunt, 4 N. B. R. 198.) A creditor to whom a conveyance has been made by an insolvent debtor need not have absolute knowledge of the fact of insolvency, in order to defeat the conveyance, but only reasonable cause to know; that is, that such a state of facts had been brought to his notice as would have led prudent business men to conclude that the debtor could not meet his obligations as they matured in the ordinary course of business. (Toof v. Martin, 6 N. B. R. 49; 13 Wall. 40; Lloyd, Ass., v. Strobridge, 16 N. B. R. 197; 10 Chi. Leg. News, 1; San Fran. Law J. 13; Fed. Cas. 8435; In re Hauck, 17 N. B. R. 158; Fed. Cas. 6219; In re McDonough, White, Ass., v. Rafferty, 3 N. B. R. 53; 1 Chi. Leg. News, 361; 16 Pittsb. Leg. J. (O. S.) 110; Fed. Cas. 8775; Burfee v. First Nat. Bank of Janesville, 9 N. B. R. 314; Buchanan et al. v. Smith, 7 N. B. R. 513; 16 Wall. 277; Armstrong v. Rickey Bros., 2 N. B. R. 150; 1 Chi. Leg. News, 145; 2 Amer. Law T. Rep. Bankr. 65; Fed. Cas. 546; Boothe, Ass., etc. v. Brooks, Nedy & Co., 12 N. B. R. 398; 1 N. Y. Weekly Dig. 125; Fed. Cas. 1650; Singer, Ass., v. Sloan et al., 12 N. B. R. 208; 3 Dill. 110; 7 Chi. Leg. News, 231; 2 Cent. Law J. 218; Fed. Cas. 12898; Loudon, Ass., v. National Bank, 15 N. B. R. 476; 2 Hughes, 420; Fed. Cas. 8525; Scammon, Ass., v. Cole et al., 5 N. B. R. 257; 3 Cliff. 472; Fed. Cas. 12432.) A knowledge of facts and circumstances which would put a prudent man upon inquiry is a reasonable cause to believe a debtor insolvent; and if a creditor had reasonable cause, when taking a preference, to believe the debtor insolvent, it makes no difference what he thought or knew of the debtor's intentions in giving the preference. (Webb, Ass., v. Sachs et al., 15 N. B. R. 168; 4 Sawy. 158; 9 Chi. Leg. News, 156; Fed. Cas. 17325.)

Where a creditor to whom preference has been given may by the slightest inquiry be apprised of his debtor's real condition, he is chargeable with a knowledge of the facts as they exist. (Lloyd, Ass., etc. v. Strobridge, 16 N. B. R. 197; 10 Chi. Leg. News, 1; 1 San Fran. Law J. 13; Fed. Cas. 8435.) Knowledge of attorneys of a judgment creditor, of the bankrupt's insolvency and intent to evade the bankrupt law, is the knowledge of the creditor. (Rogers, Ass., etc. v. Palmer, 19 N. B. R. 471;