31 in a lump at an auction sale by the trustee.29 This value should be determined as of the time the proceedings were commenced,30 or at the time of the alleged preferential payments. When the act of bankruptcy itself depreciates the debtor's property until, under this definition, he is insolvent, the petition against the alleged bankrupt must be dismissed.32 Manifestly, a person may not be able to meet current obligations, and yet his property at a fair valuation may be sufficient to pay his debts.33 Evidence must be adduced sufficient to show that the alleged bankrupt's debts were more than the value of his assets at the time the petition is filed.34 The Bankruptcy Act has given an artificial meaning to the word "insolvent," complicating the construction of statutes as applied to alleged preferences and rendering inapplicable to a large extent judicial decisions upon statutes where the word "Insolvency" is to be read in its ordinary business sense, and consequently the usual indicia, by virtue of which a creditor may be said to have reason to believe his debtor is "insolvent" or the reverse, become to a large extent of no importance.35 It is undoubtedly humane, but is thought to put creditors at their debtor's mercy. On the other hand, it protects the debtor whose property is not quickly convertible. In this aspect, it re sults in conditions not unlike those of a debtor who has taken advantage of the suspended payment periods sanctioned by some of the continental bankruptcy systems. In actual practice, it has 29. Rutland County Nat. Bank v. Graves, 19 Am. B. R. 446. 30. In re Hines, supra. 31. Rutland County Nat. Bank v. Graves, supra. 32. Chicago Title & Trust Co. v. Roebling's Sons, 5 Am. B. R. 368, 107 Fed. 71. See also Lansing Boiler Works v. Ryerson & Son, 11 Am. B. R. 558, 128 Fed. 701; In re Rogers Milling Co., 4 Am. B. R. 540, 102 Fed. 687; Vaccaro v. Bank, 4 Am. B. R. 474, 103 Fed. 436; In re Rome Planing Mills, 3 Am. B. R. 766, 99 Fed. 937. 33. Hackney v. Raymond Bros., etc., Co. (Neb.), 10 Am. B. R. 213. See also In re Doscher, 9 Am. B. R. 547, 556, 120 Fed. 408; In re Coddington, 9 Am. B. R. 243, 126 Fed. 891. 34. Knittel v. McGowan, 14 Am. B. R. 209, 134 Fed. 498. 35. In re Andrews, 16 Am. B. R. 387, 144 Fed. 922, aff'g 14 Am. B. R. 247; In re Pettingill & Co., 14 Am. B. R. 758, 135 Fed. 218. See Indebtedness or Insolvency, chapter VII, supra. done little harm.36 In determining the issue as to the solvency or insolvency of an alleged bankrupt, all of his property, exempt and non-exempt, is to be reckoned in computing the amount of his assets, except such as he may have transferred or concealed in fraud of creditors.37 Where property is transferred in fraud of creditors, the statute contemplates that the bankrupt shall not have the benefit of its valuation in determining whether he is insolvent. Where property is transferred by a debtor in payment of, or as security for, a just debt, the mere fact that it may involve a preference in bankruptcy, should bankruptcy proceedings be instituted, does not exclude it from consideration in determining the debtor's solvency.38 Where a bankrupt received money which should have been applied to the payment of his debts, refuses to disclose where or how it was kept, but insists that it has been invested by him beyond the jurisdiction of the court, it must be held that the money was "concealed " within the meaning of the Bankruptcy Act, and may not be considered in marshaling the assets to ascertain whether he was solvent.39 5. Definition of conceal.-The Bankruptcy Act provides that "conceal" shall include secrete, falsify, and mutilate.10 This, under the present law, means more than "hide;" it connotes more than secrete." Thus, with peculiar reference to the second objection to a discharge,11 it includes the falsifying or mutilating of books or business records. Under the former law, concealment of property included a concealment of title to property.12 The 36. Collier, Bankr., 6th ed., p. 5; Matter of Rung Furniture Co., 10 Am. B. R. 44. 37. In re Crenshaw, 19 Am. B. R. 502; In re Hines, 16 Am. B. R. 295, 144 Fed. 142; In re Baumann, 3 Am, B. R. 196, 96 Fed. 946. 38. In re Doscher, 9 Am. B. R. 547, 554, 120 Fed. 408, subdivision (15), as regards property to be exIcluded, has evident reference to the act of bankruptcy stated in section 3a (1), and not to the acts of bankruptcy relating to preferences. 39. In re Shoesmith (C. C. A.), 13 Am. B. R. 645, 135 Fed. 684. 40. Section 1(22). 41. Section 14b(2), "with intent to conceal his financial condition, destroyed, concealed or failed to keep books of account or records from which such condition might be ascertained." 42. In re Williams, Fed. Cas. No. 17,703. It new definition strengthens rather than impairs this doctrine. may be doubted, however, whether the definition adds anything to the ordinary meaning of the word "concealed" in section 29b; the difficulty of reading in either "falsified" or "mutilated" will be apparent at a glance.43 Almost as difficult would be the interpolation of these new meanings into the first act of bankruptcy.44 This definition has not yet been interpreted by the courts. 45 § 6. Definition of transfer.-The Bankruptcy Act provides that "transfer" shall include the sale and every other and different mode of disposing of or parting with property, or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift, or security." 46 All technicality and narrowness of meaning is precluded by this definition. The word is used in its most comprehensive sense, and is intended to include every means and manner by which property can pass from the ownership and possession of another, and by which the result forbidden by the statute may be accomplished-a preference enabling a creditor "to obtain a greater percentage of his debt than any other creditors of the same class." Thus, a payment of money by an insolvent debtor to a creditor, even in due course of business, the debtor not intending to give a preference and the creditor not having reasonable cause to believe a preference was intended, nevertheless is a transfer and constitutes a preference within the meaning of the Bankruptcy Act, and must be surrendered as a condition precedent to proving the balance of the debt or other claims of the creditor.47 The performance of labor by a debtor for his creditor is, however, not a "transfer of property" within 48 99 66 the meaning of the bankrupt law.1 In section 67e, "transfer " seems to be used as something different from "conveyance, assignment," and "incumbrance," but the better opinion is that this was an inadvertence in the drafting of the law, and that even here the generic word includes those that are specific. The words as a payment, pledge, mortgage, gift, or security," as used in this subdivision, are interpreted as illustrative only and not as qualifying the rest of the paragraph.49 The giving of a chattel mortgage is a transfer of property within the meaning of the act.50 The term is not, however, sufficiently broad to include a preferential payment to a creditor so as to bar a discharge under section 14b(4), in the absence of a fraudulent intent.51 The definition becomes important in sections 3a (1) (2) and b(1), 60a, 67e, three of the principal sections of the law. It occurs in some of the sections as amended by the Act of 1903.52 Its significance to a proper understanding of the statute cannot be too much emphasized.53 7. Definition of preference.-Although this word is not expressly defined in section one of the bankruptcy law, the Supreme Court has held that section 60a is a definition.54 A preference under this law has, therefore, but three elements: (a) insolvency, (b) the procuring or suffering of a judgment or the making of a transfer by the bankrupt, (c) a consequent inequality between creditors of the same class. Since the amendatory act of 1903, 48. In re Doscher, 9 Am. B. R. 547, 120 Fed. 408; In re Steers Lumber Co., 6 Am. B. R. 315, 110 Fed. 738, aff'd 7 Am. B. R. 332, 112 Fed. 406. 49. In re Steege, 8 Am. B. R. 515, 116 Fed. 342, 54 C. C. A. 116. 50. Matter of Riggs Restaurant Co., 11 Am. B. R. 508, 130 Fed. 691. 51. Matter of Maher, 15 Am. B. R. 786, aff'd 16 Am. B. R. 340. 52. Sections 57g, 60a. 66 53. Collier, Bankr., 6th ed., p. 7. 54. Pirie v. Chicago Title & Trust Co., 182 U. S. 438, 5 Am. B. R. 814, subdivisions a and b are concerned with a preference given by a debtor to his creditor. Subdivision a defines what shall constitute it, and subdivision b states a consequence of it." See also Swartz v. Bank, 8 Am. B. R. 673, 117 Fed. 1; In re Rosenberg, 7 Am. B. R. 316. Compare Stern v. Louisville Trust Co., 7 Am. B. R. 305, 112 Fed. 501. such a preference ceases to be so if four months shall elapse before the bankruptcy proceeding begins.55 A voidable preference is something very different.56 It follows, also, that only transfers and judgments can be preferences. The English law continues to distinguish between mere preferences and those that are either "fraudulent" or "undue." The result of our new meaning to an old-time word has been far-reaching." 57 § 8. Definition of property.—The bankruptcy law contains no definition of "property." Section 70a indicates what property passes to the trustee. The English act of 1883 defines property in comprehensive terms.58 § 9. Acts of bankruptcy; statutory provisions.-The Bankruptcy Act of 1898 provides as follows: § 3. Acts of Bankruptcy.—a Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay, or defraud his creditors, or any of them; or (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; or (3) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference; or (4) made a general assignment for the benefit of his creditors, or, being insolvent, applied for a receiver or trustee for his property or because of insolvency a receiver or trustee has been put in charge of his property under the laws of a State, of a Territory, or of the United States;* or (5) admitted in writing his in 55. Section 60a. 56. Section 60b. 57. Collier, Bankr., 6th ed., p. 8. Compare Pirie v. Chicago Title & Trust Co., supra, with In re Hall, 4 Am. B. R. 671, 679; and note changes 58. Collier, Bankr., 6th ed., |