ability to pay his debts and his willingness to be adjudged a bankrupt on that ground.

b A petition may be filed against a person who is insolvent and who has committed an act of bankruptcy within four months after the commission of such act. Such time shall not expire until four months after (1) the date of the recording or registering of the transfer or assignment when the act consists in having made a transfer of any of his property with intent to hinder, delay, or defraud his creditors or for the purpose of giving a preference as hereinbefore provided, or a general assignment for the benefit of his creditors, if by law such recording or registering is required or permitted, or, if it is not, from the date when the beneficiary takes notorious, exclusive or continuous possession of the property unless the petitioning creditors have received actual notice of such transfer or asignment.

c It shall be a complete defense to any proceedings in bankruptcy instituted under the first subdivision of this section to allege and prove that the party proceeded against was not insolvent as defined in this 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.

d Whenever a person against whom a petition has been filed as hereinbefore provided under the second and third subdivisions of this section 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.

e Whenever a petition is filed by any person for the purpose of having another adjudged a bankrupt, and an application is made to take charge of and hold the property of the alleged bankrupt, or any part of the same, prior to the adjudication and pending a hearing on the petition, the petitioner or applicant

shall file in the same court a bond with at least two good and sufficient sureties who shall reside within the jurisdiction of said court, to be approved by the court or a judge thereof, in such sum as the court shall direct, conditioned for the payment, in case such petition is dismissed, to the respondent, his or her personal representatives, all costs, expenses, and damages occasioned by such seizure, taking, and detention of the property of the alleged bankrupt.

If such petition be dismissed by the court or withdrawn by the petitioner, the respondent or respondents shall be allowed all costs, counsel fees, expenses, and damages occasioned by such seizure, taking, or detention of such property. Counsel fees, costs, expenses, and damages shall be fixed and allowed by the court, and paid by the obligors in such bond.

10. Acts of bankruptcy in general.-The Bankruptcy Act of 1898 specifies five acts of bankruptcy. These will be considered under the appropriate headings, although some of them have little, if any, relation to the subject of fraudulent conveyances. The provisions of the Bankruptcy Act which relate directly to fraudulent conveyances or transfers of his property by a debtor or bankrupt are contained in four sections of the act. Section 3a (1) of the act makes a fraudulent transfer of his property by a debtor an act of bankruptcy. If the fraudulent transfer is within four months of the filing of the petition in bankruptcy, it is not only an act of bankruptcy but void under section 67e. It is also an objection to the bankrupt's discharge under section 14b(4). If the fraudulent transfer is also voidable under the State laws, it may be set aside under section 70e, and the property or its value recovered by proper proceedings begun within the limitations as to time fixed by the State statutes. These doctrines are further considered in the appropriate sections.

11. Who may commit acts of bankruptcy.-Any person who can be adjudged an involuntary bankrupt may commit an act of bankruptcy. The term The term "person " includes corporations, part

nerships, and women.50 An agent, acting without the scope of his agency and without the consent of his principal, cannot render his principal liable for an act of bankruptcy.60 But if one member of a partnership commits an act of bankruptcy, within the scope of his authority and in respect to the partnership property, an involuntary bankruptcy proceeding may be instituted against the partnership itself.61

§ 12. First act of bankruptcy; a fraudulent transfer; subs. a(1).—Under the statutory provision, "having 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," 62 constitutes an act of bankruptcy on the part of the person so doing.63 The convey

ances and transfers made with intent to hinder, delay, or defraud creditors which are declared by the act to be acts of bankruptcy are those which by the common law and by the Statute of Elizabeth,65 now a part of the law of nearly every State, are

59. Bankr. Act (1898), § 1(19). When partnership regarded as insolvent. In re Perley, 15 Am. B. R. 54, 138 Fed. 927.

Liabilities of stockholders of a corporation considered in determining question of solvency. First Nat. Bank v. Wyoming Valley Ice Co., 14 Am. B. R. 448, 136 Fed. 466.

60. Ex parte Blain, 12 Ch. D. 522, 41 L. T. Rep. N. S. 46, 28 Wkly. Rep. 334. As to persons against whom petition may be filed under section 3b, see Collier on Bankruptcy, 6th ed., pp. 54-56.

61. Strang v. Bradner, 114 U. S. 555, 5 Sup. Ct. 1038, 29 L. Ed. 248; In re Dibblee, 3 Ben. (U. S.) 283, 7 Fed. Cas. No. 3,884; In re Black, 2 Ben. (U. S.) 196, 3 Fed. Cas. No. 1,457.

deemed to be fraudulent.65 Although insolvency may be an important circumstance to show fraudulent intent under this clause, it is not essential, as it is under clause 2, to constitute the second act of bankruptcy.67 The various transactions which will furnish a legal presumption of this fraudulent intent depend largely on the State decisions cited and discussed in preceding chapters.68 A conveyance of property by a debtor to a trustee of his own selection or a conveyance of any kind by an insolvent debtor, for the equal benefit of all his creditors, although not a voluntary general assignment, because containing certain conditions of defeasance, is nevertheless an act of bankruptcy, because of its tendency to defeat or delay the operation of the Bankruptcy Act by providing a different method of administration than that contemplated thereby and because it clearly deprives the creditors of the valuable rights accorded to them by that act.69 A chattel

Failure of bankrupt's creditors to ascertain fact of transfer may be chargeable to their own negligence. In re Bogen, 13 Am. B. R. 529, 134 Fed. 1019.

66. Githens, etc., Co. v. Shiffler & Bros., 7 Am. B. R. 453, 112 Fed. 505; In re Shapiro, 5 Am. B. R. 839, 106 Fed. 495; In re Baker-Ricketson Co., 4 Am. B. R. 605, 97 Fed. 489. Fraudulent Conveyances generally, chap. I, supra; Nature and form of transfer, chap. II, supra.

See

All such conveyances and transfers are null and void as to creditors, if made within four months prior to the filing of the petition in bankruptcy. Bankr. Act, § 67e. They may be set aside in an action brought by the trustee, even if made earlier than four months prior to the filing of such petition. Bankr. Act., § 70e.

67. In re Mingo Valley Creamery Assn., 4 Am. B. R. 67, 100 Fed. 282. 68. See chaps. I to XV, supra. See also Githens, etc., Co. v. Shif

fler Bros., supra; Tiffany v. Lucas, 15 Wall. (U. S.) 410; In re Hussman, Fed. Cas. 6,951, and citations to the next section.

66

69. Rumsey, etc., Co. v. Novelty Mfg. Co., 3 Am. B. R. 704, 99 Fed. 699, Among the rights conferred upon creditors by the Bankruptcy Act are: (1) to choose their own trustees; (2) to examine the bankrupt; (3) to have notice of all the important steps in the administration of the estate; and (4) to have the assets converted into money and distributed under the supervision and control of a court of bankruptcy;" Davis v. Bohle, 1 Am. B. R. 412, 92 Fed. 325, 34 C. C. A. 372; Globe Ins. Co. v. Cleveland Ins. Co., 10 Fed. Cas. No. 5,486, 4 Am. L. Rec. 652, 8 Chic. Leg. N. 258, 14 Nat. B. R. 311; In re Gutwillig, 1 Am. B. R. 388, 92 Fed. 337, 34 C. C. A. 377. See In re Salmon, 16 Am. B. R. 122, 143 Fed. 395.

mortgage to secure a present loan to pay certain creditors is an act of bankruptcy.70 But where an insolvent debtor, prior to legal bankruptcy, borrows money and gives security therefor at the same time, and the advancements are made in good faith upon such security to enable the insolvent debtor to carry on business, there is no violation of either the terms or policy of the Bankruptcy Act.71

§ 13. Intent. In order to constitute an act of bankruptcy under section 3a(1) the bankrupt must have transferred 72 his property with intent to hinder, delay, or defraud his creditors.73

70. In re Pease, 12 Am. B. R. 66, 129 Fed. 446.

71. In re Wolf, 3 Am. B. R. 555; In re Davidson, 5 Am. B. R. 528, 109 Fed. 882, a mortgage executed to secure a money loan made at the same time is valid, but if such mortgage is given to secure an antecedent debt, it will be deemed a preferential transfer, and therefore an act of bankruptcy.

66

Under the former act it was held that an insolvent person may properly make efforts to extricate himself from his embarrassments, and therefore he may borrow money, and give at the time security therefor, provided always that the transaction be free from fraud in fact and upon the bankrupt act.

And hence

it is a settled principle of bankrupt law, both in England and in this country, that advances made in good faith to a debtor to carry on business, upon security taken at the time, do not violate either the terms or policy of the bankrupt act." Darby v. Boatman's Sav. Inst., 1 Dill. (U. S.) 141, 6 Fed. Cas. No. 3.571. 4 N. B. R. 600. See also Gatman v. Honea, 10 Fed. Cas. No. 5,271, 12 N. B. R. 493; In re Sanford,

21 Fed. Cas. No. 12,310, 7 N. B. R. 351; In re Rosenfeld, 20 Fed. Cas. No. 12,057, 2 N. B. R. 116; In re Cowles, 6 Fed. Cas. No. 3,297, 1 N. B. R. 280.

72. In re Nusbaum, 18 Am. B. R. 598, 152 Fed. 835, where an alleged bankrupt, while insolvent, voluntarily confesses judgment in favor of certain of his creditors and permits them to levy executions on and sell without his property thereunder, having vacated or discharged the judgment, execution and levy, there transfer" which constitutes an act of bankruptcy under clauses 1 and 2 of section 3a, irrespective of clause 3 of said section.

is a

73. In re Flint Hill Stone & Constr. Co., 18 Am. B. R. 81, a petition, charging an act of bankruptcy in giving a chattel mortgage within the four months period must allege facts showing that the mortgage was given either with intent to hinder, delay and defraud creditors and that the debt secured in the mortgage was pre-existing, or, if then incurred or made, that the mortgage was for an inadequate consideration.

It is competent to show that deeds, although absolute upon their