Слике страница
PDF
ePub

70 Me. 153; Boedefeld v. Reed, 55 Cal. 299; Lewis v. County Clerk, Id. 604; Transportation Co. v. Thomas, 57 Cal. 197. 3. Same-What State Laws Affected.

In connection with the question of the validity of national bankruptcy laws and the insolvency laws of the several states, and the effect of the one upon the other, numerous attempts have been made (but without any marked success) to draw a sharp line of distinction between a bankruptcy law, properly so called, and an insolvency law. See, for instance, Adams v. Storey, 1 Paine, 19, Fed. Cas. No. 66. In fact, as pointed out in Martin v. Berry, 37 Cal. 208, 2 N. B. R. 629, the only substantial difference between a bankruptcy law and an insolvency law lies in the circumstance that the former affords relief upon the application of the creditor, and the latter upon the application of the debtor. In the general character of the remedy there is no difference, however much the modes in which the remedy may be administered may vary. An act which, like the present act of congress, embodies provisions for both voluntary and involuntary proceedings is in effect both a bankruptcy law and an insolvency law. In truth, as regards the matter under discussion, the question is not whether a particular law of a state is a "bankruptcy" law or an “insolvency" law, but whether the statute (without regard to its being called by one or the other of those names, or by neither of them) is incompatible with the effective administration of the national bankruptcy act, by invading the special field which the latter covers, or by usurping for the courts of the state the exclusive province of the bankruptcy courts to collect and distribute the assets of an insolvent debtor who is amenable to the act of congress. For example, the test of the validity of proceedings under a state law does not lie in the question whether or not it purports to release the insolvent from his obligations. "In so far as a state law attempts to administer on the effects of an insolvent debtor and distribute them among creditors, it is to all intents and purposes an insolvent law, although it may not authorize a discharge of the debtor froin further liability." In re Merchants' Ins. Co., 3 Biss. 162, Fed. Cas. No. 9,441. Compare Ex parte Rank, Crabbe, 493, Fed. Cas. No. 11,566. On the other hand, several cases have held that the right and power of a state chancery court to appoint a receiver for an insolvent corporation, as authorized by a law of the state, is not abolished by the mere fact of the national bankruptcy law being in force, but will continue at least until proceedings in bankruptcy against such corporation are actually instituted. Watson v. Bank, 5 S. C. 159; State v. Superior Court of King County, 20 Wash. 545, 56 Pac. 33, 45 I. R. A. 177; Chandler v. Siddle, 3 Dill. 477, Fed. Cas. No. 2,594. Compare French V. O'Brien, 52 How. Prac. 394; Barber v. International Co., 73 Conn. 587, 48 Atl. 758. But a different conclusion was reached with reference to a statute of Louisiana which provided for the liquidation of insolvent banks in either voluntary or forced proceedings. The law required the state court, in either case, to appoint commissioners, who were empowered to take possession of all the property and effects of the bank, to make an inventory, to supervise the destruction of all the notes of the bank found on hand, to collect the assets and pay the debts as prescribed by the act, and to distribute the balance, if any, among the stockholders. Also, by the operation of a decree of forfeiture or dissolution, to be rendered in the proceedings, the bank was practically discharged from its debts after the final settlement of its affairs. This was held to be in effect a bankruptcy or insolvency law. "Here,” said the court, "we have all the elements of a bankrupt law,insolvency, surrender of property, its administration by assignees or commissioners, distribution among creditors of the assets, and, in effect, the discharge of the corporation.' And since “an examination of the act further shows that its provisions apply, as well as those of the general bankruptcy act, to moneyed corporations, and that it prescribes a different rule for the distribution of the assets of an insolvent corporation from that established by the bankruptcy law,” it was held that the operation of the state law was suspended, and that no proceedings could be had under it while the national law was in force. Thornhill v. Bank, 1 Woods, 1, 5 N. B. R. 367, Fed. Cas. No. 13,932.

A state law, howerer, which merely protects the person of a debtor from imprisonment, without affecting the debt or contract or the other means for its enforcement, or which provides only for the release of poor debtors arrested on civil process, is not of such a nature as to be suspended by the bankruptcy act. Sullivan v. Hieskill, Crabbe, 523, Fed. Cas. No. 13,594; In re Jacobs, 12 Abb. Prac. (X. S.) 273; Jordan V. Hall, 9 R. I. 220, 11 Am. Rep. 245. And of course the latter act does not affect general laws of the states providing for the settlement of the estates of insolvent persons deceased. Hawkins v. Learned, 54 X. H. 333. Nor, it is said, does the bankruptcy law suspend a state law enabling a creditor to prevent the departure of his debtor from the state. Gottschalk v. Meyer, 28 La. Am. 885. And the opinion has been expressed that an action brought by a receiver in proceedings supplementary to execution is not a proceeding commenced under a state insolvency law, within the meaning of the saving clause of the bankruptcy act regarding such proceedings pending at the time of its taking effect. In re Meyers, 1 Nat. Bankr. X. 293, per Hotchkiss, referee.

[ocr errors]

4. Same-Cases Not Covered by Bankruptcy Law.

The state courts have frequently asserted-and with much apparent reason--that the insolvency laws of the states are suspended by the United States bankruptcy act only in so far as they conflict with the latter statute; and that, as to any cases not covered by the bankruptcy law, or expressly or impliedly omitted from its operation, it may be presumed that congress did not intend to interfere with the laws of the several states, and they may therefore still be put into effect. Appeal of Geery, 43 Conn. 289, 21 Am. Rep. 653; Pugh v. Bussel, 2 Blackf. 394; Fisk v. Montgomery, 21 La. Ann. 446; Simpson v. Bank, 56 N. H. 466, 22 Am. Rep. 491; Steelman v. Mattix, 36 N. J. Law, 344; In re Winternitz, 7 Phila. 380. To illustrate: The present bankruptcy law is not applicable, in its compulsory features, to all classes of corporations, but only to those which are "engaged principally in manufacturing, trading printing, publishing, or mercantile pursuits." Hence, if proceedings under the state insolvency law, or under a law for the winding up of insolvent corporations, are commenced against a corporation which is not amenable to the bankruptcy law, but which is within the terms of the state law, it is difficult to see on what grounds they are to be held invalid, for there is no possibility of conflict between the two statutes. See Simpson v. Bank, 50 N. H. 466, 22 Ain. Rep. 491. Again, the bankruptcy act authorizes involuntary proceedings against a debtor only in case he owes debts to the amount of $1,000 or over. But if the state insolvency law permitted compulsory proceedings against a person whose debts amounted to less than that sum (so that he would not at all be subject to the federal law), it would certainly appear that the state law might be put in force in such a case. See Corner v. Miller, 1 N. B. R. 403. Another illustration of the point here in question is found in the effect of the bankruptcy act on the statute of Pennsylvania relating to domestic attachments. This law provides for the sequestration of the entire estate of an absconding or concealed debtor, on a writ of attachment, for the appointment of trustees to be vested with title to such estate, and for its distribution to creditors. Now the bankruptcy act of 1867 declared that it should be an act of bankruptcy if a debtor should depart from the state with intent to defraud his creditors, or should conceal himself to avoid service of legal process; and in view of this provision, it was held that the state domestic attachment law was suspended while the federal act of 1867 remained in force. Tobin v. Trump, 7 Phila. 123, 3 Brew'st. 288. But the bankruptcy act of 1898 does not contain any provision relating to ab'sconding or concealed debtors, and the opinion is now advanced that it does not in any way conflict with the state law, and therefore does not suspend or supersede it (McCollough v. Goodhart, 1 Nat. Pankr. X. 512, and see Scully v. Kirkpatrick, 79 Pa. 324, 21 Am. Rep. 62), although proceedings begun under the state statute might be superseded by an adjudication in bankruptcy against such a debtor. 5. Same-Laws Regulating Assignments for Creditors.

In this branch of our subject, the most difficult questions arise in connection with the effect of the bankruptcy law upon state statutes which authorize or regulate assignments for the benefit of creditors. Notwithstanding a considerable difference of opinion, the following principles appear to be fairly well settled upon the authorities. First, the common law relating to such assignments is not a part of the state insolvency law, since it neither places the administration of the estate under the control of the courts, nor exonerates the debtor from personal liability, nor releases him or his future acquisitions from the unpaid balance of his debts; and hence it is not suspended by the enactment of a bankruptcy law. That is, an assignment made as at common law will be valid unless it is impeached or overthrown by proceedings in bankruptcy begun within the statutory time. Cook v. Rogers, 31 Mich. 391; Appeal of Hawkins, 34 Conn. 548; Haas v. O'Brien, 66 X. Y. 597; Von Hein v. Elkus, 8 Hun, 516, 15 N. B. R. 194; In re Sievers (D. C.) 91 Fed. 366. In the next place, we are to consider the statutes, in force in several of the states, which are designed to prevent fraudulent assignments and strike down preferences. These laws provide that any assignment, mortgage, or deed of trust, made by a debtor in contemplation of insolvency and for the purpose of giving a preference, shall operate as an assignment and transfer of all his property and inure to the benefit of all his creditors pro rata, if proceedings for that purpose are begun within a limited time. It is held that these statutes are not insolvency laws in such sense as to be suspended or superseded by the bankruptcy law. Linthicum v. Fenley, 11 Bush, 131; Ebersole v. Adams, 73 Ky. 83; Martin v. Hausman (C. C.) 14 Fed. 160. In the next place, there are laws in many of the states which regulate the administration of estates volun. tarily assigned for the benefit of creditors. Differing largely in details, these laws yet present the following usual features. They require such an assignment to be recorded, and give to some court of the state the settlement and administration of the estate. They require the assignee to give a bond and to file an inventory of the property. They require creditors who wish to claim under the assignment to present their claims within a stated time. They authorize the collection of assets by the assignee by suit, and his discharge upon the settlement of the trust. And they provide for the distribution of the proceeds of the assigned estate among the creditors pro rata. If the law of the state goes no further than this, it is not to be considered an insolvency law; and proceedings commenced under it are not absolutely void, merely by reason of the existence of a national bankruptcy law, although they are liable to be avoided at the instance of a trustee in bankruptcy of the insolvent assignor, subsequently appointed in bankruptcy proceedings in the proper federal court. Mayer v. Hellman, 91 U. S. 496, 23 L. Ed. 377; In re Gutwillig (D. C.) 90 Fed. 475; In re Sievers (D. C.) 91 Fed. 366; Beck v. Parker, 65 Pa. 262, 3 .Am. Rep. 625; Strong v. Carrier, 17 Conn. 319. But there are laws in some of the states which are not confined to regulating the administration of an assigned estate on just and equitable principles, but embrace features characteristic of an insolvency law properly so called. Without compelling any debtor to make an assignment, they treat such an assignment as an act of insolvency, and direct the administration of the estate to proceed substantially as would be the case in voluntary proceedings under an insolvency law, and, in particular, they provide that any creditor who has proved his claim shall be thereafter debarred from prosecuting an action upon it. In other words, they grant the insolvent a discharge from his provable debts. As to statutes of this character, the authorities hold that their operation must be considered as suspended by the enactment of the national bankruptcy law. Patty-Joiner & Eubank Co. v. Cummins, 93 Tex. 598, 57 S. W. 566; In re Curtis (D. C.) 91 Fed. 737; In re Smith (D. C.) 92 Fed. 135; In re McKee, 1 Nat. Bankr. X. 139; Lyman v. Bond, 139 Mass. 291.

Under the former class of statutes certainly, and probably also under the latter, an assignment for the benefit of creditors, though voidable at the instance of a trustee in bankruptcy subsequently appointed, is not void ab initio. Though it constitutes an act of bankruptcy under the federal statute, and though it was made for the very purpose of giving preferences and otherwise evading the provisions of that law, it is not a mere nullity, in any such sense as to leave the title to the property in the assignor as if no assignment had been made. If no proceedings are instituted in a court of bankruptcy, within the time limited, for the adjudication of the assignor as a bankrupt, and for the purpose of securing the administration of the property in such court, the assignment will be valid, at least for the purpose of securing an equal distribution of the estate among the creditors; that is, it will be valid as at common law, though not as an attempt to invoke the state insolvency law. Packing Co. v. Brown, 76 Minn. 405, 79 N. W. 522; Binder v. McDonald, 106 W’is. 332, 82 N. W. 156; Patty-Joiner & Eubank Co. v. Cummins, 93 Tex. 598, 57 S. W. 566; Boese v. King, 108 U. S. 379, 2 Sup. Ct. 705, 27 L. Ed. 760; In re Romanow (D. C.) 92 Fed. 510; Ostrander v. Meunch, 2 McCrary, 267, 12 Fed. 562; Wald v. Wehl, 18 Blatchf. 495, 6 Fed. 163; Barnes v. Rettew, 8 Phila. 133, Fed. Cas. No. 1,019; Sparhawk v. Drexel, 12 N. B. R. 450, Fed. Cas. No. 13,204; Seaman v. Stoughton, 3 Barb. Ch. 344; Strong v. Carrier, 17 Conn. 319: Cook v. Rogers, 31 Mich. 391; Bostwick v. Burnett, 74 N. Y. 317; Maltbie v. Hotchkiss, 38 Conn. 80, 9 Am. Rep. 361; Atkins v. Spear, 8 Metc. (Mass.) 190; Sadler v. Immel, 15 Xer. 265; Thrasher v. Bentley, 59 N. Y. 619; Williams v. Pitts, 55 How. Prac. 331.

Nevertheless, a general assignment by an insolvent debtor, though made for the equal and common benefit of all his creditors, without preferences, and without any actual fraudulent intent, either as to creditors or as to the evasion of the bankruptcy law, is an act of bankruptcy, upon which the assignor may be adjudged bankrupt, if proceedings are begun within four months thereafter, and if the other requisites as to jurisdiction are found to exist. Boese v. King. 108 U. S. 379, 2 Sup. Ct. 76.), 27 L. Ed. 760; Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; Perry v. Langley, 1 V. B. R. 559, Fed. Cas. No. 11,006; In re Pierce, 3 N. B. R. 258, Fed. Cas. No. 11,141; In re Smith, 4 Ben. 1, Fed. Cas. No. 12.974; Barnes v. Rettew, 8 Phila. 133, Fed. Cas. No. 1,019; In re Burt, 1 Dill. 439, Fed. Cas. No. 2,210; In re Chamberlain, 3 N. B. R. 710, Fed. Cas. No. 2.574; In re Croft. 8 Biss. 188, Fed. Cas. No. 3,404; In re Kasson, 18 N. B. R. 379, Fed. Cas. No. 7,617; In re Romanow (D. C.) 92 Fed. 510; In re Randall, Deady, 557, Fed. Cas. No. 11,531; In re Sievers (D. C.) 91 Fed. 366; Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325. Moreover, the complete jurisdiction of the court of bankruptcy over the estate of the bankrupt is not affected by the fact that an assignment for the benefit of creditors under the state law had been made prior to the adjudication. The trustee in bankruptcy takes title to the whole of the estate, including that assigned; the assignment is voidable at his instance; and he may recover the property, or its proceeds, from the assignee. Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325; In re Gutwillig, 31 C. C. A. 377, 92 Fed. 337; In re Sievers (D. C.) 91 Fed. 366; In re Gutwillig (D. C.) 90 Fed. 475; In re Smith (D). C.) 92 Fed. 135; In re Troth (C. C.) 1 Fed. 405; Pool r. McDonald, 15 N. B. R. 560, Fed. Cas. No. 11,268; Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; In re Temple, 4 Sawy. 92, Fed. Cas. No. 13.825; Macdonald v. Moore, 8 Ben. 579, Fed. Cas. No. 8,763; Boese v. Locke, 17 Hun, 270. The assignment, however, will be saved by the lapse of four months without the institution of bankruptcy proceedings. That is to say, if the debtor is adjudged bankrupt, and a trustee appointed, but not until more than four months from the making of the assignment, the trustee will not have the right to set aside the assignment, nor will he be entitled to the possession and administration of the estate as against the voluntary assignee. In such a case, the trustee in bankruptcy (saving questions of fraud) will take only such rights as the bankrupt had and could himself claim at the time of the bankruptcy. Mayer v. Hellman. 91 U'. S. 496. 23 L. Ed. 377; In re Arledge, 1 N. B. R. 644, Fed. Cas. No. 533; In re Kimball, 16 N. B. R. 188, Fed. Cas. No. 7,770. In a late case, however, it is held that, where a general assignment was made more than four months before the assignor was adjudged bankrupt, while the accounts of the assignee will not be reviewed in the bankruptcy proceedings, he will be required to account for the property of the bankrupt remaining in his hands at the commencement of the bankruptcy proceedings. In re Carver (D. C.) 113 Fed. 138. 6. Rights of Trustee in Bankruptcy as Against Assignee for Creditors.

While, as above stated, a general assignment for the benefit of creditors, if made without fraudulent intent, is only voidable in the first instance, yet if proceediags in bankruptcy against the assignor are begun within four months thereafter, the adjudication of bankruptcy will of itself, and without the necessity of bringing an action for that purpose, avoid the assignment, deprive the state courts of jurisdiction to proceed further under the assignment, and render the assigned estate subject to the administration and control of the court of bankruptcy. In re Sievers (D. C.) 91 Fed. 366; In re Gutwillig, 34 C. C. A, 377, 92 Fed. 337. In that contingency, there is no such concurrent jurisdiction, or prior right of possession, in the state court as will prevent the bankruptcy court from assuming_exclusive jurisdiction of the estate of the bankrupt. In re Smith (D. C.) 92 Fed. 135. Any further proceedings had in a state court upon such an assignment, in accordance with the state law, would be coram non judice and void. In re Curtis (D. C.) 91 Fed. 737. It follows, of course, that the assignee will have no title to the property which he could defend as against the claim of the trustee in bankruptcy. The assignee “is a mere naked bailee for the creditors, without a shred of title or lawful authority to the possession of the bankrupt's estate." In re Smith (D. C.) 92 Fed. 135. Nor could he base a claim to retain the property on the ground of his accountability to the state court having jurisdiction over the assignment. If the assignee is cited to account in a state court, he may, in bar of the proceeding, show that the whole estate has been compulsorily taken from him by the court of bankruptcy. Burkholder v. Stump, 8 Phila. 172, 4 N. B. R. 597, Fed. Cas. No. 2.165. What is true of a voluntary assignee is also true of a receiver appointed by the state court in insolvency. Proceedings in bankruptcy oust the jurisdiction of the state court, and the bankruptcy court's receiver is entitled to the possession of the property. In re Lengert Wagon Co. (D. C.) 110 Fed. 927.

In order to obtain possession of the assets, it may be necessary for the court of bankruptcy to take some action before the appointment of a trustee; and it is held that, immediately upon an adjudication in bankruptcy (or even upon the filing of a petition and before the hearing thereon) the hankruptcy court has authority to enjoin the voluntary assignee from disposing of the property confided to him, or from proceeding any further with the administration of the assigned estate. Carriage Co. v. Stengel, 37 C. C. A. 210, 95 Fed. 637; Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325; In re Gutwillig, 34 C. C. A. 377, 92 Fed. 337; In re Sievers (D. C.) 91 Fed. 366; In re Skoll, 16 N. B. R. 175, Fed. Cas. No. 12,926. Or, under the same circumstances, the court of bankruptcy has jurisdiction to appoint a receiver to take charge of the assigned estate pending the adjudication in bankruptcy. In re Etheridge Furniture Co. (D. C.) 92 Fed. 329.

The trustee in bankruptcy, upon his appointment and qualification, is entitled to take the property from the possession of the assignee. It has been suggested that a proper remedy for him is to apply to the state court for an order on the assignee to surrender the estate to him; and, if denied, to appeal to the higher court of the state, and ultimately to the supreme court of the United States. Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320. If the estate is in the possession of a receiver appointed by a state court, as distinguished from an assignee for the benefit of creditors, it is undoubtedly the proper procedure (as stated in the principal case) for the trustee or receiver in bankruptcy to apply to the state court in the first instance. See In re Lengert Wagon Co. (D. C.) 110 Fed. 927, and other cases cited in the opinion, supra. But this course is not necessary if the person having possession of the property is merely an assignee selected by the debtor lim-

51 C.C.A.—2

« ПретходнаНастави »