Bank of Washington.-Bankrupt Law of the United States. BANK OF WASHINGTON. It is the usage of the Bank of Washington, and of other banks in the District of Columbia, to demand payment of a bill on the day after the last day of grace; and this usage has been sanctioned by the decisions of the supreme court. This usage is equally binding on parties who were not acquainted with its existence, but who have resorted to the bank governed by such usage, to make the bill negotiable. Bank of Washington v. Triplett et al., 1 Peters, 25. 1. The holder of a promissory note, drawn before, but transferred after a commission of bankruptcy had issued against the drawer, is entitled to prove his debt under the commission, and to receive a dividend. Humphreys v. Blight's Assignees, 4 Dall. 370. 2. In the case of negotiable paper, the assignee takes it, discharged of all the equity as between the original parties, of which he had no notice. But wherever the assignee has notice of such equity, either positively or constructively, he takes the assignment at his peril. A commission of bankruptcy is legal notice, that wherever mutual debts subsisted between the bankrupt and his creditors, the right of set-off attaches. When the negotiable paper was assigned after the commission of bankruptcy, the party takes it subject to any set-off as between the drawer and payee. Ibid. 3. Under the bankrupt law of the United States, a joint debt may be set off against the separate claim of the assignee of one of the partners; but such set-off could not have been made at law, independent of the bankrupt law. Tucker v. Oxley, 5 Cranch, 34; 2 Cond. Rep. 182. 4. A joint debt may be proved under a separate commission, and a full dividend received; it is equity alone which can restrain the joint creditor from receiving his full dividend until the joint effects are exhausted. Ibid. 5. Wherever the terms in which a power is granted by the constitution to congress, or wherever the nature of the power itself requires that it shall be exclusively exercised by congress, the subject is completely taken away from state legislatures, as if they had been forbidden to act upon it. The power granted to congress of establishing uniform laws on the subject of bankruptcy, is not of this description. Sturges v. Crowninshield, 4 Wheat. 122; 4 Cond. Rep. 410. 6. In the distribution of a bankrupt's effects in this country, the United States are entitled to a preference, although the debt was contracted by a foreigner in a foreign country, and although the United States had proved their debt under the commission of bankruptcy, and had voted for an assignee. Harrison v. Sterry et al., 5 Cranch, 289; 2 Cond. Rep. 262. 7. A conveyance on the eve of bankruptcy, to give a preference to a particular class of creditors, is a fraud on the bankrupt law, and void. Ibid. 8. Such assignment may be valid to secure money actually advanced on the credit of it, and subsequent to its date. Ibid. 301. 9. Under a separate commission of bankruptcy, against one partner only, his private property, and his interest in the funds of the company passes. Ibid. 289. 10. The right to compensation from Spain, held under an abandonment made to underwriters, and accepted by them, for damages and injuries, which were to be satisfied under the treaty, by the United States, passed to the assignees of the bankrupt, who held such rights by the provisions of the bankrupt law of the United States, passed April 4, 1800. Comegys et al. v. Vasse, 1 Peters, 219. 11. The circuit courts of the United States have jurisdiction of matters arising under the bankrupt law of the United States, as they have of any other subject, where the constitution and laws of the United States give jurisdiction; but the district courts have not the same jurisdiction in cases of bankruptcy, as the chancellor of England has. Lucas et al. v. Morris et al., 1 Paine's C. C. R. 396. 12. The district courts of the United States have not, like the chancellor in England, exclusive jurisdiction over the entire execution of the bankrupt law. They cannot remove assignees, nor compel them to account. Ibid. 13. Upon the death of an assignee, under the bankrupt law of the United States, the right of action for a debt due to the bankrupt, vested in the executor of the assignee. Richards et al., Assignees, &c. v. Maryland Ins. Co., 8 Cranch, 84; 3 Cond. Rep. 45. 14. Where the original ground of action is founded on contract, but the immediate cause arises ex delicto, and the claim is for damages, unliquidated by any express agreement, or such as the law will not imply an agreement to pay, the certificate of bankruptcy is no bar, because such claim could not have been proved under the commission. Dusar v. Murgatroyd, 1 Wash. C. C. R. 13. 15. But if the agreement were to pay a particular sum, on failure to perform the contract; or if the case was such that the plaintiff has his election to bring either trespass or case for money had and received, and waives the former by bringing the latter; the damages become a debt, which the law implies a promise to pay, and the certificate is a bar. Ibid. 16. In an action brought against the owner of a vessel for damages for an injury sustained on board a ship by the neglect of the master, a certificate of bankruptcy cannot be pleaded 'in bar. Ibid. 17. One guilty of perjury in the proceedings Bankrupt Law of the United States. under the bankrupt law, cannot be prosecuted for the offence, after the repeal of the law. United States v. Passmore, 4 Dall. 372. 18. A deed executed before the 1st of June, 1800, although acknowledged after, is not within the first section of the bankrupt act of April 4th, 1800, ch. 173. Wood v. Owings, 1 Cranch, 239; 1 Cond. Rep. 302. 19. A certificated bankrupt or insolvent, discharged from the particular contract, need not be made a party to the bill on the contract. Van Reimsdyke v. Kane's Ex'r., 1 Gall. C. C. R. 371. 20. The power given to congress to pass uniform laws, relative to bankruptcy, is exclusive of such power in the state governments; and this, whether the former has thought proper to exercise it or not. Golden v. Prince, 3 Wash. C. C. R. 313. 21. A discharge from a debt under the bankrupt laws of the place of contract, is good in every other place, where pleaded as an extinguishment of the debt. But a like discharge where the contract is not made, has no effect. Le Roy v. Crowninshield, 2 Mason's C. C. R. 151. 22. A debtor concealing himself from, and being denied to his creditors, does not constitute an act of bankruptcy under the laws of the United States, unless the service of process is thereby prevented. Barnes et al. v. Billington, 1 Wash. C. C. R. 29. 23. If the debtor order himself to be denied to creditors and others, and is in consequence thereof denied to an officer, who comes to serve a process, it is an act of bankruptcy: provided the officer comes to serve the process, and not on other business, and the denial has taken place within six months of the issuing of the commission. Ibid. 24. Giving a bond, with warrant to confess judgment to one creditor, upon the eve and in contemplation of bankruptcy, does not constitute a bankruptcy, unless the judgment entered on the bond, and the issuing of the execution, was at the instance or by the procurement of the debtor. Such a bond would be a fraud on the general creditors. Ibid. 221 ruptcy, cannot prove the debt. Marks et al., As- 29. The acceptor or endorser of a bill of exchange, who pays the bill after the bankruptcy of the drawer, may offset the same against the bankrupt's assignees; but he must show the debt to be a subsisting one in him, at the time the action was brought, for this is a case of mutual credit, given before the bankruptcy, although the money was not paid until after. Ibid. 30. The district courts of the United States have not power, in bankrupt cases, to remove assignees, or compel them to account. Lucas v. Morris, Paine's C. C. R. 396. 31. The holder of the negotiable paper, payable "without defalcation," under the laws of Pennsylvania, assigned after a commission of bankruptcy has issued, may come in under the commission, allowing all just offsets existing at the time of the bankruptcy, and which would have been admitted if the assignment had not been made. Humphreys v. Blight's Assignees, 1 | Wash. C. C. R. 44.* 32. The purchaser of a negotiable note, who becomes such after a commission of bankruptcy has issued, may prove under the commission; and he holds the note, subject to all legal offsets. Ibid. 33. The 65th section of the bankrupt law of the United States, passed the 2d of March, 1799, does not repeal the provisions of the laws of the United States, which give to the surety who pays bonds for duties a preference over other creditors. Mott v. The Assignees of Maris, 2 Wash. C. C. R. 196. 34. The provisions of the bankrupt law except from its general operation, not only the preference of the United States, but also the right of preference for satisfaction of debts due to the United States. Ibid. 35. P. paid a sum of money to the United States, as surety of S., in a bond for duties. S. became insolvent, and assigned his effects to Baker, who received four thousand dollars under the assignment, mixed the same with his own funds, and afterwards became bankrupt, and the defendants were appointed his assignees; but no 25. Where two of three assignees of a bankrupt enter into an agreement in the absence of the third, the contract is not binding on the ab-effects, known to be part of the estate of S., came sent assignee, unless he had previously given authority to make it, or substantially recognise and acknowledge it. Aliter, among partners. Blight v. Ashley et al., 1 Peters' C. C. R. 16. 26. The agreement of the assignees of a bankrupt, to give a preference to a particular creditor, is not valid, without the assent of the commissioners, and a certain portion of the creditors. Ibid. 27. Denial to an officer, whereby he is prevented serving process, must be really adversary, and not by concert between the creditor and the debtor, to bring about an act of bankruptcy. Ibid. 28. No debt but such as is due and owing at the time of the bankruptcy, can be proved under he commission; and, consequently, an endorser or acceptor of a bill of exchange, drawn by the Dankrupt, who has not paid it before the bank into their hands. The plaintiff claimed to have 36. A. H. devised an estate to C. S., for life; and after the death of C. S., he directed that the estate should be sold, and divided among the grandchildren of the testator, who should be living at the death of C. S. B. married one of the grandchildren, and, before the death of C. S., B. became bankrupt. B. and wife, after the decease of C. S., sold the property claimed under Bankrupt Law of the United States. the will of A. H., and the plaintiff claimed under | full power and authority, under the bankrupt act, this conveyance. By the court:-The decisions of the English courts abundantly prove that a possibility, whether belonging to the husband or the wife, would not pass to the assignees of the husband, on his becoming bankrupt, if it were not for the strong language of the statutes of bankruptcy. Krumbaar v. Burt, 2 Wash. C. C. R. 406. 37. The possibility held by B., under the will of A. H., formed no part of his estate to which he was entitled in law or equity, of which the commissioners could take possession under the 5th section of the bankrupt law of the United States; and, therefore, they could not transfer it to the assignees of the bankrupt, under the provisions of the 6th section. Ibid. 38. The provisions of the English bankrupt laws, and those of the bankrupt law of the United States, differ in relation to the contingent interests of the bankrupt; and it is clear, that by the most liberal construction of the law, the interest of the husband in the estate of his wife, under the will of A. H., did not pass to the assignees. Ibid. 39. The provisions of the 13th section of the bankrupt law of the United States do not affect this question; they do not require an assignment of contingent interests, but relate to their disclosure by the bankrupt. Ibid. 40. So exclusively have bankrupt laws operated on traders, that it may well be doubted whether an act of congress, subjecting to such a law every description of persons within the United States, would comport with the spirit of the powers vested in them in relation thereto. Per Livingston, J., in Adams v. Storey, Paine's C. C. R. 79. 41. In the case of Chapman v. Forsyth et al., 2 Howard's Rep. 206, it was decreed, that under the bankrupt act of 1841, 5 Statutes at Large, 440, debtors were not excluded from the benefits of the law, who held and owed money in the capacity of trustees, (as a class,) they owing other debts besides the money held in trust. The exception in the act applies to the debts, and not to the person. 2 Howard, 206. 42. A factor who retains the money of his principal is not a fiduciary creditor, within the meaning of the act. Ibid. 43. Fiduciary debts being excepted from the discharge of the bankrupt, the interests of the fiduciary creditor are in no manner affected by it. Without the consent of the fiduciary creditor, by his coming in and proving his debt, the court in bankruptcy can take no jurisdiction of the debt; and although the bankrupt may include the debt in his schedule, and the discharge may be general, as the law gave no jurisdiction over the debt, it is not discharged. İbid. 44. The statute of Kentucky provides "that no writ of fieri facias or other execution shall bind the estate of the debtor, but from the time such writ shall be delivered to the sheriff or other proper officer to be executed." The lien on the debtor's property created by the delivery of such a fieri facias to the sheriff, is not divested by the subsequent bankruptcy of the defendant. Savage's Assignee v. Best, 3 Howard, 118. to proceed in cases of bankruptcy; and the su preme court has no revising authority over its proceedings. Ex parte Christy, 3 Howard, 322. 46. Where A mortgaged to B the whole of his stock in trade, and nearly all of his real estate, to secure a debt due from A to B, and on the same day made oath to a petition for the benefit of the bankrupt act, and subsequently B assigned to the Cohannet Bank and others, all his right, title, and interest in the said stock and in the said real estate: it was held, that the mortgages were "in contemplation of bankruptcy," within the meaning of the bankrupt act of 1841, ch. 9, and were therefore void; and that it was immaterial whether B did or did not know that a fraudulent preference was intended in his favour, if it were actually given. Morse v. Cohannet Bank, 3 Story's C. C. R. 693. 47. Held, also, that inasmuch as the Bank had notice at the time when the assignment was made, that A had failed, and only took it as collateral security for old claims upon B, it was not a bona fide purchase for a valuable consideration without notice; and that, at all events, as the assignment by B was merely of his right, title, and interest, without covenant of title, the invalidity of his title destroyed all right of the bank. Ibid. 48. To constitute a bona fide purchase for a valuable consideration, the sale must be for a new consideration; and the transfer of property merely as a new security for old debts and liabilities, without extinguishment or surrender of such debts, or of the old securities therefor, is not sufficient. Ibid. 49. The pendency of proceedings in bankruptcy, is sufficient constructive notice to all grantees of property proceeding from the bankrupt. Ibid. 50. Where the principal is bankrupt, a court of equity will, on application by the surety, compel the creditor to prove his debt against the principal, provided the surety bring the amount due into court. And if the surety pay the debt, he will be entitled to be substituted for the cre ditor, and to assume his rights. In the matter of Babcock, 3 Story's C. C. R. 393. 51. The holder of a bill of exchange is entitled to prove his debt in bankruptcy against the drawer, the acceptor, and the payee, and to receive a dividend from all their estates until his full debt is paid; and if one only be bankrupt, he may prove his debt against such bankrupt, and also proceed against the others at law. Ibid. 52. Sureties are generally entitled, upon pay ment of the debt of the principal, to the secu rities held by the creditor; but in bankruptcy, if the bankrupt give the creditor a security from his own property, the creditor cannot prove his debt without surrendering the security; but if a security from a third person be transferred to the creditor, he may prove his debt without surrendering the security, and may enforce such security against such third person, provided he do not thereby receive more than his claim. 45. The district court of the United States has Ibid. Bankrupt Law of the United States. 53. Where a creditor proved his debt in bankruptcy against the acceptor, and also brought a suit at law against the drawers, and attached their property: it was held, that he was not bound to pursue the lawsuit at his own expense, but if he did not, the assignee of the bankrupt could carry it on for the benefit of the bankrupt's estate, and at the expense thereof. Ibid. 54. Where a suit is commenced against the bankrupt, and property attached on mesne process, before proceedings in bankruptcy, the certificate in bankruptcy may be pleaded in bar of further proceedings in the suit. In the matter of Bellows & Peck, 3 Story's C. C. R. 428. 55. The district court, upon the application of the bankrupt, or of his assignee, before the discharge is granted, may issue an injunction to the creditor, to stay proceedings until the further order of the court. lbid. 56. If the creditor does not reside within the district, an injunction against his agents or attorneys within the district, will be effectual. Ibid. 57. If the creditor, his agents or attorneys, proceed in the suit, notwithstanding the injunction, they are liable to be committed for contempt. Ibid. 58. If the bankrupt do not obtain his discharge, the creditor may petition for a dissolution of the injunction, and, if it is granted, he may proceed in his suit to judgment and execution. Ibid. 59. If the discharge is obtained, and the creditor intend to contest its validity on the trial in the state court, he should apply to the district court for leave so to do. Ibid. 60. If the validity of the discharge, as such, is not contested, and the state court, on demurrer, should hold the discharge invalid as to the property attached, and the creditor proceed to judgment and execution, the district court should enjoin the sheriff from levying on the attached property, and order him to deliver the same to the assignee, or, if it has been sold, to bring the proceeds into court. Ibid. 61. An attachment of property on mesne process, bona fide made, before a petition filed in bankruptcy by the debtor, is not a lien or security upon the property, within the intendment of the second section of the bankrupt act of 1841, ch. 9. Ibid. 62. Such attachment will not entitle the creditor to proceed to judgment in the suit, if the debtor has, pending the suit, lawfully and bona fide obtained his discharge in bankruptcy, and the certificate thereof is pleaded as a bar to further proceedings in the suit. Ibid. 63. Where an attachment was so made, and a discharge so obtained and pleaded, it was held not to be necessary for the district court to order the attaching officer to deliver the property to the assignee, until the final decision of the state court, in which the suit was pending. Ibid. 64. Such an order having been made by the district court, it was held, that it should be modified, so far as to permit the property to remain in the hands of the officer, until the further order of the district court, and to await the final action of the state court. Ibid. 65. Where A and B, being partners in trade, and apprehending embarrassment in their business, conveyed all their stock, and real estate, and certain notes, to certain of their creditors, to secure them against certain debts and liabili ties, as sureties and endorsers on the notes of A and B; and afterwards suits were commenced upon certain of the debts so secured, on which judgment was rendered, and execution levied; but before judgment was rendered, A and B became bankrupts under the act; and the personal chattels so assigned were, previous to the bankruptcy, sold, and the proceeds applied to the payment of the said debts: it was held, that the assignment was an act "in contemplation of bankruptcy," and in preference of certain creditors, and was therefore void; that the said judgments were not valid liens, within the saving of the last proviso of the second section of the bankrupt act; that the proceeds of the personal chattels, sold and applied to the payment of the debts, could be followed by the assignee, and made assets in bankruptcy; and that the said fraudulent conveyance was a bar to the bankrupt's discharge. Everett v. Stone, 3 Story's C. C. R. 446. 66. The phrase "contemplation of bankruptcy," means a contemplation of insolvency, and not of voluntary or involuntary proceedings under the bankrupt act. Ibid. 67. Where an attachment is made by creditors, and afterwards, before judgment in the suit, the debtor files his petition in bankruptcy, if the creditor, with knowledge thereof, take judgment and levy execution, and the debtor be afterwards declared a bankrupt, the levy and execution are a fraud upon the bankrupt act, and are void. Ibid. 68. Creditors, taking under a conveyance, fraudulent under the bankrupt act, are not to be treated as purchasers, but as creditors claiming under a defective title. Ibid. 69. Where the petition set forth that K, as agent of B, paid to A, a creditor of B, a certain due-bill, in order to induce A to become party to a general assignment in favour of B's creditors, which never took effect; and B subsequently became a bankrupt under the act: It was held, that the payment of the due-bill, as set forth in the petition, was not a fraudulent preference in contemplation of bankruptcy, and that the evidence showed that K did not act as agent of B; and that if he did, since he concealed his agency from A, that he was to be treated as to A, as a purchaser, and not an agent Winsor v. Kendall, 3 Story's C. C. R. 507. 70. A creditor is never held to be unduly preferred by a bankrupt, unless he understands at the time, that he is dealing with the bankrupt, or with his avowed agent, for security or payment out of the funds of the bankrupt. Ibid. 71. The assignee of a bankrupt has only the right of the bankrupt, except in cases of assignment or transfers, or agreements with one creditor in fraud of the others. Ibid. 2. Decisions on the Laws of the States of the United States, relative to Bankruptcy and Insolvency. 72. A resident of Massachusetts, having con State Bankrupt and Insolvent Laws. tracted a debt there with another citizen of the | unaffected by the act of congress, except where same state, removed to Pennsylvania, became a they may apply to individual cases. Ibid. resident there, and took the benefit of the bankrupt law of Pennsylvania. Query, Whether he can plead his discharge to an action brought for the old debt. Emory v. Greenough, 3 Dall. 369. 73. Since the adoption of the constitution of the United States, a state has authority to pass a bankrupt law, provided such law does not impair the obligation of contracts, and provided there be no act of congress in force to establish a uniform system of bankruptcy, conflicting with such law. Sturges v. Crowninshield, 4 Wheat. 122; 4 Cond. Rep. 409. 74. The act of the legislature of the state of New York, passed on 3d of April, 1811, which not only liberates the person of the debtor, but discharges him from all liability for any debt contracted previous to his discharge, on his surrendering his property in the manner it prescribes, and so far as it attempts to discharge the contract, is a law impairing the obligation of contracts, within the meaning of the constitution of the United States, and is not a good plea in bar of an action brought upon such contract. lbid. 75. The line of partition between bankrupt and insolvent laws is not so distinctly marked, as to enable any person to say with positive precision, what belongs exclusively to the one, and not to the other class of laws. Ibid. 76. A bankrupt law may contain the regulations which are generally found in insolvent laws; and an insolvent law may contain those which are common to a bankrupt law. Ibid. 77. The right of the states of the United States to pass bankrupt laws, is not extinguished by the enactment of a uniform bankrupt law throughout the Union, by congress; it is only suspended. The repeal of that law cannot confer the power on the states, but it removes a disability to its exercise, which was created by the act of congress. Ibid. 78. Wherever the terms on which a power is granted by the constitution to congress, or wherever the nature of the power itself requires that it should be exercised exclusively by congress, the subject is as exclusively taken away from the state legislatures, as if they had expressly been forbidden to act upon it. Ibid. 79. The power granted to congress, of establishing uniform laws on the subject of bankruptcies, is not of this description. Ibid. 80. Although the states may, until that power is exercised by congress, pass laws concerning bankrupts, yet they cannot, constitutionally, introduce into such laws a clause which discharges the obligations the bankrupt has entered into. Imprisonment of the debtor is no part of the contract, and he may be released from imprisonment without impairing its obligation. Ibid. 82. An act of a state legislature, which dis charges a debtor from all liability for debts contracted previous to his discharge, on his surrendering his property for the benefit of his creditors, is a law impairing the obligation of contracts within the meaning of the constitution of the United States, so far as it attempts to discharge the contract; and it makes no difference, in such a case, that the suit was brought in a state court of the state of which both the parties were citizens, where the contract was made, and the discharge was obtained, and where they continued to reside until the suit was brought. Farmers' and Mechanics' Bank v. Smith, 6 Wheat. 131; 5 Cond. Rep. 35. 83. The states of the United States have a right to pass bankrupt laws, notwithstanding the power granted to the general government by the constitution, to establish a uniform system of bankruptcy. Adams v. Storey, 1 Paine's C. C. R. 97. 84. The act of April 3, 1811, passed by the legislature of New York, is an insolvent law, and not a bankrupt law. Ibid. 85. The discharge of a citizen from his debts, under the insolvent laws of Rhode Island, is no discharge of a contract made, and to be executed, in a foreign country. The law of the place where a contract is made, is to govern as to its validity, nature, and construction: but the remedy in such contract is to be pursued according to the law of the place where the contract is made. Van Reimsdyk v. Kane's Ex'r., 1 Gallis. C. C. R. 371. 86. A state legislature cannot, by an insolvent law, suspend process in the courts of the United States, as to the citizens of the state. Babcock v. Weston, 1 Gallis. C. C. R. 168. 87. It would appear that but for the provisions of the constitution of the United States, a discharge from a debt by the insolvent laws of the state where the contract is made, and of which both parties are citizens, is good everywhere. Ibid. 88. The insolvent act of Rhode Island extends to discharge the party from debts and contracts not yet due; and the bar created thereby applies to the debt or contract, in whatever court it is sued. Sheiffelin v. Wheaton, 1 Gallis. C. C. R. 441. 89. The plaintiff below, a citizen of the state of Kentucky, instituted a suit against the defendant, a citizen of Louisiana, for the recovery of a debt incurred in 1808, and the defendant pleaded his discharge by the bankrupt law of Louisiana, in 1811; under which, according to the provisions of the law, "as well his person as his future effects," were for ever discharged "from all the claims of his creditors." Under this 81. The sixty-first section of the act of con- law, the plaintiff, whose debt was specified in gress of 1800, ch. 173, for establishing a uniform the list of the defendant's creditors, received a system of bankruptcy, does not confirm state in-dividend of ten per cent. on his debt, declared solvent laws containing a provision impairing the obligation of contracts, but merely leaves them to operate, so far as constitutionally they may, by the assignees of the defendant. Held, that the plaintiff, by voluntarily making himself a party to those proceedings, abandoned his extra |