panic. In the year 48 B. C., after the civil war, to call this law by its specious title, although there Julius Caesar suffered debtors to discharge their obligations by transferring all their property at an appraised value to their creditors. This was termed "cessio bonorum," and not only exempted the debtors from the harsh penalties of the old law, but released any property coming into the debtor's possession, subsequently, from liability to execution so far only as that portion of the property was requisite for the subsistence of the debtor. One fundamental distinction between the Common Law and the Civil Law theory of bankruptcy, if the former term is permissible in a limited sense, is that under the Roman doctrine the property of the bankrupt was vested in the vendee - the Anglo-Saxon conception vests the estate in a trustee. (1) The distinctions between insolvency and bankruptcy, at one time distinctly differentiated, is now practically obsolete. Almost all important countries to-day possess some form of insolvency or bankruptcy law, and until the millenium, it is fair to presume that the polity of most governments and the commercial prosperity of nations will require some means of relieving individuals from the consequences of speculation, rash enterprise and extravagance. Whether it is advisable to have a permanent General Bankruptcy Law like the one that exists at present in this country, is a topic bristling with many difficulties. Certain it is, that the law enacted in 1898, was warranted by the condition of the business world, but undoubtedly the presence of a statute so favorable to the position of debtors is an encouragement to the perpetuation of the very condition that the law was intended to alter. In actual practice it has encouraged speculation and business temerity in many instances, as is amply demonstrated by the fact that many persons have repeatedly taken advantage of its provisions, since its enactment. This feature of its operation will doubtless bring about an amendment limiting its availability to debtors after a first discharge. The method of collecting fees - an antiquated relic of medievalism—has unquestionably prevented many honest but unfortunate debtors from taking the benefit to which they were entitled in all morality, expediency and justice. The fee system is at best, conditionally an evil necessity; under this law, it has been a source of oppression, and frequently the only extraneous evidence of the lack of uniformity in its application to business unfortunates. In some cases it is actually a misnomer (1) Kings, during the Middle Ages, when the necessities of a depleted treasury, or the clamor of an impoverished populace, pressed them urgently, seem to have had an effective manner of abolishing debts on a wholesale basis. As a rule only the Jewish creditors sustained the brunt of this generosity on the part of rulers. Hallam remarks in chap. ix, of his work on the Middle Ages: "One is at a loss to conceive the process of reasoning in an ordinance of St. Louis, where, for the salvation of his own soul and those of his ancestors, he releases to all Christians a third part of what was owing by them to Jews.'" is a provision contained therein, to facilitate the The origin of the word "bankruptcy," which one writer ascribes to the custom of Florentine merchants, unable to liquidate their obligations, to suffer a "breaking" of their benches or counters, is older even etymologically. The Italian, old High German, Anglo Saxon and French words, "banca," signifying bank, "bancarotta," for bankruptcy, "benc," "banc,” or banque," were only translations of the classical phrases originating from the Latin words "mensa," mensarius-table on which bankers told their money, the latter derivatively, a banker. To become a bankrupt, in classical Latin, not civil law verbiage, was a mensa surgere," literally, to rise from the table, the Italian custom probably being a corruption or misinterpretation of the ancestral one. Irrespective of etymological history, the examples cited prove the antiquity of the origin of laws respecting insolvent debtors. The evolution of such legislation from the middle ages down to modern times can be found in almost any text-book on the subject of bankruptcy. The early legislation of England evinces, of necessity, much crudeness, down to the statute of Anne, in the year 1706 (2). This (2) Mr. Hunter, one of the learned counsel in the case of Sturges v. Crowninshield, traces the evolution of legislation on this subject as follows: He cites 5 Coke Litt., 290 B. to show that imprisonment for debt was unknown to the Common Law of England, being even against Magna Charta. The Statute of Marlbridge in 1267 (52 Hen., III, chap. 23), first allowed imprisonment for debt. In 1283, the statute of Acton Burnel 11 of Edw. I (1283) afforded this remedy to foreign merchants. 13 Edw. I (chap. 2) gave same remedy against servants, bailiffs, chamberlains and all manner of receivers. The 19 Hen. VII (chap. 9) gave like process in actions of the case and debt as in trespass. Statute of 8 Eliz. (chap. 2) restricted law eliminated the penal element prevalent in all upon the subject of bankruptcy is almost as absolute previous enactments, provided for the appointment as to give it limitless and plenary discretion. The of a commission by the Lord Chancellor, for a dis-only restriction placed upon this attribute of sov charge of the debtors person, and after acquired ereignty is as to its uniformity. "To come within property, after he had received "a certificate of conformity," specifying that he had obeyed the statute, and stamped its character upon all subsequent legislation. To quote the language of Mr. Bush: "This humane enactment has been followed in all subsequent legislation on the subject. It recognized that the object of the system is two-fold: (1) To dedicate the property of an insolvent debtor to the ratable payment of his debts; and (2) to grant him a discharge from his existing obligations, to the end that he may be restored to the activities of life, freed from the burdens visited upon him by previous misfortunes in business. It may be justly remarked that there is nothing more to be accomplished by any law on the subject; all other provisions are matters of detail more or less effectively designed to accomplish these ends." It may be well to premise before arriving at the discussion of the Law of 1898, that its bearing, machinery and administrative functions ought to be tested by this criterion of excellence, always remembering that no human legislation can be perfect even in ideal. The laws of 1800, 1841, 1867, with amendments thereto, were based substantially upon provisions in the enactments of the mother country. The well known difficulties encountered by judges and lawyers in reconciling the provisions of State laws dealing with the subject of insolvent debtors, with the federal measures passed under the authority conferred by paragraph 4 of section 8, article 1, of the Federal Constitution, have evoked the highest efforts of the most learned judges on the bench. By these decisions the subjects of bankruptcy and insolvency have been freed from scholastic and archaic distinctions, and brought down to the level of practical facility. The famous case of Sturges v. Crowninshield, 4 Wheat., 198, lessened the material differences between bankruptcy and insolvency, defining bankruptcy as "the stoppage and breaking up of business from inability to carry it on." The cases of Morse v. Hovey (1 Barb. Ch., 404, and 1 Sand. Ch., 187) decide that the word "bankruptcy" bears a meaning co-extensive with insolvency, being equivalent to that word in the Constitution. The powers of congress the constitutional provision a bankrupt law must be uniform throughout the United States." See Day v. Bardwell (3 Bank Reg., 455, 97 Mass., 246); In re Dillard (9 Bank Reg., 8). Uniformity has been defined, after a concrete fashion by many decisions. "When the assignee takes in each State whatever would have been available to execution creditors." See In re Ruth (1 Bank Rek. Sup., 154); In re Appold (ibid., 178). The exemptions allowed under the various State enactments, are guaranteed by this constituional limitation, although discrepancies in amount are immaterial. In re Appold (1 Bank Reg., 621). The comprehensiveness of this power granted to congress, a branch of the federal government, must be a source of no little difficulty to those theorists who still believe in the inherent sovereignty of the States, as independent powers. Such an anomalous conception of sovereignty is in no other form of government logically thinkable. For instance: The Federal Constitution does not deny to congress the power to infringe vested rights, or to violate the obligation of contracts. In re Jordan (Bank Reg., 180); In re Kean (ibid., 368); Legal Tender cases (12 Wall., 457). Yet article 1, section 10, of the Federal Constitution, expressly denies this power to the States (3). The enactment of State insolvent (3) The history of this far-reaching section of the federal Constitution has been told by Bancroft, His "the tory of the United States, vol. VI, pages 361-2, delegates from Connecticut had agreed among them selves that the legislatures of the individual States ought not to possess a right to make any laws for the disagreement of the parties.' For the rest, King, as charge of contracts in any manner different from the we have seen, proposed a clause forbidding the States to interfere in private contracts; but the motion had been condemned as reaching too far; and instead of it, at the instance of Rutlege, the convention denied to the States the power to pass bills of attainder or ex post facto laws.'" In this manner it was supposed that laws for closing the courts, or authorizing the debtor to pay his debts by more convenient instalments than he had covenanted for, were effectively prohibited. But Dickinson, as we have seen, after consulting Blackstone, mentioned to the house that the term ex post facto related to criminal cases only, and that restraint of trade from retrospective law in civil cases would require some further provision, Before an explanatory provision had been made, the section came into the hands of the committee on revision and style. That committee had no authority to bring forward any new proposition, but only to make corrections of style. Gouverneur Morris retained the clause forbidding ex post facto laws; and, resolute, not "to countenance the issue of paper money and the consequent violation of contracts," he of himself added the words: "No State shall pass laws altering or impairing the obligation of contracts." The convention reduced the explàtory words to the shorter form: "No State shall pass any law impairing the obligation of contracts." "In this manner," the historian naively remarks, "an end was designed to be made to barren land laws, laws for the instalment of debts, and laws closing the courts against suitors." verted or removed, with intent to defraud, hinder or This act specifies five acts of bankruptcy, that of laws "discharging the person and after acquired versa, are substantially conciliated. As the essential Under subdivision (c) of section 3 of the present act, it is provided that solvency at the time of filing the petition against an involuntary bankrupt is a complete defense, a provision wisely calculated to discourage persecution and sporadic resort to the machinery of the courts. Farmers and wage earners are excepted from persons subject to adjudication as bankrupts in involuntary cases, these proceedings being limited to other natural persons, unincorporated companies, and "incorporated companies engaged principally in manufacturing, trading, printing, publishing, or mercantile pursuits, owing debts to the amount of one thousand dollars or over." Private bankers are also brought within this provision. Any natural person may become a voluntary bankrupt. A partnership may be adjudged a bankrupt during the continuance of the partnership business or after its dissolution and before the final settlement thereof. That, practically, such a course of action would These provisions are unequivocal, except that as ever be adopted by the States, is absurd even imagin-one writer has remarked in reference to the provision atively; it illustrates, however, how fundamentally respecting manufacturing corporations, it would be wrong the opposite conception is in theory. difficult to say under what heading mining corporations could be placed. The National Bankruptcy Act, approved July 1, 1898, created a wave of discussion throughout the business world. Upon the whole it was generally conceded, that the moment was opportune, and the legislation, practically necessitated by extreme exigency. The bench and the bar of the country were agreed as to its general policy, although there had been considerable opposition to various sections, "some of the opposition even being in favor of striking out the involuntary features of the bill. Such a one-sided measure would have reproduced the greatest dissatisfaction eventually, and would at first blush militate against justice and fairness in administration. The present measure is a result of compromising the extreme advocates on both sides. Those who leaned too favorably toward debtors, and vice If this view of the historian be sound, and his authori ties seem to bear him out, the power of the States to pass insolvent laws, must have been expressly repugnant to the framers of the Constitution. In order to avail creditors of the benefits of this act, the petition must be filed within four months from the commission of any of the alleged acts of bankruptcy. This is required by section 3 of the act, subdivision (b). An important decision affecting the interpretation of this part of the law was decided November 28, 1898, in the United States District Court, Southern District of New York, reported in the New York Law Journal for December 6, 1898. This was decided on a motion to restrain the disposition of a bankrupt's assets by the assignee, who by an assignment dated November 9, 1898, made by the bankrupt Henry Gutiwillig, for the benefit of his creditors, took possession of the property. On the following day the petitioning creditors filed a petition asking for an adjudication of bankruptcy, and praying for a restraining order against the assignee until the adjudication. Judge Adams delivered the opinion of 66 the court. After citing sections 3, 4 and 59, of the act of July 1, 1898, declaring such an assignment to be itself "an act of bankruptcy," and authorizing creditors within four months thereafter to file a petition in bankruptcy, and sections 18 and 19, providing for notice and subpoena to the debtor, the court proceeds: Section 4 provides that upon an impartial trial, the debtor may be adjudged an involuntary bankrupt. By sections 55 and 44, a meeting of creditors is required to be held after an adjudication of bankruptcy, at which a trustee of the bankrupt's estate is to be chosen by the creditors, or upon their failure to agree, to be appointed by the court. From the above provisions it is obvious that in every case of involuntary proceedings in bankruptcy, a considerable interval of time, more or less, must elapse between the filing of the petition and the appointment of a trustee competent to take and administer the estate. If in such cases the assigned assets legally belong to the bankrupt's estate, it is the duty of this court, under section 2, sub * * * divisions 3 and 15 of the statute, upon suitable application, either to grant an order restraining the voluntary assignee from disposing of the property in the meantime, or else to appoint a receiver to take immediate possession of it." The court then laid down the following preliminary propositions: I. Voluntary assignments for the benefit of creditors, as practiced in this State and others, do not originate in the State statutes, but in the common law power of the debtor to dispose of his property. II. The New York State law of 1860, and subsequent acts regulate to a certain extent this power of distribution and provide various securities therefor. III. These State measures do cover in part the original purpose of bankruptcy laws, namely the equal distribution of the debtor's property among his creditors. IV. State statutes in permitting preferences to employes, and creditors at the debtor's option to the extent of one-third of the assets are opposed to equality of distribution- the aim of bankruptcy laws. 66 V. A general assignment made under State laws similar to the statute in New York, cannot be considered as a proceeding commenced under State insolvency laws" within the meaning of the last paragraph of the act of 1898. The question raised by the motion must be decided upon general bankruptcy principles and the other provisions in the present law. In answer to the contention of the assignee that there exists no provision in the Bankruptcy Act, making assignments voidable unless made with intent to defraud creditors, and the assignee to contention that by section 70 of the act itself, "the trustee takes the estate of the bankrupt as of the date he was adjudged a bankrupt," the assignee thereby arguing that as the property was assigned previously, the trustee could not take title, the court, after giving its reasons and citations, laid down these fundamental propositions: I. In the absence of statutory grounds, the cases cited were decided upon the principle that voluntary assignments are in effects acts of bankruptcy, fraudulent, not at common law, or under the 13th Elizabeth, but because they divest the Bankruptcy Court's jurisdiction and the creditor's choice of a trustee, being a fraud upon the act, viz., ipso facto fraud without regard to the actual intention. II. Section 67, subdivision (e) of the present act, providing that any transfers made within four months prior to the filing of the petition “with intent to hinder, delay, or defraud creditors, shall be null and void," must be construed in the light of the previous proposition, viz., "the debtor must be held to have intended the necessary effect of his act" (4). 66 III. The clause in section 70, providing that the trustee shall be vested by operation of law with the title of the bankrupt as of the date when he was adjudged a bankrupt," does not affect the question. The purpose of that clause was to protect the after acquired property of the bankrupt from vesting in the trustee, also that the trustee takes the previously acquired property, not when he is appointed trustee, but when the bankrupt is adjudicated such. The court alludes to subdivision 4 of the same section, giving to the trustee property previously transferred in fraud of creditors, as enforcing its position. Motion was denied. Both the decision and the general discussion by the court are eminently sound. It is no disparagement to (4) The case of Bray et al. v. Cobb (U. S. District Court, Eastern District of North Carolina, decided in December, 1898), holds that chapter 3, section 3, subgeneral assignment for section 4, defining acts of bankruptcy, is "made a the benefit of creditors," 44 irrespective of insolvency. The court said: "It is per se an act of bankruptcy." In the case of Lea Bros. & Co. v. Geo. M. West Co. (U. S. Dist. Ct., Eastern Dist. of Virginia, January, 1899) Judge Waddill writes: A general assignment of one's estate and effects to trustees constitutes an act of bankruptcy, and the current of authority, both English and Amerithe case of Boese v. King (108 U. S., 385), decided under is to the same effect." The court quoted from can, the act of 1867. The case of Davis v. Bohle et al. ([In re Sievers], U. S. Circuit Ct. of Appeals, Eighth Circult, February, 1899), accords with the New York case. The court held: "Under an English bankrupt act, which made it an act of bankruptcy if a person executed any fraudulent conveyance or transfer with intent to defeat or delay his creditors, it was repeatedly held that a voluntary assignment by a debtor of his whole estate for the equal benefit of all his creditors, was an act of bankruptcy, not because such a conveyance was fraudulent in fact, but because it was constructively fraudulent, and in violation of the Bankrupt Act, in that it provided for of the insolvent debtor than that contemplated by a different mode of administration upon the effects the act." The case of In re Theodore E. Curtis et al. ([Bank of Waverly], U. S. District Ct., Southern Dist. of Illinois, January, 1899), also harmonizes with these Meyer & Dickinson (U. S. Dist. Ct., East. Dist. of N. Y.), where this case was cited and approved. cases. See, also, case of Chemical National Bank v. say that the propositions enunciated are almost selfevident legally and from the standpoint of business common sense. Any other interpretation would have been the signal for amending the law, so as to set at rest any doubtful or technical constructions. The leading decisions under the act of 1867 accord with that of the court in this case, and the English decisions while from the general principles of equity jurisprudence perhaps hostile to a part of the court's opinion, are yet under the exceptions made by the decisions after the enactment of Insolvent Debtors' Acts, harmonious. Another important decision by the same court, as to the status of mechanics' liens under the Bankruptcy Law, reported in the New York Law Journal for December 19, 1899, holding that mechanics' liens even if perfected by a compliance with the prerequisite statutory provisions, are dissolved by a petition filed in involuntary bankruptcy, within four months after the filing of the liens, was squarely overruled in the United States Circuit Court of Appeals, Wallace, circuit judge, delivering the opinion of the court. The argument of the lower court that under the New York Mechanics' Lien Law, requiring the filing of a notice in the office of the County Court, in order to perfect the lien, the lien thus obtained being within the express terms of section 67 of the Bankruptcy Law, as a lien created or obtained through legal proceedings," and therefore voidable by the trustee in bankruptcy, was disposed of by the Appellate Court, as follows: 151), decided that the concealment or destruction of books, prior to the passage of the Bankruptcy Act, was not "in contemplation of bankruptcy" under section 14, subd. "b" of the act (5). In re Price et al., U. S. Dist. Ct., Southern District of New York, February 2, 1899, it was decided that, under section 58 of the act, providing for the notice by mail of ten days, to all creditors, thereafter "the published and mailed notices of application for a discharge should contain a notice of examination of the debtor to avoid the necessity of further notice to all creditors in case such an examination should be allowed." Only one examination is to be ordinarily allowed. In re Kletchka, U. S. Dist. Ct., Southern District of New York,, February, 1899, it was decided that, under section 67, subd. (C), of the act providing that liens obtained through supplementary proceedings within four months should be dissolved by the adjudication, the court could, under the powers conferred by section 2, subd. 15, make 'such orders as are necessary for that purpose" (6). In re Adolf Friedman, U. S. Dist. Ct., Southern In this case a District of New York, March 1899. motion was made by a creditor of the bankrupt, that the trustee pay his claim in full out of the assets. The ground of the motion was a lien of an attachment issued in a suit brought by the creditor against the bankrupt and levied on a stock of merchandise, December 8, 1898. A petition in involuntary bank28th, a receiver in bankruptcy was appointed. ruptcy was filed December 14, 1898. On December January 6, 1899, Friedman was adjudicated a bankrupt. February 10, 1899, the receiver was elected trustee. Subsequently, appraisers were appointed who appraised the assets and the stock of merchan On "A legal proceeding is any proceeding in a court of justice by which a party pursues a remedy which the law affords him. The term embraces any of the formal steps or measures employed in the prosecution | dise. Thereafter the merchandise being sold at or defense of a suit. In the section it obviously auction, the trustee held the proceeds of the sale. refers to the use of judicial process, the phraseology On the date of the filing of the petition, a motion being "levies, judgments, attachments or other liens was made to discharge the attachment, which was obtained through legal proceedings." The filing of denied by the State court. The creditor had proved notice of a mechanic's lien has no necessary relation his claim as an unsecured debt. The trustee claimed to the initiation or prosecution of a suit. The filing that this act constituted a waiver of any claim under is essential in order to maintain the action to fore- the attachment. The creditor applied for leave to close the lien, because otherwise the lien does not withdraw his proof, no dividend having yet been attach, but it is no more a preliminary step in the declared. The referee decided that under such cirsuit, than is the protesting of a note in a suit against | cumstances the proof of claim is not to be deemed the indorser. It is a proceeding of the same kind as irrevocable election, and that the creditor should as filing a chattel mortgage or recording a deed." be permitted to withdraw his proof (7). The case of Coulter (2 Saw., 42; 6 Fed. Cas., 637) under the old act, upheld the validity of mechanics' liens, although in the Matter of Cook et al. (3 Biss., 116; 6 Fed. Cas., 381), the court decided that the lien claimant could not institute proceedings in the State courts after a petition in bankruptcy had been filed, the court in bankruptcy upholding the claimant's rights under the lien. The purpose of the act to protect the liens of mechanics and materialmen is far-sighted and humane. In the Matter of Isidor Stark, U S. Dist. Ct.. Southern Dist., N. Y., March, 1899, the referee following the case of Buckingham v. McLean (13 How., (5) This decision properly overruled a number of cases holding a contrary view. The previous cases had considerably confused the ideas of 'insolvency " and "bankruptcy." (6) Johnson v. Rogers, 15 B. R. I.; 13 Fed. Cases. 794; In re Pitts, 9 Fed. Rep., 542; Olney v. Tanner, 10 Fed. Rep., 101, 113. (7) This opinion seems to be in harmony with the best previous authorities, notwithstand the fact that a number of cases decided under the act of 1867 con tained contrary expressions. In re Jaycox et al., et N. B. R., 241, 13 Fed. Cases, 409, it was held that if a creditor had proved his claim as an insecured debt, in ignorance of the fact that he is secured, he should be allowed to withdraw his proof and prove as a |