§ 225. How far the Consideration of Judgments is open to Examination. — In England, judgments obtained before bankruptcy in actions of contract, and offered for proof, are commonly spoken of as open to contradiction almost like simple contracts.1 The reason for this practice is, that judgments are often confessed as security for a debt less than their face, or for a fluctuating balance. The reported cases are all those of defaulted actions or confessed judgments, and the true principle is, that judgments should be inquired into only when they were given as security, or when there has been such fraud or error as would authorize a court of law or equity to open the judgment in favor of the defendant, or such collusion or preference as would be a fraud in bankruptcy upon the equality of creditors. This is the American doctrine,2 and it rests upon the admitted principle, which is probably the actual law of England, that a bankrupt, acting in good faith, and before bankruptcy is contemplated, binds himself and his creditors by all his acts, errors, and neglects. For this reason a judgment obtained for tort is not only provable, but will not be re-examined in bankruptcy. An eminent judge has said: "A judgment is always conclusive when there has been a real fight between the parties." (Per James, L. J., Ex parte Banner, 17 Ch. D. 480, 484.) Of course, if a judgment is given as security, only the true amount of the debt is to be proved.5 § 226. Whether a Judgment obtained pending the Bankruptcy can be proved.—The question whether a judgment obtained pending the proceedings in bankruptcy can be proved if the original debt were provable, is one upon which the courts have been much divided. Its most important aspect is in respect 1 Ex parte Bryant, 1 Ves. & R. 211; Ex parte Marson, 2 Dea. 245; Ex parte Prescott, 1 M. D. & De G. 199; Ex parte Chatteris, 26 L. T. N. s. 174; Ex parte Kibble, L. R. 10 Ch. 373 (and so of awards, Ex parte Butterfill, 1 Rose, 192); Ex parte Anderson, 14 Q. B. D. 606; Re Fraser (1892), 2 Q. B. 633; Re Easton, 10 Morrell, 111; Re Hawkins (1895), 1 Q. B. 404. 2 Ex parte O'Neil, 1 Lowell, 163, Fed. Cas. No. 10,527; Catlin v. Hoffman, 9 N. B. R. 342, Fed. Cas. No. 2521; Fowler v. Dillon, 12 N. B. R. 308, Fed. Cas. No. 5000. 3 Re Lane, 23 Q. B. D. 74. 5 See § 166. See Re Pinkel, 1 N. B. N. 138 and cases cited; Re Gallison, 2 Lowell, 72, Fed. Cas. No. 5203. debtor's discharge, We may say here to the effect upon such a judgment of the and it will be treated of under that head. that most of those courts who permit proof do not admit it as upon a judgment, but as upon a provable debt not merged in a judgment, and therefore do not allow proof for costs excepting when the action has been defended by the assignees, as mentioned in the next section.2 § 227. Judgment to ascertain Amount. If the validity or amount of a provable debt is disputed, an action pending at the time of the bankruptcy may be prosecuted to judgment in order to settle the dispute. If the creditor recovers, his debt and costs may be proved, and execution should be stayed until the question of the defendant's discharge is decided. This practice obtains independently of statutes, and has been expressly adopted by some of them.3 The assignee should be summoned in, because he is interested to contest claims upon the estate; and if judgment is rendered against him, it is in his official character only. 1 Infra, § 451; Emery, Appellant, 502; Parsons v. Mills, ib. 431; Cot89 Maine, 544. ton v. Clark, 16 Beav. 134; Bullard v. Dame, 7 Pick. 239; Healy v. Root, 11 Pick. 389; Hess v. Reynolds, 113 U. S. 73, 77, per Miller, J. 2 See § 187. [Under the act of 1898 costs are allowed up to the time of filing the petition. § 63 a (5), infra, § 526.] 8 See Blossom v. Goodwin, 1 Mass. 4 Norton v. Switzer, 93 U. S. 355. CHAPTER IX. PRIORITY OF PAYMENT OF DEBTS DUE THE UNITED STATES. § 228. Statute. The Revised Statutes (§ 3466) provide: That whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor in the hands of the executors or administrators is insufficient to pay all his debts, those due to the United States shall be first satisfied; and that the priority shall extend not only to cases in which an act of bankruptcy is committed, but also to voluntary assignments by persons unable to pay in full, and to attachments of the estate of an absconding, concealed, or absent debtor. This is, in substance, a re-enactment of the laws of 1797 and 1799.1 The United States have no priority by prerogative independently of statute.2 § 229. For what Debts. The privilege obtains for all debts in the broad sense of the bankrupt law, legal or equitable, and whether for public moneys, or upon bills of exchange, bonds, contracts, or quasi contracts, whether presently payable or not, whether the debtors are citizens or foreigners, and whether the debt was contracted within or without the United States; and whenever an action of debt could be maintained, as for specific penalties; or assumpsit for money illegally borrowed of a public agent. The privilege includes interest to the time of payment.5 1 1 Stat. 515; ib. 676. Bayne v. United States, 93 U. S. 2 United States v. Bank of N. Car., 6 642; Re Rosey, 6 Ben. 507, Fed. Cas. Pet. 29. 8 United States v. Fisher, 2 Cranch, 358; United States v. Bank of N. Car., 6 Pet. 29; Harrison v. Sterry, 5 Cranch, 289; Howev. Sheppard, 2 Sumner, 133, Fed. Cas. No. 6772. No. 12,066; Re Vetterlein, 20 Fed. Rep. 109. 5 Re Bousfield, 17 N. B. R. 153, Fed. Cas. No. 1704; Re Huddell, 47 Fed. Rep. 206. § 230. Privity. Whether money deposited in a bank, or otherwise invested by a public officer, is money of the government, for which there will be a privilege in favor of the United States, or a set-off against them, if the bank becomes insolvent, depends upon whether, by reason of privity of contract, or by virtue of the law of principal and agent, or of fraud, the government could maintain a suit directly for the money. If so, the consequences follow; but if the agent is the only party responsible to the government, and has a right to deal and does deal with the money as his own, he only will be considered the creditor of the banker or depositary, and there will be no privilege in his favor, nor for the government through him.2 § 231. Meaning of "Insolvent."-In the case of a living person, being "insolvent," or committing "an act of bankruptcy," are, in this statute, substantially synonymous. "Insolvent," as we have already seen, is a word of many meanings. When the rights of third persons dealing with a debtor may be involved, it is unsafe to make them, depend on the actual state of his affairs, not judicially declared, and perhaps not known even to himself. In this connection, therefore, it is held to mean not a mere inability to pay in full, but a technical insolvency or bankruptcy under the law, State or national. When this status has not been adjudged, the United States attaching or seizing property of their debtor, take rank with other creditors according to the time of their attachment, however insolvent in fact the debtor may be. There is no case reported in which the priority has been enforced while the debtor retained the management of his own affairs.1 If he 1 Bayne v. United States, 93 U. S. 642; Re Chamberlin, 17 N. B. R. 49, Fed. Cas. No. 2580; Re Miller, 17 N. B. R. 402, Fed. Cas. No. 9554. 2 Comm. v. Phoenix Bank, 11 Met. 129; Re Corn Ex. Bank, 7 Biss. 400, Fed. Cas. No. 3242. 3 United States v. King, Wall. Sen. 13, Fed. Cas. No. 15,536; Prince v. Bartlett, 9 Mass. 431, affirmed, 8 Cranch, 431; United States v. Sheriff of Charleston, Bee, 196, Fed. Cas. No. 16,276; United States v. Canal Bank, 3 Story, 79, Fed. Cas. No. 14,715; United States v. Marshal of N. Car., 2 Brock. 488, Fed. Cas. No. 15,727; Beaston v. Farmers' Bank, 7 Gill & J. 421, affirmed, 12 Pet. 102; Thelusson v. Smith, 2 Wheat. 396. 4 United States v. Cochran, 2 Brock. 274, Fed. Cas. No. 14,821. were technically a bankrupt, as, for example, if he had made a composition under the statute, the priority would arise, although the creditors should permit him to retain possession of his assets. But a mere act of bankruptcy in pais, though within the words of the law, can only be ascertained by the adjudication of a competent court. § 232. Assignment. The "assignment" is an assignment of the whole property in trust for creditors, and not a mere conveyance of part by way of preference; and the burden is upon the United States to prove that an assignment with or without schedules, which does not, in terms, purport to convey the whole property of the debtor, does so in fact.2 If partners have made a general assignment of their joint effects, it may be presumed that they are severally insolvent.3 A colorable or trivial omission of property will not take the assignment out of the law; and if several assignments, though of different dates, are part of one scheme, and together make up a disposition of substantially all the property, they will be sufficient. It is doubted whether a conveyance, even of the whole property, to one or more creditors directly, without a trust, but merely to pay or secure those creditors, will be an assignment within the statute. Such a conveyance would be an act of bankruptcy, when there is a bankrupt law in force; but it would seem that the United States, or some other creditor, must proceed to have the bankruptcy judicially decreed, before the priority can be established.5 § 233. Corporations. The word "person" includes a corporation. It has been said that the winding up of a corporation, 6 1 United States v. Hooe, 3 Cranch, 73; United States v. King, Wall. Sen. 13, Fed. Cas. No. 15,536, more fully stated by the Chief Justice in Downing v. Kintzing, 2 S. & R. 326. 2 United States v. Howland, 4 Wheat. 108; United States v. Langton, 5 Mason, 280, Fed. Cas. No. 15,560. United States v. Marshal, etc., 2 Brock. 488, Fed. Cas. No. 15,727, per Mar shall, C. J.; United States v. Bank of United States, 8 Rob. (La.) 262; United States v. Griswold, 8 Fed. Rep. 496. 5 Conard v. Nicoll, 4 Pet. 291, per Marshall, C. J.; United States v. McLellan, 3 Sumner, 345, Fed. Cas. No. 8 United States v. Shelton, 1 Brock. 15,698; Bouchard v. Dias, 1 N. Y. 201 517, Fed. Cas. No. 16,272. 4 Downing v. Kintzing, 2 S. & R. 326; Marshall v. Barclay, 1 Paige, 159; (overruling s. c. 10 Paige, 445). Rev. Sts. § 1; Beaston v. Farmers' Bank, 12 Pet. 102; United States v. |