our law, because the assignee's title relates only to the filing of the petition,1 and the innocence of a transferee before that time is always a valid defence to him when the assignee challenges his title.

it.

§ 40. Acts connected with Insolvency, or proving Mere insolvency of a debtor is not made a sufficient ground for a petition by creditors, because such a petition against a solvent trader might make him insolvent. The statutes have therefore usually required some definite act or omission to be shown, either as conclusive evidence of the fact, such as lying in prison for debt, when imprisonment was the usual remedy; failing to dissolve an attachment; failing to secure an admitted debt overdue; suspending payment; or else some act in addition to insolvency, such as giving a preference, a conventional fraud which cannot be committed by a solvent person.

§ 41. Definition of Insolvency. - A trader is insolvent when he cannot pay his debts in the usual course of business, though his property, on a final winding up of his affairs, may be and may be proved beforehand to be sufficient to discharge them in full.2 As persons who are not traders have no usual course of business, the more extensive meaning of the term would probably be applied to them, of persons whose assets are not equal to their debts.3

1 [Under the act of 1898 the trustee's title relates only to the adjudication. § 70.]

2 Bayly v. Schofield, 1 M. & S. 338; Shone v. Lucas, 3 Dow. & Ry. 218; Parker v. Gossage, 2 C. M. & R. 617, per Parke, B.; Queen v. Sadler's Co., 10 H. of L. 404, 426, per Willes, J.; De Tastet v. Le Tavernier, 1 Keen, 161; Thompson v. Thompson, 4 Cush. 127; Herrick v. Borst, 4 Hill, 650; Lee v. Kilburn, 3 Gray, 594; Hazelton v. Allen, 3 Allen, 114; Barnard v. Crosby, 6 Allen, 327; Nat. Bank Metropolis v. Sprague, 21 N. J. Eq. 530; Toof v. Martin, 13 Wall. 40; Buchanan v. Smith, 16 Wall. 277; Graham v. Stark, 3 N. B. R. 357, Fed. Cas. No. 5676; Re Dibblee, 3 Ben. 283,

Fed. Cas. No. 3884; Re Bininger, 7 Blatch. 262, Fed. Cas. No. 6057; Merchants' Bank v. Truax, 1 N. B. R. 545, Fed. Cas. No. 9451; Re Gay, 2 N. B. R. 358, Fed. Cas. No. 5279; Anshutz v. Hoerr, 1 Fed. Rep. 592; Swan v. Robinson, 5 Fed. Rep. 287; May v. Le Claire, 18 Fed. Rep. 164; Hayden v. Chemical Bank, 84 Fed. Rep. 874; Peabody v. Knapp, 153 Mass. 242; Sacry v. Lobree, 84 Cal. 41; Sabin v. Fuel Co., 25 Ore. 15.

[The law is different under the Act of 1898, § 1 (15), infra, § 464.]

8 See Re Scott (1896), 1 Q. B. 619; Adler Co. v. Hellman, 75 N. W. Rep. 877 (Neb.); Toof v. Martin, 13 Wall. 40, 47.

§ 42. Suspension of Commercial Paper.

The late act of

Congress and some State statutes make suspension of his commercial paper by a trader, if continued for a certain period, an act of bankruptcy.

Commercial paper in this connection means bills, notes, and other negotiable instruments upon which the holder, by delivery or indorsement, may bring action in his own name according to the custom of merchants or by statute; and paper designed to circulate as money. Since "traders" includes bankers, manufacturers, etc., and "persons" includes corporations, the negotiable bonds or notes of banking, trading, and manufacturing corporations come within this clause.

Whether the paper is made and passed, or contracted in the course of the trader's business (which was required by an amendment to our late statute), is usually a question of fact. It has been held that notes given to raise capital for beginning business, or to settle partnership accounts at its close, are not made in the course of business.2 Notes indorsed for the accommodation of the maker,3 or given merely as memoranda of indebtedness, or (as a general rule) notes secured by mortgage, are not business paper in this sense.

Suspension of payment means a general suspension, which, in the case of a trader, is strong evidence of insolvency. Such general suspension may be proved by a single act.5 But the

1 Re Nickodemus, 3 N. B. R. 230, Fed. Cas. No. 10,254; Re Shea, 3 N. B. R. 187; Re Stevens, 1 Sawyer, 397, Fed. Cas. No. 13,393; Re Chandler, 1 Lowell, 478, Fed. Cas. No. 2591; Re Carter, 3 Biss. 195, Fed. Cas. No. 2470; Re Kenyon, 6 N. B. R. 238; Re Hercules Mut. Life Soc., 6 N. B. R. 338, Fed. Cas. No. 6402; Re Clemens, 2 Dillon, 533, Fed. Cas. No. 2877; Mendenhall v. Carter, 7 N. B. R. 320, Fed. Cas. No. 9426; Love v. Love, 21 Pitts. L. J. 101, Fed. Cas. No. 8549; Re Sykes, 5 Biss. 113, Fed. Cas. No. 13,708.

2 Re Weaver, 9 N. B. R. 132, Fed. Cas. No. 17,307; Re Lanz, 14 N. B. R. 159, Fed. Cas. No. 8079.

8 Re Clemens, 2 Dillon, 533, Fed Cas. No. 2877; Re Manning, 5 Biss. 491, Fed. Cas. No. 9040; Re Nickodemus, 3 N. B. R. 230, Fed. Cas. No. 10,254. But see Re Chandler, 1 Lowell, 478, Fed. Cas. No. 2591, and Re Clemens, 9 N. B. R. 57, Fed. Cas. No. 2877, note.

4 Re Westcott, 7 N. B. R. 285, Fed. Cas. No. 17,430.

5 McLean v. Brown, 4 N. B. R. 585, Fed. Cas. No. 8880; Re McNaughton, 8 N. B. R. 44, Fed. Cas. No. 8912; Re Wilson, 8 N. B. R. 396, 5 Biss. 387, Fed. Cas. No. 17,780.

bankrupt act is not to be used to enforce the payment of doubtful claims; and, therefore, if the debtor proves that he intends in good faith, and upon reasonable grounds, to resist payment of the demands in question, the suspension is not sufficient evidence of insolvency. So if the non-payment has been caused by an injunction or a vis major, or that the creditors have consented to it.2 But it is not a valid defence that the debtor has voluntarily put himself in a position to make payment impossible; as by an assignment, or procuring an injunction.3

Where both creditor and debtor are acting in good faith, and the only question is as to the validity of the defence set up against the suspended paper or accounts, the better practice is to retain the petition in the court of bankruptcy until the issue can be tried at law. This was done under the former statute in several cases.

§ 43. Partners.

- If the members of a firm, or any two or more of them, have committed acts of bankruptcy, they may be proceeded against jointly.5

It is held in England that a partner cannot be made bankrupt for the acts of his co-partner without his personal privity or participation therein. These decisions, so far as they apply to acts affecting only the partner himself or his separate property, are, of course, sound; but otherwise in respect to acts or omissions affecting all the partners. An act by one member of a firm, within the scope of his authority, in relation to the

1 Re Thompson, 2 Biss. 166, Fed. Cas. No. 13,936; Re Munn, 3 Biss. 442, Fed. Cas. No. 9925; Nat. Bank v. Iron Co., 5 N. B. K. 491, Fed. Cas. No. 9018; McLean v. Brown, 4 N. B. R. 585, Fed. Cas. No. 8880; Re Hercules Mut. Life Soc., 6 N. B. R. 338, Fed. Cas. No. 6402; Re Sykes, 5 Biss. 113, Fed. Cas. No. 13,708; Re Westcott, 7 N. B. R. 285, Fed. Cas. No. 17,430; Re Mannheim, 7 N. B. R. 342, Fed. Cas. No. 9038; Re Staplin, 9 N. B. R. 142, Fed. Cas. No. 13,304.

Fed. Cas. No. 8574; Doan v. Compton, 2 N. B. R. 607, Fed. Cas. No. 3940; Re Pratt, 9 N. B. R. 47, Fed. Cas. No. 11,369.

3 Re Laner, 9 N. B. R. 494, Fed. Cas. No. 8055; Hardy v. Bininger, 4 N. B. R. 262, Fed. Cas. No. 6057.

4 See Re Catholic Publishing Co., 2 De G. J. & S. 116.

5 See ante, § 21; Wright v. Cohn, 88 Cal. 328.

6 Mills v. Bennett, 2 M. & S. 556; Ex parte Mavor, 19 Ves. 539; Ex parte

2 Re Lowenstein, 2 N. B. R. 306, Addison, 3 De G. & S. 580.

joint property or joint debts, such as giving a preference, making a fraudulent transfer, should be imputed to all the members in this as in all other civil cases. And so are the authorities in this country.1

If the members have committed several distinct acts of bankruptcy, they may be made bankrupt jointly, because the sum of all the parts is equal to the whole.2 This was denied in an early case in Massachusetts without much discussion.3

Partners, if insolvent, and if they are indebted severally as well as jointly, may commit an act of bankruptcy in the nature of a preference, by one of them selling out the joint stock to the other; because the assignment tends to convert joint into separate assets, and thus to defraud joint creditors if bankruptcy follows, because the joint and separate assets are marshalled to the joint and separate debts respectively; and so if they convey joint property to secure a separate debt.*

1 See Harrison v. Sterry, 5 Cranch, 289; Strang v. Bradner, 114 U. S. 555 and cases cited; Fisher v. Currier, 5 Law Reporter, 217, Fed. Cas. No. 4818; Re Black, 2 Ben. 196, Fed. Cas. No. 1457; Re Dibblee, 3 Ben. 283, Fed. Cas. No. 3884.

2 See Hogg v. Bridges, 8 Taunt. 200; Spencer v. Billing, 3 Camp. 310, 1 Rose, 362; 2 Lindley, 4th Eng. ed., 1095; Robson, 4th ed., 677; Re Penn, 5 N. B. R. 30, Fed. Cas. No. 10,927.

8 Ensign v. Briggs, 6 Gray, 329. 4 See Anderson v. Maltby, 2 Ves. Jr. 244; Re Byrne, 1 N. B. R. 464, Fed. Cas.

No. 2270; Ex parte Shouse, Crabbe, 482, Fed. Cas. No. 12,815; Ferson v. Monroe, 21 N. H. 462; Ex parte Mayou, 4 De G. J. & S. 664; Phillips v. Ames, 5 Allen, 183; Ex parte Kemptuer, L. R. 8 Eq. 286; Re Waite, 1 Lowell, 207, Fed. Cas. No. 17,044; Re Johnson, 2 Lowell, 129, Fed. Cas. No. 7369; Ex parte Snowball, L. R. 7 Ch. 534; Re Cook, 3 Biss. 122, Fed. Cas. No. 3150; Re Jones, Willis Bankruptcy, 17, 18; Ransom v. Van Deventer, 41 Barb. 307; Wilson v. Robertson, 21 N. Y. 587. See infra, § 468.

CHAPTER IV.

PETITIONS.

-When a debtor subject to the

§ 44. Petition by Creditors. law has committed an act of bankruptcy, a creditor or creditors, to whom he owes debts to an amount fixed by the statute, may file a petition against him.

Formerly in England the validity of the commission might always be tried in the courts of common law, and it was there held that the petitioning creditor's debt must be legal and under one of the statutes that it must have been presently payable.

But now the courts of bankruptcy are superior courts, and the older practice is much modified.1 In this country any debt which could be proved at the first meeting is a good petitioning creditor's debt; and the reader is referred to the chapter on the proof of debts for further information. The courts of bankruptcy here are intrusted with the decision of all necessary questions, and under most statutes have power to summon a jury.

Contingent debts or liabilities are not sufficient, if (as is usual) the statute makes them provable only sub modo and under peculiar circumstances.2

It has been held that a secured creditor cannot petition; but the better opinion is that if he can show that he is not fully secured, he may be a petitioner in respect of the proved deficiency, or for the full amount if he chooses to abandon his security.3

1 Robson, Bankruptcy, 7th ed., p. Vanderlinden, 20 Ch. D. 289; Re Alex204.

2 Ex parte Page, 1 Gl. & J. 100; Sigsby v. Willis, 3 N. B. R. 207, Fed. Cas. No. 12,849.

* Ex parte Mauritz, L. R. 5 Ch. 779; Re Tupper, L. R. 9 Ch. 312; Ex parte

ander, 1 Lowell, 470, Fed. Cas. No. 161; contra, Re Brainard, 38 Atl. Rep. 71 (Vt.). [Secured creditors may petition if their security is less than their debts. Act of 1898, § 59 b.]