a law whose operation was not present to the mind of the actor.1

2

§ 66. Statutory Definitions. I have already said that preferences became a matter of statutory definition many years ago in the United States. They were defined in the insolvent debtor's acts in England as early as 7 Geo. IV., c. 57, but in substantial conformity with the judgment of the courts. The act of Congress of 1841 defined them as payments, etc., given in "contemplation of bankruptcy." Judge Story, who drew the act, held that this phrase had no technical meaning, but included an expectation of stopping payment and breaking up the trade; but many able judges, and finally the Supreme Court, held that the expression had been adopted from the decisions in England, and must be controlled by them. The law of 1841 was soon repealed, and the Legislature of Massachusetts made a statutory definition of preference which, with subsequent amendments, was much broader than that of the act of Congress of 1841, and was afterwards copied in that of 1867. The statute of 1869, in England, followed our law of 1867 either by design or coincidence. The act of Parliament of 1883 follows the law of 1869, excepting in one particular. I give below our law of 1867 and the English law of 1883.

Act of Congress, 1867, § 35, 14 Stats. 534: "If any person being insolvent, or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person having a claim against him, or who is under any liability for him, procures any part of his property to be attached, sequestered, or seized on execution, or makes any payment, pledge, assignment, transfer, or conveyance of any part of his property, either directly or indirectly, absolutely or conditionally, the person receiving such payment, pledge, assignment, transfer,

1 Morgan v. Brundrett, 5 B. & Ad. 289; Atkinson v. Brindall, 2 Bing. N. C. 225; Belcher v. Prittie, 10 Bing. 408; Belcher v. Jones, 2 M. & W. 258; Re Paine (1897), 1 Q. B. 122.

Fed. Cas. No. 561; Morse v. Godfrey, 3 Story 364, Fed. Cas. No. 9856; Hutchins v. Taylor, 5 Law Reporter, 289, Fed. Cas. No. 6953.

2 Arnold v. Maynard, 2 Story R. 349, 151.

8 Buckingham v. McLean, 13 How.

or conveyance, or to be benefited thereby, or by such attachment, having reasonable cause to believe such person is insolvent, and that such attachment, payment, pledge, assignment, or conveyance is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it, or so to be benefited."

Bankruptcy Act, 1883, 46 & 47 Vict., c. 52, § 48: "(1) Every conveyance or transfer of property, or charge thereon made, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they come due from his own money in favor of any creditor, or any person in trust for any creditor, with a view of giving such creditor a preference over the other creditors, shall, if the person making, taking, paying, or suffering the same... [become bankrupt] within three months after the date of making, taking, paying, or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy. "(2) This section shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt."

The statutory definition, which since 1869 has been substantially alike in both countries, is broader than the older decisions in England. An intent to prefer, according to all analogy, may coexist with other motives; and a contemplation of insolvency is evidence of intent as well as a contemplation of technical bankruptcy.

The § 67. No Particular Mode of Transfer necessary. words of the statute must always govern. Some statutes have omitted to mention certain modes of giving a preference, as, in one case, a payment of money;1 in another, giving a charge upon property already in the creditor's possession. These omissions have always been corrected by the Legislature as soon as they were pointed out; and by the late act of Congress, any direct or indirect method of giving a preference may 2 Philps v. Hornstedt, L. R. 8 Ex. 26, 1 Ex. D. 62.

1 Wall v. Lakin, 13 Met. 167.

be assumed to come within the prohibition, such as a consignment to enable a factor to set off his existing demand,1 a sale to a creditor for a like purpose,2 a consolidation of actions by means of which an attachment of too long standing to be dissolved would apply to debts not before secured,3 a judgment confessed or hastened with intent to prefer, and any other means thus far brought to notice.

§ 68. Being Insolvent. We have already seen that the definition of insolvency in the case of a trader is an inability to pay his debts as they come due in the ordinary course of his business. If a trader is insolvent, and knows it, he is presumed to know that the consequence of paying or securing one or more creditors will probably be to prefer him or them. Some learned judges held that "being insolvent" was so absolute an expression that it was immaterial whether the debtor knew of his own insolvency or not. But this is manifestly wrong, considered as a peremptory ruling of law. The whole clause is qualified by the "intent;" and no one can intend a consequence unless he knows the facts from which the consequence is to be inferred.7 Of course, there is a very strong presumption indeed that a person is acquainted with his own affairs.8

§ 69. Contemplation of Bankruptcy or Insolvency. - Contemplation of bankruptcy means that the debtor expects or fears to become a bankrupt, either by filing his own petition or by the action of his creditors. This contemplation may

1 Burpee v. Sparhawk, 97 Mass. 342; Fed. Cas. No. 6222; Rison v. Knapp, Nudd v. Burrows, 91 U. S. 426. 1 Dillon, 186, Fed. Cas. No. 11,861;

2 Smith v. McLean, 10 N. B. R. 260, Hall v. Wager, 3 Biss. 28, Fed. Cas. No. Fed. Cas. No. 13,074. 5951; Re Clarke, 10 N. B. R. 21, Fed.

3 Samson v. Burton, 5 Ben. 343, Cas. No. 2843. Fed. Cas. No. 12,285.

4 Re Baker, 14 N. B. R. 433, Fed. Cas. No. 763; Little v. Alexander, 21 Wall. 500; Webb v. Sachs, 15 N. B. R. 168, Fed. Cas. No. 17,325.

Ante, § 41. As to meaning of insolvency under act of 1898, see infra, § 464.

7 Curtis v. Leavitt, 15 N. Y. 9; Toof v. Martin, 13 Wall. 40; Rice v. Grafton Mills, 117 Mass. 228; Otis v. Hadley, 112 Mass. 100, that the debtor's belief is material; Re Locke, 1 Lowell, 293, Fed. Cas. No. 8439.

8 See infra, § 73.

9 Morgan v. Brundrett, 5 B. & Ad. Haughey v. Albin, 2 Bond, 244, 289; Gibson v. Muskett, 4 M. & G. 160.

be in the mind of a solvent debtor, because he may intend to commit an act of bankruptcy.

In some insolvent laws insolvency has the technical meaning of becoming an insolvent by judicial decree, and in such case contemplation of insolvency would have a similar meaning to contemplation of bankruptcy under a law called a bankrupt act.1

In this country it is now usual, in defining a preference, to refer to an actual state of insolvency rather than to a judicial determination of it; and, of course, in a bankrupt law, the word "insolvent" cannot refer to becoming a judicial insolvent, as there is no such thing possible.

As I have said, a debtor must contemplate a present or future state of bankruptcy or insolvency before he can possibly intend to prefer a creditor.2

§ 70. Payment, Gift, etc.; Conveyance of all. When Worseley v. DeMattos 3 was decided, a fraud, to be an act of bankruptcy, must be a "fraudulent grant or conveyance;" and the courts held that there could not be a "grant or conveyance" excepting by deed. In that case the conveyance was by deed, and was held to be an act of bankruptcy. By § 3 of 6 Geo. IV., c. 16, a trader could be made bankrupt not only if he had made a fraudulent grant or conveyance, but if he had "made any fraudulent gift, delivery, or transfer of any of his goods or chattels." Mr. Eden, who drew the statute," said in his commentary upon it that "all those acts which have heretofore been determined to be fraudulent preferences will, under the latter of these provisions [gift, delivery, etc.], be henceforth considered as acts of bankruptcy." This provision has been repeated in all subsequent statutes, and the textwriters have continued to assert that fraudulent preferences are acts of bankruptcy, as, upon principle, they certainly

are; but the courts of England have decided otherwise.2 The statute of 1883, in England, has settled the matter by declaring in comprehensive terms that all fraudulent preferences shall be acts of bankruptcy.

The courts of England have continued to hold that a conveyance of a debtor's whole property is something different from a preference, and is either valid altogether or an act of bankruptcy. At first they held that the fraud consisted in the fact that the deed, if acted on, would necessarily put an end to the debtor's trade. But a solvent trader has a right to put an end to his trade. Until this was discovered, there were several decisions avoiding such an assignment, even when there was a present valuable consideration.5

But as an insolvent trader has an undoubted right to borrow money upon security, they next held that if the conveyance was upon a fresh consideration it was valid. Both these distinctions are sound; but they come to this, that such a conveyance is voidable if it is a preference, and not otherwise.

In several statutes relating to insolvent debtors and to limited companies, a general definition has very properly included conveyances of all and of a part under a general description of preferences. The courts, however, have in most instances continued to treat a conveyance of this sort as something distinct from a preference. Thus they hold that if, on the one hand, property of substantial value is omitted from the conveyance, or, on the other, any assistance or promise of assistance is given to enable the debtor to continue his trade, the technical fraud has not been committed. This last exception was reduced to an absurdity when it was held that forbearance

1 Ante, § 61.

2 Ex parte Stubbins, 17 Ch. D. 58; Ex parte Hodgkin, L. R. 20 Eq. 746.

6 See Administrator General v. Lascelles (1894), A. C. 135.

7 Davies v. Acocks, 2 C. M. & R. 461; Gas Light Imp. Co. v. Terrell, L. R. 10

3 See Jones v. Harber, L. R. 6 Q. B. Eq. 168. 77.

4 Balme v. Hutton, 2 Y. & J. 101; Wedge v. Newlyn, 4 B. & Ad. 831; Porter v. Walker, 1 M. & G. 686.

5 Butcher v. Easto, Doug. 295.

8 Ex parte Chester, 1 Ch. D. 293, note; Ex parte Winder, 1 Ch. D. 290.

Bittlestone v. Cooke, 6 E. & B. 296; Chase v. Goble, 2 M. & G. 930; The Thames, 63 L. T. 353.