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directly." Thus, if one gives a warrant of attorney or a confession of judgment with intent that it shall be used by way of preference, the courts have called this an indirect mode of giving a preference.1 So a conveyance to a third person who makes a preference to a creditor,2 or a sale or mortgage to one who knows that the purchase-money will be used by the debtor to give a preference, is voidable by the trustees. The real person to be benefited by such a transaction is the preferred creditor, and if he had notice of the fraudulent intent, it is against him that justice would seem to require the suit to be brought. It has been said that the third person might, in such case, be permitted by the court to maintain an action against the preferred creditor in the name of the assignees.5 And where a purchaser gave his note for goods so purchased from the debtor, and the latter indorsed the note to a creditor, by way of preference, and the promisor was obliged to surrender the goods to the assignees, he successfully resisted payment of the note which was held by a second indorsee who took it when overdue.6

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§ 81. Preference of Sureties. Indorsers, sureties, and other persons liable for the debts of the bankrupt are creditors, within the meaning of the law against preferences to pre-existing creditors. If, therefore, a payment is made or security given, either directly to a surety, or to a creditor with the privity of the surety, for the purpose of preferring the latter, and he has the requisite notice of the intent, and the other requisites concur, assignees may recover of him. If, however, the surety

1 Traders' Bank v. Campbell, 14 Wall. 87; Clarion Bank v. Jones, 21 Wall. 325; Re Sims, 19 N. B. R. 57, Fed. Cas. No. 12,889. See § 83.

2 Gibson v. Dobie, 5 Biss. 198, Fed. Cas. No. 5394. See Priest v. Brown, 100 Cal. 626; Saunders v. Russell, 171 Mass. 74. As to indirect preferences under act of 1898, see infra, $523.

3 Crafts v. Belden, 99 Mass. 535; Ex parte Mendell, 1 Lowell, 506, Fed. Cas. No. 9418; Bucknam v. Goss, 13 N. B. R. 337, Fed. Cas. No. 2097; Devas v.

Venables, 3 Bing. N. C. 400; Hall v.
Haskell, 169 Mass. 291.

4 White v. Bartlett, 9 Bing. 378; Gibson v. Dobie, 5 Biss. 198, Fed. Cas. No. 5394.

5 Ex parte Mendell, 1 Lowell, 506, 509, Fed. Cas. No. 9418.

6 Potter v. Belden, 105 Mass. 11.

7 Ahl v. Thorner, 3 N. B. R. 118, Fed. Cas. No. 103; Sill v. Solberg, 6 Fed. Rep. 468, 10 Biss. 252; Smith v. Little, 9 N. B. R. 111, Fed. Cas. No. 13,072; May v. Le Claire, 18 Fed. Rep. 164. See infra, § 523.

is not party or privy to the transaction, he is not liable.1 Recovery of the creditor is considered in § 80.

§ 82. Suffering a Judgment to be obtained. It was held in respect to preferences, under the act of 1867, that the word "suffer" (judgment to be obtained) was qualified by the requirement of an intent on the debtor's part to prefer the creditor, and that one who merely permitted judgment against him to go by default, when he had no just defence to the action, could not be said to have such an intent, though he knew that the creditor would obtain an advantage over the general body of creditors by virtue of his judgment.2

This section should probably receive a similar construction.

If the debtor has aided in any way by word or act to cause an action to be brought, or to hasten the recovery of judgment, he procures it; and if he is insolvent, the act is a preference. If he knowingly suffers judgment for a false or fictitious demand, it is fraudulent in the ordinary sense.

§ 83. Confession of Judgment. - In those States in which a judgment operates a lien upon the property of the judgment debtor, a confession of judgment, or a warrant of attorney will be a "security," and, if given and received as a preference, will be voidable by the assignees.

Such an act may also be an indirect conveyance of property or a "procuring" of its being taken, by way of preference, if the debtor knows that the creditor intends to put it in force by levy, whether the law gives a lien by judgment or only by levy or seizure.1

1 Bean v. Laflin, 5 N. B. R. 333, Fed. Cas. No. 1172; Churcher v. Cousins, 28 U. C. Q. B. 540; Botham v. Armstrong, 24 Grant, 216.

2 Wilson v. City Bank, 17 Wall. 473. [The law is otherwise under the act of 1898. See infra, § 466.]

3 Little v. Alexander, 21 Wall. 500; Clarion Bank v. Jones, ib. 325; Beattie v. Gardner, 4 Ben. 479, Fed. Cas. No. 1195; Lane v. Haynes, 8 Law Reporter, 499; McKenty v. Gladwin, 10 Cal. 227; Sartwell v. North, 144

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4 Hall v. Wallace, 7 M. & W. 353; Gore v. Lloyd, 12 M. & W. 479 Shawhan v. Wherritt, 7 How. 627; Buckingham v. McLean, 13 How. 151; Atkinson v. Purdy, Crabbe, 551, Fed. Cas. 616; Campbell v. Traders' Bank, 2 Biss. 423, Fed. Cas. No. 2370; 14 Wall. 87; Clarion Bank v. Jones, 21 Wall. 325; Claridge v. Kulmer, 1 Fed. Rep. 399; Darling v. Townsend, 5 Fed. Rep. 176.

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§ 84. No Preference by Judgment in invitum; Wilson v. City It was held by many of the courts that mere submission to an adversary judgment, by an insolvent debtor, might be a preference, the words "suffer his property," etc., being used in one part of the statute. But in Wilson v. City Bank 1 the Supreme Court held that the intent to prefer qualified the definition of a preference, and that no one could intend a preference by merely neglecting to defend an indefensible action; and that the argument which had prevailed in many cases, that an insolvent person was bound to go into bankruptcy, found no support in the statute.

-No act which

§ 84 a. Debtor aiding in procuring a Judgment. is solely that of the creditor will make a judgment a preference, as where one reduced his claim to bring it within the jurisdiction of a court having summary proceedings.2 If, however, the debtor does any act, however slight, to give his creditor an advantage through the forms of action and judgment, or by simply confessing judgment without service, or submitting to judgment for a debt not due; or gives a new note which enables the creditor to obtain a more speedy remedy; or agrees to consolidate several actions by which an attachment will apply to some demands which did not secure them before; or comes within the jurisdiction for the purpose of enabling the creditor to obtain service upon him; or, in short, aids in any way to forward the action of one creditor, or, with the creditor's consent, conceals the fact of it, this is a procuring or suffering within the act. And it would probably be held that a notice

1 17 Wall. 473. See s. c. 1 Dillon, 476, Fed. Cas. No. 16,842; Nat. Bank v. Warren, 96 U. S. 539; Re Runzi, 3 Fed. Rep. 790; Britton v. Payen, 7 Ben. 219, Fed. Cas. No. 1906; Van Alstyne v. Cook, 25 N. Y. 489; Varnum v. Hart, 119 N. Y. 101. [The law is otherwise under the act of 1898. See infra, § 466.] 2 Witt v. Hereth, 6 Biss. 474, Fed. Cas. No. 17,921.

3 Little v. Alexander, 21 Wall. 500; Samson v. Burton, 5 Ben. 343, Fed. Cas. No. 12,285; Partridge v. Dearborn,

2 Lowell, 286, Fed. Cas. No. 10,785;
Loudon v. First Nat. Bank, 15 N. B. R.
476, Fed. Cas. No. 8525; Beattie v.
Gardner, 4 Ben. 479, Fed. Cas. No.
1195; Parsons v. Caswell, 1 Fed. Rep.
74; Darling v. Townsend, 5 Fed. Rep.
176; Brown v. Jefferson Co. Bank, 9
Fed. Rep. 258; Lane v. Haynes, 8
Law Rep. 499; Balfour v. Wheeler, 15
Fed. Rep. 229; Sage v. Wynkoop, 16
N. B. R. 363, Fed. Cas. No. 12,215;
Sartwell v. North, 144 Mass. 188; s. c.
151 Mass. 142.

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by the debtor to his creditor to enter up or to enforce his judgment would make the levy voidable.1

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§ 85. Preferences in Respect to Time when given. A preference, though called fraudulent, is merely the payment or security of a just debt or liability, and all the statutes, at present, have established a limit of time before the actual technical bankruptcy; that is, before the filing of the petition, or before the adjudication, within which the preference must have been given, or it will be no fraud at all. In our late statute it was four months, and it was uniformly and necessarily held that a mere preference, the date of which was not disputed, could be assailed by the assignees only when the bankruptcy occurred within the prescribed period.2 But many of the courts, in their desire to further the intent of the statute, were inclined to hold that the preference had its date when a mortgage was recorded, or when a right of levy or seizure was actually availed of, rather than when the right was acquired by the creditor. These decisions, however, have been overruled.

The principle is clear, and was clearly pointed out by Curtis, J., in Buckingham v. McLean, that an intent to prefer on the part of a debtor cannot be inferred from the action of some one else, such as a creditor who simply exercises his right of entering a judgment or recording a deed. If, therefore, a security is valid when given, but requires some seizure or record to vest the title, the creditor may put it in force at any time up to the day and hour of the technical bankruptcy;5 so

1 Hall v. Wallace, 7 M. & W. 353; Belcher v. Magnay, 12 M. & W. 102; Vogle v. Lothrop, 4 N. B. R. 439, Fed. Cas. No. 16,985; Singleton v. Butler, 2 B. & P. 283; Re Skegg, 7 Morrell, 240.

2 Bean v. Brookmire, 1 Dillon, 25, Fed. Cas. No. 1168; Coggeshall v. Potter, 1 Holmes, 75, Fed. Cas. No. 2955; Hubbard v. Allaire Works, 7 Blatch. 284, Fed. Cas. No. 6814; Collins v. Gray, 8 Blatch. 483, Fed. Cas. No. 3013; Re Lane, 2 Lowell, 333, Fed. Cas. No. 8044; Sidener v. Klier, 4

Biss. 391, Fed. Cas. No. 12,843. As to a preference after a petition, see Ex parte Palmer, 10 Morrell, 252; Act of 1898, § 60 b.

8 This is the law under the act of 1898. See infra, § 466.

4 13 How. 151, 169.

5 Re Wynne, 4 N. B. R. 23, Fed. Cas. No. 18,117; Vogle v. Lathrop, 4 N. B. R. 439, Fed. Cas. No. 16,985; Clarke v. Iselin, 21 Wall. 360; Sawyer v. Turpin, 2 Lowell, 29, Fed. Cas. No. 12,410; 1 Holmes, 226, Fed. Cas. No. 12,409; 91 U. S. 114; Nat. Bank of

if a draft is drawn in good faith and sent to a creditor in the ordinary course of business, with no intent to prefer, the transfer is valid, though the creditor when he procured its acceptance had heard of the insolvency of the drawer.1

One distinguished judge, dissatisfied with these decisions, held that they did not apply to a case where the debtor was insolvent, and known to be so when the warrant of attorney was given, though that was more than the prescribed time before the bankruptcy.2 This view agrees with a decision that where the fraud consists in procuring property to be taken, it is not complete until seizure.3

If the parties agree to keep a mortgage of chattels from the record, and renew it from time to time, to save the statutory requirement of a record within a fixed period, and for the very purpose of misleading creditors, there is evidence of an intent to prefer; and so of an agreement to give security when required.* Where the parties agreed that a conveyance should take effect for the benefit of the grantee at a certain time, if by that time the creditors had not accepted a compromise, the preference dated from that time.5

It was held by a very able judge that a preference was so far made a fraud, by the late act of Congress, that a concealment of it would prevent its being cured by the lapse of four months before the bankruptcy. This decision was dissented from in a vigorous opinion, which is more sound, for the bankruptcy of the debtor within four months was a condition precedent to its being a fraud.

§ 86. Promise to give Security. — In this country, a promise to give security at some future indefinite time, or when re

Fredricksberg v. Conway, 14 N. B. R. 513, Fed. Cas. No. 10,037; Re Swenk, 9 Fed. Rep. 643; Gale v. Burnell, 14 L. J. Q. B. 340; Matthews v. Westphal, 48 Fed. Rep. 664.

1 Re Baxter, 25 Fed. Rep. 700, 28 Fed. Rep. 452.

2 Re Herpich, 15 N. B. R. 426, Fed. Cas. No. 6418.

636.

Ex parte Fisher, L. R. 7 Ch.

5 Haskill v. Frye, 14 N. B. R. 525, Fed. Cas. No. 6195; Heathman v. Rogers, 153 Ill. 143.

6 Bank of Columbus v. Harris, 14 N. B. R. 510, Fed. Cas. No. 4595. 7 Anibal v. Heacock, 2 Fed. Rep. 169. See Matthews v. Westphal, 48

8 Belcher v. Gummow, 9 Q. B. 873. Fed. Rep. 664.

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