66 We have quoted at length from the foregoing opinion for the reason that the court has clearly emphasized and set forth the contrast between the provision made in section 67, cl. f," of the act, making void certain liens obtained by a creditor, and the provision in regard to what acts of a debtor shail be followed by the consequences of bankruptcy. When it was desired to render liens obtained by a creditor under judicial proceedings against the property of his debtor void, under certain circumstances, without reference to any voluntary act of the debtor, Congress had no difficulty in finding appropriate language to express its meaning, just as the English act above quoted used appropriate and unequivocal language to define the things which, being done by the creditor, should work the bankruptcy of the debtor, without requiring any act on his part.1 DALLAS, Circuit Judge. I concur in the conclusion arrived at in this case, but not in the construction put by the majority of the court upon clause 3 of section 3 of the bankruptcy act of 1898. The reasons for this dissent may be briefly stated, and need not be elaborated. I do not think that any special significance should be ascribed to the word "acts," as it occurs in section 3. What was intended, as I believe, was merely to designate what conduct of a person would have the effect of making him a bankrupt. The word "acts" is certainly sometimes used as an equivalent for the word "behaves," even where the behavior referred to is not positive, but negative, in character, as where it is said that a man acts unreasonably in not doing something which in reason he ought to do. In the corresponding section of the bankrupt act of 1867 it was unquestionably so used, and I perceive no ground for supposing that in the act of 1898 it was employed in a narrower sense. By section 39 of the act of 1867 it was provided, among other things, that any person "who has been arrested and held in custody under or by virtue of mesne process, . . . and such process is remaining in force and not discharged by payment, . . . or has been actually imprisoned, . . . shall be deemed to have committed an act of bankruptcy." Here, then, we find that under the act of 1867 an act of bankruptcy might consist of the debtor's arrest or imprisonment, which, of course, could not be his own act, and that, by his not doing, — not paying, the act of bankruptcy constituted by his arrest would be consummated and established. Hence it appears that Congress in the previous statute provided that certain acts, not of the debtor himself, should be deemed to be acts of bankruptcy committed by him; and I therefore cannot agree that, by reason of the association in the present act of the same phrase "acts of bankruptcy "- with the words "suffered or permitted," these words must be interpreted to mean connivance, co-operation, or participation, and nothing else besides. Neither can I agree that the words "suffered or permitted" necessarily import positive action. They may do so, it is true; but they also, and 1 Portions of this opinion immaterial to the main point have been omitted. --- I think ordinarily (especially when disjunctively presented), signify passive sufferance or quiescent allowance," not to forbid or hinder; to tolerate" (Webster); "to refrain from hindering; allow, permit; tolerate" (Century). But there are considerations which, in my opinion, should have greater weight in the construction of this clause than any nice discrimination of the diverse definitions of particular words. The cases of Wilson v. Bank and Clark v. Iselin were decided under the act of 1867, and, with those decisions and that act presumably in mind, the act of 1898 was passed, with provisions which, as respects the matter in question, notably differ from those of the act of 1867. The word procure," which was in that act, and which might well be said to indicate that positive action on the part of the debtor was contemplated, was pointedly omitted from the act of 1898; and to the word "suffered " there was added the words " or permitted," with, as I think, the evident intention of making it clear that procurement would not be necessary, but that mere sufferance or allowance would be enough, to occasion bankruptcy. Moreover, clause 3 of section 3 of the act of 1898 does not include the provisions of the act of 1867 with reference to the debtor's intent, or anything whatever upon that subject; and this departure, I think, shows that the object in view was not merely to impose bankruptcy upon the debtor because he had given a preference, but was to preclude, where possible, the acquisition of any advantage of one creditor over others. Taken together, I cannot but regard these modifications as significant of a design to prevent the present statute from being construed as the former one had been. It cannot be supposed that such suggestive changes in their otherwise similar terms were made without purpose, and to me it is manifest that the intention in making them was to establish as the law of 1898 - no matter what that of 1867 might have been that, if an insolvent (regardless of intent or procurement) either suffered or permitted any creditor to obtain a preference, his failure to vacate it within the time limited would be an act of bankruptcy; and this understanding is accordant with the general policy of the act, to which allusion has been made, that no creditor shall be, either by procurement or sufferance, enabled "to obtain a greater percentage of his debt than any other of such creditors of the same class." Section 60. The decisions of the district courts in other circuits as well as in this one are in harmony with the views I have expressed. Those decisions1 are, of course, not binding upon us, but they are entitled to much weight; and, in my opinion, the construction which has heretofore uniformly been given to the clause under consideration ought not now to be discarded in this jurisdiction. 1 Re Meyers, 1 A. B. R. 1 (referee); Re Whalen, 1 N. B. N. 228; Re Reichman, 91 Fed. Rep. 624; Re Moyer, 93 Fed. Rep. 188; Re Ferguson, 95 Fed. Rep. 429; Re Rome Planing Mill, 96 Fed. Rep. 812; Parmenter Mfg. Co. v. Stoever, 97 Fed. Rep. 330 (C. C. A. Ist. Circ.); Re Thomas, 103 Fed. Rep. 272; Re Storm, 103 Fed. Rep. 618; Re Harper, 105 Fed. Rep. 900. SECTION II. (continued). (e) TRANSFERS FOR PRESENT CONSIDERATION. RE LOCKE. DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, [Reported in 1 Lowell, 293.] OBJECTIONS to the bankrupt's discharge heard by the court. The examination of the bankrupt, which was the only evidence in the case, tended to show that he had been extensively engaged in trade down to the year 1857, when he failed and settled with many of his creditors. Others, including the two who proved their debts here and opposed his discharge, had obtained judgments which were still valid. Since 1857 Locke had not been a trader, but had earned money by service in the army and as a clerk. The specifications set up certain payments made by him from time to time, within four months before filing his petition for rent and other necessaries. Locke admitted that he was insolvent when he made those payments and for ten years before, but denied any intent to prefer those creditors and any contemplation of bankruptcy. J. D. Ball, for the creditors. J. S. Abbott, for the bankrupt. LOWELL, J. . I am further of opinion that the payments which this debtor made are not within any true definition of a fraudulent preference. It is very rarely that the payment of rent, or of a butcher's or grocer's bill, in the ordinary course of dealing, can be a preference, because the consideration is a continuing one. If the tenant does not pay his rent, he is ejected, and the main consideration is the forbearance; and so of the other like bills, though in a less degree. We have seen that a debtor cannot be said to intend a preference, unless he expects or fears either to stop payment or to become bankrupt. The evidence shows that this defendant did not contemplate bankruptcy. He had, indeed, years before stopped payment, and ceased to be a trader, and had disposed of his trade capital by what may or may not have been preferences by the law of his domicile. But he had accumulated no new estate, and the payments which are now objected to were for his current expenses, and made out of his current earnings, though they were made monthly and not day by day. If these were technical preferences under section 39, which I doubt in the case of one not a trader, and not paying one trade creditor before another, yet I cannot believe they were fraudulent preferences within section 29, which should bar his discharge. Discharge granted.1 1 In Smith v. Teutonia Ins. Co., 22 Fed. Cas. No. 13,115, it was held that payment of rent by a company after its insolvency was known was not an act of bankruptcy as it EX PARTE AMES. RE MCKAY AND ALDUS. DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, APRIL, 1871. [Reported in 1 Lowell, 561.] LOWELL, J. The petitioner, as trustee for himself and his partner, holds a mortgage upon nearly all the stock, tools, and other movable property of the bankrupts, and it was to be expected that the general creditors should look upon the transaction with suspicion, and inquire carefully into, its consideration. The advances were all made after the nineteenth of September; the mortgage was made on the seventeenth of October, and McKay and Aldus stopped payment on the latter part of November of the same year, 1868. A mortgage of all the property of a trader, or of so much as will make him insolvent, when given for a pre-existing debt, is, by the law of England, conclusively presumed to be a fraud upon the bankrupt act: Worsley v. DeMattos, 1 Burr. 467; Dutton v. Morrison, 17 Ves. 199; Lindon v. Sharp, 6 M. & G. 895; Stewart v. Moody, 1 C. M. & R. 777; and although our law does not deal in conclusive presumptions, yet the result is much the same, for it would be almost impossible to explain away such an apparent preference. It is not so with security given for present or future advances, which if made in good faith and without notice of any fraudulent intent on the part of the trader, cannot be acts of bankruptcy, for the reason that a fair exchange of equivalents injures no one. Unless, therefore, the mortgagee is party or privy to some fraud or preference (as in the case of Ex parte Mendell, Re Butler, supra, 506), he may hold his security against the assignee however insolvent the mortgagor may have been at the time. Hutton v. Cruttwell, 1 Ellis & B. 15; Bittlestone v. Cooke, 6 Ellis & B. 296; Harris v. Rickett, 4 H. & N. 1.' prevented the "forfeiture of the lease and the consequent loss of their office furniture and other property." Reed v. Phinney, 2 N. B. N. 1007 (referee), acc. See also Re Pearson, 95 Fed. Rep. 425. In Re Merchant's Ins. Co. 6 B. R. 43, 48, however, the court held that payment of the rent of a lot on which the lessee had erected a valuable building, though made with a view of "subserving the best interests of creditors," was a technical act of bankruptcy." In Re Lange, 97 Fed. Rep. 197, Brown, D. J., said: "Payment of rent by an insolvent is not necessarily an act of bankruptcy. But when it is done as a means and for the purpose of carrying on a business in fraud of creditors, it should be so regarded." In Smith v. Teutonia Ins. Co., supra, it was also held that payment of salaries in the course of business was not an act of bankruptcy, but in Re Kenyon, 6 B. R. 238, it was held that payment even of wages entitled to priority under the bankrupt act was an act of bankruptcy. The surrender of such payments by creditors as a condition of proof was compelled in Re Kohn, 2 N. B. N. 367 (referee); Re Jones, 2 N. B. N. 961. 1 Tiffany v. Boatman's Inst., 18 Wall. 375; Ex parte Packard, 1 Low. 523; Darby v. Institution, Dill. 144; Gaffney v. Signaigo, 1 Dill. 158; Re York, 3 B. R. 661; Harrison v. McLaren, 10 B. R. 244; Re Montgomery, 12 B. R. 321; Douglass v. Vogeler, 6 Fed. Rep. 53; Re Cobb, 96 Fed. Rep. 821; Re Wolf, 98 Fed. Rep. 84; Williams v. Coggeshall, 11 Cush. 442; Bush v. Boutelle, 156 Mass. 167; Leighton v. Morrill, 159 Mass. 271, acc. But a transfer of an insolvent's whole property to secure In cases of a mixed character, where security for a past debt is coupled with a further advance, the law of England is thus stated by the latest text writer: "It does not appear to be formally settled whether the assignment by a debtor of the whole of his effects, in consideration partly of an existing debt and partly of an advance, is or is not an act of bankruptcy." After citing the authorities on both sides, he adds: "The weight of authority would seem to be in favor of a transaction of this sort not being an act of bankruptcy where the advance is made bona fide to enable the debtor to meet his engagements and carry on his business. Such an act may be, and in fact often is, the wisest course a trader can take to promote the interest of his creditors." Robson on Bankruptcy, 110, citing Re Colemere, L. R. 1 Ch. Ap. 128; Allen v. Bonnett, 21 L. J. N. s. 309.1 I am inclined to think that the test proposed by Mr. Robson is the true one under our law. It is not every insolvent who can be made bankrupt by his creditors, though every insolvent can petition in his own behalf. Congress has carefully refrained from saying that a state of insolvency is equivalent to an act of bankruptcy, though hopeless insolvency as proved by certain tests is so. For instance, a trader whose paper lies over for fourteen days has become bankrupt; but if his credit is sufficient to enable him to obtain a renewal within thirteen days, he cannot be proceeded against as a bankrupt on that ground. The question being in each case whether there was an intent to prefer, there may be many in which the evidence of a real and honest intention not to stop payment may make valid a security which was partly given for money previously advanced, if coupled with sufficient present advantages to the debtor to relieve the case of any fraudulent appearance. And there may even be cases where the purpose and expectation to keep on are so manifest that no intent to prefer can be found, though the insolvency was well known to both parties. The present case, however, is not one which calls for any critical examination into the boundary lines of the domain of preference. The history of the dealings between these parties from the 19th of September onward fails to show any intended fraud on the act. Indeed I a small temporary loan at an exorbitant rate of interest was held invalid in Brooks v. Davis, 4 Fed. Cas. No. 1950. Similarly a sale for value may be made by an insolvent. Sedgwick v. Lynch, 5 Ben. 489; Re Pusey, 7 B. R. 45; Sedgwick v. Wormser, 7 B. R. 186; Tiffany v. Lucas, 8 B. R. 49; Re Strenz, 8 Fed. Rep. 311; North v. McDonald, 1 Wyo. 348, 351. In Re Strenz, the sale was of the insolvent's entire stock of goods and fixtures. 1 In the seventh edition of Robson on Bankruptcy, 155 (1894), the passage reads: "It may, however, be now considered as settled that a transaction of this sort is not an act of bankruptcy, where the advance is of a substantial sum and made bona fide to enable the debtor to meet his engagements, and, if a trader, to carry on his business. . . . If, however, the circumstances of the case are such as to show that the real object in making the advance was not to enable the debtor to continue his trade or meet his engagements, but to secure to the creditor the repayment of the debt previously owing to him, the transaction will be regarded as a fraud on the other creditors and an act of bankruptcy." |