The Portland daily press., 1871-05-13
DAILY PRESS
ND.
SATURDAY, MAY 1S, 1871.

District Court Maine Di.trie,. u,x ,o
1871. i"'
BANKRUPTCY.
Thomas II. Haskell, assignee of Nathan
Cleaces, in equity .. Dartvin Ingalls,.
FOX J.
Cleaves was adjudged bankrupt on his own
petition fled March II, 1871, and the plain
tin has been duly qualified as his assignee.
Oh the 10th OF December last the respond
ent attached on writ against Cleaves, re.
turnab!e at the January term, all said
Cleaves' real estate, the action was duly en-.
tered, the defendant deiaulted and judg.
ment rendered January Both. The real es.
late attached was seized on the execution
feDruary 2lst, and thereupon before any lew
was completed, on the 18th OF April. the as
signee instituted this suit, to eniOin further
proceedings upon said execution against the
estate OF the bankrupt on the ground that a
W, ,rauuliieht preference would be obtained.
ine Ease Is submitted on bill, answer and
agreed statement. 1t is admitted. that on the
2Oih OF December the bankrupt was insol-
vent; the debt due ingalls, was for money lent
by him to the bankrupt in September last. IN
be repaid in thirty days. The answer admits
that the respondent, previous to commenc.
ing his action had called upon Ceaves several
times for payment, that he had always prom
ised TO pay in few days, but always failed so
TO do; that he knew other suits had been
commenced against Cleaves and his property
attached thereon. The bankrupt being then
insolvent, having thus repeatedly failed TO pay
borrowed money when pressed for payment
and the respondent having been compelled,
with other creditors, to resort to legal process
to obtain security for their demands, bold,
he must be held to have then had reasonable
cause TO believe the bankrupt insolvent, as is
required by the PROVISIONS of the bankrupt
act TO invaidate preference.
The bankrupt must be deemed to have IN.
tented preference to the attaching creditors,
as he allowed their suits TO proceed forthwith
10 judgment and execution against him, and
he delayed taking any steps to avail himself OF
the provisions of the bankrupt act and vacate
the attachments until the rights of the credi.
tols had not only ripened into execution, but
they had actually seized his real estate there
on and were proceeding to dispose of the same
in satisfaction OF their claims. All this the
bankrupt could have Obviated by answering
to the actions and filing his petition to be
deereed bankrupt. The inevitable conse-
quence of his acquiescence in the actions of the
creditors, was to give them preference His
intentions as well as those of the creditors
must be judged by the legal consequences of
their conduct, and therefore find that the
bankrupt did intend to give and the respond
ent, in fraud of the act, did intend and at
tempt TO obtain preference over the other
creditors by the suit and proceedings under it.
The case Goes not find, that the bankrupt
procured the attachment to be made or the
seizures on execution of his property; but it
does most clearly establish that he being in-
solvent suffered his property to be attached
and afterwards taken on legal process with
intent to give preference to the attaching
on of hay,
for which, most certainly he could have been
adjudged bankrupt on creditors petition,
if filed within six months, and if Cleaves were
an insolvent bankrupt, the present. bill could
certainly be maintained,a ,as the volumes of the
Bankrupt Register contain at least score OF
authorities, in which,in similar cases creditors,
thus obtaining preference by legal process,
have been eDjOined against further proceed
iDgs or required to refund the amounts thus
collected by them in fraud OF the act.
The proceedings in bankruptcy having been
commenced within four months of the attach
ment, all rights by virtue of such attachment
were dissolved, under the provisions of the
18th Section oil the act, and the respondent is
compelled to rely on his alleged lien, by force
of the seizure OF the estate on the execution
on the 20th OF February last after Cleaves had
committed an act OF bankruptcy by suffering
his property to be attached on legal proce IS
by tie respondent. 1t is claimed, that the
creditor, not having instituted involuntary
proceedings, but having allowed Cleaves to
proceed in his own behalf, as a bankrupt, the
case is not affected by the provisions of the
Both section, but must depend ON the 35th
section, "relating to preferences and fraulu-
lent conveyances;" that whilst by the 39th
section, the procuring or suffering Of his prop.
erty to be taken on legal process by an insul.
vent, intending a preference, is declared an
act OF bankruptcy and is clearly in fraud oil
| the act; yet by the provisions OF the 35th sec
| ton it is only when such insolvent, with such
| intent, prOcures his property to be attached
or seized on execution, that the att tachment
or seizure is declared void-that, er industria
the suffering by an insolvent. OF his property
to be ethus attached or seized, is not denounc-
ed, and such an attachment or seizure on ex-
| ecution is not declared void, when the debtor
is not active in procuring it to be made, but is
| only passive, in allowing the law to take its
usual ordinary course, and apply his property
by due process OF law, in discharge of his LA
| bilites.
1t is true that the Ssh section does not il
| express words declare an attachment, or seiz
ure on execution void, which an insoven
suffers to be made and continue upon hl!
property, but after declaring, that if an iBsol
| vent, with intent 10 give preference procure!
| "hy P.'ie VI MS PAoPVi'y " uc dIJhcucG Ol
| seized on execution, the same shall be void
it further provides, that il such debtor, make.
| any payment pledge, assignment, transfer OF
conveyance OF any part OF bis properly eithe
| directly or indirectly, absolutely or condition
ally, the person receiving such payment, &c.
having cause to believe such person is insol
vent and that the same is made in fraud O
| the act the same shall be void; and ii no
made in the usual and ordinary course o
business of the debtor, the fact shall be prime
fdcie evidence OF fraud" The taking of
debtors property on legal process cannot b
said to be in the ordinary course of his busi
ness.
In the case of Black and Secor Bank. Re!
u, Judge Blatchiord in a most able opii
ION, which has been cited and approved h
nearly every one OF the district Judges, bs
examined this question elaborately and viii
great care. IL was case OF inyoIuntor
bankruptcy where the party bad suffered hi
property to be taken ON execution, and wa
clearly within The Both sec. After demon
strating such to be the case the learned Judg
proceeds: "The same result follows uude
the Both sec: Thr two sections are in pd,
n,aterid and must be construed together
There is however no conflict between then
and they are o! the same purport and teno
The aC
of suffering the creditor to take the propert
OF the firm on legal process, the firm being il
solvent, when such taking could have bee
prevented by an application in voluntaI
bankruptcy, was fraud ON the provisions
the act, and must be held to have been
transfer made by the debtors and with a vie
to give a preference to the creditors. Tb
creditor was to be benefited by the transie
and had reasonable cause to believe the firf
to be iDsOlvent, and that the transfer wa
made in fraud OF the provisions OF the act
The transfer was not made in the usual an
0rdinary course of the debtors business, am
therefore it was void and the assignee is er
titled to recover the property transferred c
its value. The decision in "In re Davidso
b II LOG" covers this point. 1t was vo
untary bankruptcy. .and Judge Blatchford thel
held that the debtor committed an act ,
bankruptcy iE suffering his property to
/ taken on legal process; that thereby the cred
tor obtained preference, and not having su
rendered the property he could not prove h
} claim, and the sheriff was required TO pay
the assignee the amount thus collected on IL
execution.
The bankrupt act was intended to preve,
all preferences by an insolvent within TO,
months OF the commencement of preceedin
IN bankruptcy and TO insure an equal distrib
tlon OF his estate among his creditors. L ca
not believe that a seizure of an insolyent
estate on execution, and by which, if perleC
ed, gross injustice viii be perpetrated again
the general creditors, can avail q creditor
the insolvent should Immediately file his D
titon to be adjudged bankrupt, whilsl
would be set aside and adiudoed void
the creditors should succeed i'm the case an
first prevent decree of bankruptcy again
him. Such construction of the law wou
cause the validity OF the seizure to depend el
| tiIely on the alacrity and diligence of the il