Nathan Clifford

“ Equal distribution of the property of the bankrupt, pro rata, is the main purpose which the Bankrupt Act seeks to accomplish, and it is clear to a demonstration that the end and aim of those who framed the act must be defeated in this case if the proceedings of the judgment creditors are sustained, as they have perfected liens, by those proceedings, upon all or nearly all of the visible property of the bankrupts. ”

“ Until the debtor commits an act of bankruptcy it is doubtless true that any creditor may lawfully sue out any proper process to enforce the payment of debts overdue, and may proceed to judgment, execution, seizure, and sale of his property ”

“ Insolvency in the sense of the Bankrupt Act means that the party whose business affairs are in question is unable to pay his debts as they become due in the ordinary course of his daily transactions, and a creditor may be said to have reasonable cause to believe his debtor to be insolvent when such a state of facts is brought to his notice respecting the affairs and pecuniary condition of his debtor, in a case like the present, as would lead a prudent business man to the conclusion that he, the debtor, is unable to meet his obligations as they mature in the ordinary course of business. ”

“ It is as much the policy of the Bankrupt Act to uphold liens and trusts when valid as it is to set them aside when invalid.'
Of course Buchanan & Co. intended to collect the bill by ordinary process in State courts. That is not per se unlawful. No statute has forbidden it; no decisions hold it wrong per se. The machinery of the State courts has not been abolished by the Bankrupt Act, nor the whole burden of collecting debts thrown on the Federal courts. They did not intend to violate the letter or spirit of the Bankrupt Act by any collusion with their debtor. ”

“ Fraudulent preference is the gravamen of the charge, and the complainant, as the assignee of the estate of the bankrupts, prays that the said judgments and all the proceedings in the suits may be decreed to be void and of no effect, and that the judgments, executions, and levies may be vacated and set aside, and that it may be decreed that he, as such assignee, is entitled to have and receive all the real and personal estate of the bankrupts free and clear of any lien by virtue of the said judgments, or of any of the aforesaid proceedings, and for an injunction. ”

“ Judgment creditors of a corporation, it is held, do not obtain a preference by such a proceeding, but must proceed according to the provisions of the article relative to the sequestration of the property and effects of corporations for the benefit of creditors. [28]
Viewed in any light the court is of the opinion that neither the decree of the State court appointing the receiver nor the order enlarging his powers, nor any of his proceedings under those powers, afford any defence to the bill of complaint. ”

“ A debtor who is threatened or pressed can prevent the taking of his property on legal process by going into voluntary bankruptcy, and if he does not he clearly allows or suffers the taking. [8]
(b.) The insolvency of the company being established, and the fact being proven that it permitted judgments to be entered and its property to be taken on execution, the intent follows.
The natural consequence of the defendants obtaining judgment and levy was to give them a preference over other creditors, there not being sufficient assets to pay all the creditors in full ”

“ Ordinary prudence is required of a creditor under such circumstances, and if he fails to investigate when put upon inquiry he is chargeable with all the knowledge it is reasonable to suppose he would have acquired if he had performed his duty. ”

“ Much discussion to show that the paper company was insolvent is certainly unnecessary, as the answer admits the fact to be as alleged in the bill of complaint. They failed to meet their paper at maturity as early as the 4th of March, 1869, as conclusively appears from the letter of the principal appellants to the treasurer of the company, acknowledging the receipt of a telegram from him to the effect that the company could not pay their note falling due on that day. ”

“ It was added to cover acts of wilful omission, not embraced in the word 'procure.' It is to be used in the sense of 'allow,' or 'permit,' not of 'endure.' A man suffers, permits, or allows that which he could, but does not desire to, prevent. He simply endures that which he has done the best he knew how to avoid. ”

“ II. The appointment of Buchanan as receiver of the claims against the insurance companies, was a nullity. Sections 292 and 294 of the New York Code of Procedure, in reference to proceedings supplementary to execution, have no applicability to incorporations. [17]
Reply: A debtor does not, in the sense of the Bankrupt Act, 'suffer' his property to be taken, if he in good faith use, as he is advised and believes, effectual means to prevent it, and fails only by mistake, misfortune, lack of time, or accident. ”

“ Instead of yielding at that time to the threat of the appellants, the corporation bankrupts, on the 21st of July following, made, executed, and delivered to one Benjamin Hoyt an indenture of assignment, wherein they pretended to convey to the said assignee all their real and personal property in trust, to convert the same into money, and with the proceeds to pay the debts of the company. ”

“ Such proceedings, therefore, must be held invalid, as they were promoted and prosecuted by the parties acting in fraud of the Bankrupt Act, and inasmuch as that conclusion affects the judgments recovered by the appellants, it will not be necessary to bestow much consideration upon the subsequent proceedings to perfect the liens or to the order for the appointment of a receiver, or to the second order extending his jurisdiction and enlarging his powers. ”

“ Neither the information received August 5th, of the assignment and the Jones judgment, nor the knowledge acquired by Mr. Goodwin, August 10th and 11th, nor his directing a levy and indemnifying the sheriff on the 13th, could prejudice the liens acquired on the 4th. We may, therefore, lay out of consideration all that occurred after that date.
5. The burden of proof rests on the assignee. It must be admitted that, irrespective of the Bankrupt Act, his title is subject to liens of Buchanan & Co. ”