Insolvency law

“ The claims of both parties, therefore, when analyzed, amount to the assertion, as a proposition of law, that they both have greater rights in consequence of the insolvency than they would have had if the insolvency had not taken place. ”

“ But even if it should be held that such a law could not invalidate such a conveyance so far as citizens of other states are concerned, it is clearly valid so far as it makes the conveyance an act of insolvency sufficient to support an adjudication of insolvency, and the appointment of a trustee or assignee to take and distribute among creditors any property which may lawfully come to his possession. ”

“ All creditors except plaintiff in error agreed fully to release insolvent in consideration of the distribution directed by the decree. And, as their claims were much in excess of the fund, plaintiff in error could have obtained nothing on account of its claim without giving insolvent a full release.
The decision below is not supported by Boese v. King, supra. In that case there was an assignment under the New Jersey insolvency law. Some years later creditors obtained judgment against the assignor in New York. ”

“ The condition of insolvency was 'disclosed' because it was known to the officers of the law, and action had been taken by them in consequence thereof, and that is all that is necessary. We think the conclusions of the circuit court were correct, and its judgment is affirmed. ”

“ Its operation is excluded or suspended as a necessary effect of the enactment of the Act of Congress, although that contains no express provision to that effect.
Most of the States have on their statute-books provisions for a permanent system of insolvency proceedings. In some they are as favorable to the debtor as the United States bankrupt law of 1898: in more they are less favorable. ”

“ If this argument were to prevail, it would, in cases of insolvency, defeat the right of set-off recognized and enforced in the law, as every creditor of the bankrupt holding a claim against the estate subject to reduction to the full amount of a debt due the bankrupt receives a preference in the fact that, to the extent of the set-off, he is paid in full. ”

“ You have a right to refuse to deliver the flour because, though the buyer has not yet broken his contract, the prospect of his being able to keep it, in view of his insolvency, is so slight that his prospective inability to perform in the future, when the time comes, excuses you from going on now. Insolvency or bankruptcy of one party to a contract will always excuse the other party from giving credit or going on with an executory contract, unless concurrent performance is made by the insolvent party or security given for future performance. ”

“ A debtor may thus be insolvent without becoming bankrupt, but he cannot be a bankrupt without being insolvent, for bankruptcy is a legal declaration of his insolvency and operates as a statutory system for the administration of his property, which is thereby taken out of his personal control.
In primitive communities bankruptcy systems were unknown. Individual creditors were left to pursue their remedies by such means as the law or practice of the community might sanction, and these were generally of a very drastic character. ”

“ But this overlooks the plain terms of the New York law. That statute does not profess to deal with the bank and its relations as a going concern; it wholly and exclusively undertakes to regulate the distribution of the assets after insolvency. Insolvency, and insolvency alone, is made the criterion from which the preference is to arise. Indeed, the statute in terms directs its mandate to discharge the claim with preference, not to the bank eo nomine, but to the assignee, trustee, or agent charged with administering its effects after insolvency has become flagrant. ”

“ They invoke the settled rule that state insolvency laws which are tantamount to bankruptcy because they provide for an administration of the debtor's assets and a winding up of his affairs similar to that provided by the national act are suspended while the latter remains in force, and proceedings under them are utterly null and void whether commenced within four months of the filing of a petition in bankruptcy or before. ”

“ If the Massachusetts insolvent law did not, from the mere fact of filing the petition of insolvency, operate to devest the insolvent of all control of his credits, it is obvious that such control existed in the creditor when the suit was begun in Rhode Island, for the only step taken in the Massachusetts proceedings prior to the commencement of the suit in Rhode Island was the filing of the petition in insolvency. Every other step in the insolvency was taken after the Rhode Island suit was begun, and the trustee process there levied. ”

“ So long as there is no national bankrupt act, each state has full authority to pass insolvent laws binding persons and property within its jurisdiction, provided it does not impair the obligation of existing contracts; but a state cannot by such a law discharge one of its own citizens from his contracts with citizens of other states, though made after the passage of the law, unless they voluntarily become parties to the proceedings in insolvency. ”

“ The dissolution effected under Illinois law is in no way related to a state of insolvency or bankruptcy. Insolvency or bankruptcy as a ground for dissolution is not within the terms or contemplation of the law. Liquidation of a corporation is no part of the purpose of the dissolution; nor is insolvency or liquidation involved in the proceedings to enforce the mechanics' liens or foreclose the mortgages. ”

“ Only through the combination of the three elements is the act of bankruptcy committed. Insolvency alone does not suffice, nor is it enough that it be coupled with suffering or permitting a creditor to obtain a preference by legal proceedings. ”

“ If this were so, it would by no means follow that the record was inadmissible to sustain that issue; but, be this as it may, these averments, as we construe them, are distinct, and independent of each other. The first is complete in itself, because, if the makers were insolvent, it would have been idle to bring a suit against them. But there are other things besides insolvency which might render a suit unavailing; as, for instance, want of consideration in the note, or, as in this case, an adjudication in bankruptcy. ”

“ When a person’s financial liabilities are greater than his means of meeting them, he is said to be “insolvent”; but he may nevertheless be able to carry on his business affairs by means of credit, paying old debts by incurring new ones, and he may even, if fortunate, regain a position of solvency without his creditors ever being aware of his true condition. And even when his insolvency becomes public and default occurs, a debtor may still avert bankruptcy if he is able to effect a voluntary arrangement with his creditors. ”

“ And the operation of the bankruptcy laws of the United States cannot be defeated by insolvent commercial corporations applying to be wound up under state statutes. The bankruptcy law is paramount, and the jurisdiction of the Federal courts in bankruptcy, when properly invoked, in the administration of the affairs of insolvent persons and corporations, is essentially exclusive. Necessarily, when like proceedings in the state courts are determined by the commencement of proceedings in bankruptcy, care has to be taken to avoid collision in respect of property in possession of the state courts. ”

“ An insolvent law is an act occasionally passed for the relief of the body of the debtor. A bankrupt law, as distinguished from an insolvent law, is a general law, by which all the property of the debtor is taken and divided among his creditors, and he discharged from his debts, and made, as it is sometimes said, a new man. But if this be not a bankrupt law, then it may remain in force, if congress should exercise its power. Would then the laws on the subject of bankruptcy be uniform? It is impossible to believe, that the convention meditated such an absurdity. ”

“ Therefore, though the rules and forms in bankruptcy provide for an issue as to solvency in cases of involuntary bankruptcy, where by the statute such issue becomes irrelevant, because the particular act relied on in a given case conclusively imports a right to the adjudication in bankruptcy if the act be established, the allegation of insolvency in the petition becomes superfluous, or, if made, need not be traversed. ”

“ By this section, if the "person" in custody who files a declaration of insolvency shall be a trader, subject to the laws of bankruptcy, it only operates as an act of bankruptcy—upon which the creditors may proceed, or not, as they please. ”

“ The two sections are accordant, and identical in their provisions. They keep up the great distinction between insolvency and bankruptcy, which some of our judges have undertaken to abrogate; they keep up, also, the great distinction between the proper subjects of bankruptcy—to wit: traders, and those who are not traders; and they keep up the distinction between the release of the person (which is the object of insolvent laws) and the extinction of the debt with the consent of creditors, which is the object of bankrupt systems. ”

“ It must be conceded that on the 30th day of April, when the defendants caused the judgment to be entered, the execution to issue, and the levy to be made, they knew that Dibblee & Co. were insolvent; but that knowledge is not of itself sufficient to invalidate the judgment and execution. A creditor may pursue his insolvent debtor to judgment and execution, with full knowledge of the insolvency, notwithstanding the provisions of the Bankrupt Act, provided the debtor does nothing to aid the pursuit. ”

“ It becomes necessary temporarily to turn the property over to a representative of the owner and his creditors in order to satisfy their claims and at the same time to preserve the property from needless dissipation until such time as a satisfactory settlement with creditors can be made and the business placed on a sound footing once again. In case, however, a condition of insolvency exists, i.e., a condition in which the liabilities exceed the assets, a receiver in bankruptcy may be appointed by the court upon application of the creditors or at the request of the owner. ”

“ Whenever there has been no national bankruptcy law in existence, the States have been held to be free to pass such insolvent laws as they might think proper. During the existence of a national bankruptcy law no State insolvent law can be of any force which covers the same field. ”

“ The rule relates to possession and disposition, and it has been frequently decided that the surrender of the insolvent does not divest him of the title to the property surrendered, though it strips him of the power to control, alienate, or dispose of the same during the administration of his estate, and so vests it in the creditors, or in the syndic for them; that it is no longer liable to seizure, attachment, or execution, but is held to be administered and disposed of according to law, for the benefit of the creditors. ”

“ Assignees in insolvency under the comprehensive rule by which the assignee is vested with all the rights of property belonging to the bankrupt, acquire the same right as creditors to avoid any transactions of the insolvent debtor which were intended to enable a third party to hold his property in trust for his own benefit. ”

“ Consequently, the lien of a judgment obtained before defendant's death cannot be affected by a declaration of insolvency subsequently made by his administrator. But if, at the time of the death, the fund from which each of the creditors has an equal right to claim satisfaction is insufficient to pay all, equity requires that one should not be permitted, by a mere race of diligence, to seize satisfaction of his whole debt, at the expense of another. Hence, a declaration of insolvency must relate back to the death, in order that this equitable principle may have its effect. ”

“ Insolvent laws are derived from the cessio bonorum of the Roman law, and discharge the person, and not the future acquisitions of the debtor. A judgment, assignment or cession, under that law, does not extinguish the right of action; it has no other effect than to release from imprisonment. A bankrupt law establishes a system for a complete discharge of insolvent debtors. ”

“ The same considerations of public policy that require legislation under which an insolvent individual debtor and an insolvent general partnership may turn over their property to such creditors as willr elease their debts would seem to have equal force in the case of limited partnerships that are insolvent, or contemplate insolvency. ”

“ Insolvency is the most usual reason for liquidating a corporation. Insolvency may be either actual or legal. By the National Bankruptcy Act insolvency is defined as the condition in which the assets of a person, firm, or corporation are less than the debts. This definition emphasizes the economic point of view. A corporation is legally insolvent when the cash assets are not sufficient to pay debts when they become due. ”

“ The obvious answer is that if this is a necessary requirement, the deed does state that the assignor 'is indebted to divers persons in considerable sums of money, which he is at present unable to pay in full.' When a person is unable to pay his debts, he is understood to be insolvent. It is difficult to give a more accurate definition of insolvency. ”

“ The estate is insolvent, and the assets in the hands of the federal receiver are insufficient to pay credtors, and shareholders will receive nothing. On April 1, 1919, 2 1/2 years after the appointment of the federal receiver, creditors of William Necker, Incorporated, filed a bill in the Court of Chancery of New Jersey alleging the corporation's insolvency, praying that it be decreed to be insolvent, that an injunction issue restraining it from exercising its franchises, and that a receiver be appointed to dispose of the property, and distribute it among creditors and shareholders. ”