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In re Thomas Princeton.

made in the usual, and ordinary, course of business, the fact shall be prima facie evidence of fraud.

The act also imposes upon creditors duties in regard to their debts, and even forfeitures. In this case, a debtor, notoriously insolvent, made seven chattel mortgages of his entire stock in trade to secure creditors; and an agent of those creditors being placed in possession of the mortgaged property was about to dispose of the goods at auction, when the marshal seized them under the warrant. The mortgages are primâ facie evidence of a fraudulent intent on the part of the debtor, but they may not be, per se, of such intent on the part of creditors. If a mortgage be given to a preferred creditor, without his knowledge, as is alleged on the part of some of the mortgagees, or if a creditor, upon receipt of knowledge of such preference, repudiates it, the prohibition or penalty of the law in respect of his debt is not to be enforced against him. The act only prohibits the proof of a debt where the preferred creditor "had reasonable cause to believe a fraud on the act was intended, or that the debtor was insolvent." The prohibition is clearly applicable in this case to the debts of those creditors who had reasonable cause to believe that their debtor was insolvent when they accepted the mortgages or attempted to enforce them by a sale of the property.

It is alleged on the part of some of the preferred creditors, that they surrendered their mortgages, and should be allowed to prove their debts under the following provision in section 23 of the act: "Any person, who, after the approval of this act, shall have accepted any preference, having reasonable cause to believe that the same was made, or given, by the debtor contrary to any provision of this act, shall not prove the debt or claim, on account of which the preference was made, or given, nor shall he receive any dividend therefrom until he shall first have surrendered to the assignee all property, money, benefit, or advantage received by him under such preference." It will be observed that the mere acceptance of a preference by a creditor does not preclude him from

In re Thomas Princeton.

proving his debt or receiving dividends. In addition to such acceptance the creditor must have reasonable cause to believe that the preference was made, or given, by the debtor contrary to a provision of the act- that is, as in this case, that the debtor was insolvent. And in such case, under the 35th section the assignee may recover of the preferred creditor the property received, or its value. Under sections 23 and 35, where a creditor accepts a preference with reasonable cause to believe that his debtor is committing a fraud upon the act, he is barred from proving his debt or receiving dividends unless he make return of the matter so received, and on failure to do so he may lose both, and all benefit from the preference, and dividends of assets.

The phraseology and intent of sections 23, 35, and 39 are different. Section 23 provides that any person who, after the approval of the act, shall have accepted any preference, having reasonable cause to believe, &c. Section 35, declaring void preferences and fraudulent couveyances, limits the time of prohibition to four and six months. These provisions of the act prohibiting preferences to creditors, are general directions for its administration upon the principle of equality. Section 39 prescribes the several causes of involuntary bankruptcy as frauds, and authorizes proceedings against the debtor at the instance of creditors. It is made a cause of bankruptcy for an insolvent debtor to prefer a creditor, in any manner therein stated. And if the debtor shall be adjudged a bankrupt, the assignee may recover back the money, or property, received by the preferred creditor, provided, such creditor receiving such preference, had reasonable cause to believe that a fraud on the act was intended, or that the debtor was insolvent, and such creditor shall not be allowed to prove his debt in bankruptcy. This prohibition as to the creditors is predicated on the adjudication of bankruptcy upon the allegation in the petition against the debtor. And the creditor, having reasonable cause to believe the alleged violation of the act by the debtor, is considered a participant in the offence against the act, and is, therefore, prohibited from proving his debt in bankruptcy.

In re Benjamin F. Appold.

The act requires proceedings in cases of involuntary bankruptcy to be prosecuted at great expense, and it seems just that the creditor who knowingly encourages, or aids, a debtor to commit a fraud on the act, to the prejudice of the other creditors, should be deprived of all benefit under the act. It cannot be permitted to a creditor who, with reasonable cause of knowledge, has participated in such fraud on the act as to found a proceeding against his debtor, to relinquish his intended preference and claim to prove his debt under the 23d or any other section of the bankrupt act.

U. S. DISTRICT COURT, E. D. PENNSYLVANIA.

Quare, Whether under the present bankrupt law of the United States, goods, if the estate in the hands of the assignee are distrainable for rent?

If they are not, it is because they are not less in legal custody than goods taken in execution; and under the equity of any laws of the respective states which, like the English statute 8 Anne, c. 14, entitle a landlord to payment of rent accrued, not exceeding one year's, out of the proceeds of goods sold under an execution, the landlord, who is prevented from distraining, may demand such an amount of rent from the assignee in bankruptcy.

Such a rule of decision is not inconsistent with apparently contrary decisions under the English system of bankruptcy.

Though rent, as such, may not accrue during the proceedings in bankruptcy, an equal charge for storage may, for a certain period, under certain circumstances, be incurred by the assignee.

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So far as conformity in the procedure under executions out of the federal courts, and out of the courts of the respective states, had been attained under the act of congress of May 19, 1828, and the rules of practice in the federal courts, which, under the authority conferred by that act, had, from time to time, been adopted before the present bankrupt law was passed the constitutional requirement, that the system of bankruptcy should be uniform throughout the United States, has been fulfilled, if the bankrupt law operates uniformly upon whatever would have been liable to execution if no such law had been passed, though the subjects of its operation may not be in all respects the same in every one of the states.

In re BENJAMIN F. APPOLD.

ON May 1st, 1868, Register Slaymaker certified the following questions, agreed to by the assignee of the bankrupt and

In re Benjamin F. Appold.

the attorney of the bankrupt's landlord. The room in which the bankrupt had conducted his business of a grocer, was leased to him at $62.50 per quarter. On January 24, 1868, the day appointed by the assignee for the sale of the goods of the estate on the premises, a bailiff of the landlord appeared, and by virtue of a warrant from him, distrained the goods for $125, due for two quarters rent. The bailiff did not sell the property, but it was agreed by and between the principal and the assignee, that the latter should make the sale, and that the proceeds" in his hands should remain subject to the claim of the landlord just as the goods then were." The assignee made the sale and received the proceeds. In his account, as audited before the register, immediately following the statement of the balance for distribution, was a memorandum, that this balance was subject to such rights as the landlord of the bankrupt, might have obtained by virtue of the levy made by his bailiff, and of the agreement made as above by the assignee. The questions presented were, First. Is the landlord entitled to take out of the balance in the hands of the assignee the sum of $125 due to him by the bankrupt for rent? and Second. Has the register authority to direct or sanction the payment of this sum to the landlord by the assignee out of the balance in his hands, as shown by the account?

CADWALADER, J. Under the present system of bankruptcy in the United States, the estate in the hands of the assignee is more determinately in legal custody than under the English system. There is, therefore, I think, reason to doubt the applicability of the English decisions that a land

lord's right to distrain continues after an assignment 179 under the bankruptcy of his tenant.1 But if * these au

1 In a case of involuntary bankruptcy there certainly can be no distress while the estate is in the custody of the marshal as messenger, and the assignee succeeds to this custody.

In the case of the estate of Samuel C. Brown, an involuntary bankrupt (21 October, 1867), this court was of opinion that rent might be paid by the assignees on the same footing as under an execution, and that an equal amount as accruing storage might be paid in addition so long as the assignee should necessarily occupy the premises.

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In re Benjamin F. Appold.

thorities are inapplicable, it does not follow that the so-called lien of a landlord for rent should be wholly disallowed. The proceedings in bankruptcy may then have the effect of a statutory execution so that the case of the bankrupt's landlord may be within the equity of any laws of the respective states which entitle a landlord to payment out of the proceeds of goods taken in execution. The Pennsylvania statute, following the English act of 8 Anne, c. 14, entitles him thus to receive an amount not exceeding a year's rent. Blackstone's opinion (2 Com. 487), that the landlord was thus entitled to the benefit of the analogy of the statute of 8 Anne, where he omitted to distrain, has been overruled in England only because the goods late of the bankrupt on the demised premises are distrainable in England, notwithstanding the assignment in bankruptcy. Otherwise, the case would be within the equity of the statute. This conclusion may be reached without any necessity for considering the rent as a lien properly so called.

Under the Maryland insolvent law, it has been decided that the property of an applicant for the benefit of that act is in the custody of the law and cannot be distrained, and also, that without a previous distress the landlord has no recourse against the estate. The latter part of this decision depends upon the local statute law. The statute 8 Anne, it is true, is in force in that state; but certain state laws are cited as controlling the decision there. 10 Md. 156.

In a previous case of the estate of Jeremiah M. Gale, also an involuntary bankrupt, the landlord of the bankrupt commenced summary proceedings before an alderman to recover possession of the demised premises under the Pennsylvania statute of 25th of March, 1825. Upon the petition of the assignee showing that his dispossession would be injurious to the interests of the creditors, he was, on the 19th August, 1867, authorized by this court to pay the rent, or if not in funds, to give security under the Pennsylvania statute. In this case it was desirable that the lease, fixtures, and good-will should be sold with the late stock in trade of the bankrupt.

In the case of Schell, Berger & Co., voluntary bankrupts, a provisional receiver had been appointed after the adjudication of bankruptcy and before the first meeting of creditors. He was afterwards elected assignee. But before he thus became assignee, an order upon him as receiver to pay rent was made on the 16th March, 1868, upon the landlord's petition, showing that funds were in hand which ought to be thus applied. The receiver certified that in his belief the landlord's claim was correct.

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