In re Kenyon & Fenton.

that puts the property out of the firm in the strict sense. The removal of the property by mortgage out of the hands of one and into the possession and ownership of the other partner does not remove the same in legal contemplation from liability to the firm's creditors.

But the other clause of this specification, that said payments made by said firm within six calendar months with intent to prefer creditors, is a sufficient charge under the act; therefore, this cause of demurrer, being good only in part and not obnoxious to the petition in another material point, it cannot be sustained.

The fact that said payments were made to the employees of said firm, in their said business, while other employees, with the petitioner, were not paid, does not relieve, against this act, or cause for proceedings in bankruptcy against them. They have no right to prefer one of their employees against the rights of other creditors whether employees or otherwise. The law prefers an employee to the amount of fifty dollars, but this preference must be secured, if at all, by and through the proceedings in bankruptcy, and not outside of them, or independent of, and in spite of the act.

Whenever a person or a firm find they are unable to pay his or their debts in full, or his or their commercial paper at maturity, it is his or their duty to apply to the court in due form of law under the bankrupt act, to distribute his or their assets among his or their creditors equally, without other preference than the said act provides.

But, counsel insist, that because the petitioner has embraced certain elements of section thirty-five, with those of section thirty-nine of the act, therefore his petition in these respects is obnoxious to the demurrer. The petitioner manifestly has a right so to do. These two sections must, as they uniformly have been, be construed by the courts together: for in effect, section thirty-five so provides, as follows: "And if any person, being insolvent, or in contemplation of insolvency or bankruptcy, within six months before the filing of the petition by or against him, makes any payment, sale, as

In re Kenyon & Fenton.

signment, transfer, conveyance, or other disposition of any part of his property to any person who then has reasonable cause to believe him to be insolvent, or acting in contemplation of insolvency, and that such payment, sale, assignment," etc., "is made to prevent the same from being distributed under this act, or to defeat the object of, or in any way impair, hinder, impede or delay the operation and effect of, or to evade any of the provisions of this act," etc., the same "shall be void," etc. The thirty-ninth section provides, “that any person residing," etc.," and owing debts," etc., "being bankrupt or insolvent, or in contemplation of bankruptcy or insolvency, shall make any payment, gift, grant, sale, conveyance or transfer of money. or other property, estate, rights or credits, or give any warrant to confess judgment, or procured or suffered his property to be taken on legal process, with intent to give a preference to one or more of his creditors, or to any person or persons who are or may be liable for him as endorser, bail, surety or otherwise, or with the intent, by such disposition of his property, to defeat or delay the operation of this act; or who, being a banker, broker, merchant, trader, manufacturer or miner, has fraudulently stopped payment, or who has stopped or suspended and not resumed payment of his commercial paper within a period of fourteen days, shall be deemed to have committed an act of bankruptcy," etc.

From the recital of these parts of the said two sections, it is manifest that they must be construed together, particularly in proceedings in involuntary bankruptcy. To decide otherwise would be a violation of the letter as well as the spirit of the act.

The fourth cause of demurrer assigned that there is no sufficient allegation that the said payments were made in contemplation of insolvency, with intent to give a preference, etc., cannot be sustained; for the averments in the petition are, that the said firm, within the period of six calendar months, within said territory, to wit, on the seventeenth day of November, eighteen hundred and seventy-one, being in

In re Kenyon & Fenton.

contemplation of insolvency with intent to give preference, did make payments to sundry persons (naming them) and at sundry other times therein named, within said territory, and also averring that they were manufacturers, etc. A more

specific compliance with the provisions of the act could not be made than is made by the petitioner.

The fifth cause of demurrer is a general one and goes to the whole petition; it, therefore, follows from what has already been said, that it cannot be sustained.

The assertion of counsel that the notes in said petition. set forth, were given by said firm as publishers of said daily paper and not as manufacturers as aforesaid, is not borne out by the allegation and, averments in said petition contained. The petitioner avers that said firm were manufacturers of books, blank books, cards, bill heads, etc., as well as publishers of said paper, and also avers that said firm made said notes and delivered them, etc., that is, they put them in circulation as commercial paper. Thereby the same became their commercial paper under the act and under the law merchant, and cannot be restricted in its character by the appliance of a technical construction such as counsel have sought to give it. Whether it was uttered by said firm as the publishers of said daily paper, or as manufacturers of books, blank books, cards, bill heads, etc., it matters not, for the same being negotiable and put into circulation, either as publishers as aforesaid or as manufacturers as aforesaid, or as publishers and manufacturers as aforesaid, it becomes their commercial paper within the meaning of the bankrupt act, as well as under the law merchant. A more restricted construction would be an utter disregard of the spirit and letter of the law, and do violence to the best interests of the business community. In re Chandler, 4 N. B. R. 66; in re Nickodemus, 3 N. B. R. 55 in re Hollis, 3 N. B. R. 82.

The term commercial paper, within the meaning of the bankrupt act, includes negotiable notes, bills of exchange, negotiable bank checks, certificates of deposit used in commer

In re Kenyon & Fenton.

In this sense

the restricted By usage and

cial transactions known as the law merchant. congress used the term in the act, and not in sense of counsel in the argument of this case. by statute, negotiable paper is to be regulated by custom and the law merchant. If a "banker, broker, merchant, trader, manufacturer or miner" allows his paper to go to protest and suspends payment for fourteen days, or if he has fraudulently stopped payment, in either case he has committed an act of bankruptcy. A frandulent stoppage of payment is an act of bankruptcy, and his creditors may proceed against him at once, without waiting fourteen days. But when there is only stoppage or suspension of payment, without fraud, then the same must continue without resumption, fourteen days, before the act of bankruptcy is complete.

This provision in the thirty-ninth section, is so clear, that it seems strange that counsel should insist upon a different construction. In re Jersey City Window Glass Co. 1 N. B. R. 113; in re Ballard & Parsons, 2 N. B. R. 84; in re Lowenstein, 2 N. B. R. 99; Doan v. Compton, 2 N. B. R. 182; Davis et al. v. Armstrong, 3 N. B. R. 7; Heinsheimer et al. v. Shea et al. 3 N. B. R. 46; in re Hollis, 3 N. B. R. 82.

Paper not given in the ordinary course of the business of a banker, merchant, manufacturer, trader or miner, it has been held, is not commercial paper within the meaning of the act. In re Lowenstein, 2 N. B. R. 99; in re McDermott Patent Bolt Mfg. Co. 3 N. B. R. 33. But in re Chandler, 4 N. B. R. 66, holds the contrary doctrine.

It is sufficient, however, if the debtor's commercial paper was incurred in his character of banker, merchant, trader, manufacturer or miner. It does not matter whether the same was given for a loan of money, for goods, or to his or their employees, or otherwise, nor whether the maker, acceptor or endorser, as principal debtor or otherwise, is liable thereon, if it appear in the petition that it is the debtor's commercial paper of the class enumerated in section thirtynine of the act. In the case at bar it so appears with sufficient averments. We must, therefore, overrule the demurrer

Rogers v. Winsor.

and grant leave to the bankrupts to reply to the allegations contained in the petition.

STRICKLAND, J.-The petition appears to be sufficient upon its face and the paper is negotiable paper. Then the only question remaining is: are these parties within the purview of the law are they manufacturers? If so, the paper as a matter of course is their commercial paper. I believe them to be manufacturers. The demurrer is not well taken.

UNITED STATES DISTRICT COURT-RHODE ISLAND.

The assignee in bankruptcy can claim only such interest and right in any property as the bankrupt could have claimed at the filing of the petition by or against him. Hence where the bankrupt has made conveyances by which his books of account pass to an assignee of his own selection, the assignee in bankruptcy cannot claim them until such conveyances are shown to have been fraudulent and void.

To obtain possession of such books, an assignee must proceed by a bill in equity or action at law, in which the validity of said conveyances can be tested, and not by simple petition.

ROGERS, Assignee, v. WINSOR.

KNOWLES, J.-The questions raised upon this petition, though seemingly of a novel character, will be found, I incline to believe, virtually settled in this district, if in no other, by reported adjudications of both SHEPLEY, C. J., and CLIFFORD, J., of the supreme court. The facts to be kept in view are substantially these:

On the sixth of September, eighteen hundred and seventy-one, a creditor's petition in bankruptcy was filed by Daniel W. Ford, against Gardner S. Hall and Robert I. Getty, formerly copartners as G. S. Hall & Co., upon which the said Hall and Getty, both as co-partners and as individuals, were adjudged bankrupt on the seventeenth of January, eighteen hundred and seventy-two. In due course of proceedings Horatio Rogers, Esq., was appointed assignee of the bankrupts, who, on the nineteenth of February, presented to the