error or irregularity, nor otherwise subjected to any collateral attack.1

If they are presented as claims against the estate of the bankrupt, they, with all costs and interest accrued before the bankruptcy, are entitled to allowance. Whether a judgment of this class constitutes a claim against the estate of the bankrupt must be determined by deciding whether it is a "debt," demand or liability within the meaning of Sec. 5067 of the Revised Statutes. Generally a judgment merges or extinguishes the cause of action out of which it arose, and is, therefore, entitled to the same consideration when founded upon a tort, as when founded on a contract. It is a "debt" irrespective of its origin. There is therefore no doubt that a judgment may be a provable debt, although the cause of action on which it was based could not have been proved as a claim against the bankrupt.3 As a general rule, all judgments of the class of which we are now writing are provable debts within the meaning of the Bankrupt Act. Judgments for fines imposed for the commission of crimes, or for contempts of court, are not within the general rule, and are not provable debts.5 Penalties given by statutes are treated as debts. A judgment for such a penalty is therefore provable. The pendency of an appeal does not destroy the provable character of a judgment.7

SEC. 3. Judgments Entered within Four Months prior to the Bankruptcy.-Judgments of the second class, when at

1 McKinsey v. Harding, 4 B. R. 39; In re J. H. Dunn, 11 B. R. 270; In re Dibblee, 2 B. R. 617; 3 Ben. 283; Flanagan v. Pearson, 14 B. R. 37; In re Campbell, 1 B. R. 165; 1 Abb. C. C. 185; 1 L. T. B. 30; In re Burns, 1 B. R. 174; 7 A. L. Reg. (N. S.) 105; 24 Leg. Int. 357.

2 Ex parte O'Neill, 1 Lowell, 163; 1 B. R. 677.

33 Parsons on Contracts, 6th ed., 466.

4 In re J. W. Sidle, 2 B. R. 220; Boyd v. Vanderkemp, 1 Barb. Ch. 273. 5 In re Sutherland, 3 B. R. 314; 1 Deady, 416; Spalding v. State, 4 How. (U. S.) 21; s. C., 10 Paige Ch., 284; 7 Hill, 301; Macy v. Jordan, 2 Den. 570.

6 In re Rosey, 8 B. R. 509.

7 In re Sheehan, 8 B. R. 345; In re Gold. M. M. Co. 3 Saw. C. C. 601.

tempted to be asserted as the basis of a lien against the estate of the bankrupt, are likely to be attacked on the ground that, for the purpose of creating such liens, they are void by the provisions of sections 5021 and 5128 of the Revised Statutes.8 Section 5128 provides that "if any person, being insolvent, or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give preference to any creditor or person having a claim against him, procures or suffers any part of his property to be attached, sequestered, or seized on execution, or makes any payment, pledge, assignment, transfer, or conveyance, of any part of his property, either directly or indirectly, absolutely or conditionally, the person receiving such payment, pledge, assignment, transfer, or conveyance, or to be benefited thereby, or by such attachment, having reasonable cause to believe such person is insolvent, and knowing that such attachment, sequestration, seizure, payment, pledge, assignment, or conveyance, is made in fraud of the provisions of this title, the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it, or so to be benefited." By section 5130 a, “in cases of involuntary or compulsory bankruptcy, the period of four months, mentioned in section 5128, is changed to two months.' The judgments most frequently subjected to the scrutiny authorized by these sections are those rendered by confession, or upon default. When a confession of judgment, or a warrant, or other power to confess a judgment, is given more than four months prior to the filing of the bankrupt's petition, and a judgment is in fact entered by virtue thereof within the four months, the question then arises whether the validity of the judgment depends on the date of its entry, or the date of the warrant or power. The answer to this question was given by the Supreme Court of the United States: "In a case where a creditor, holding a confession of judgment perfectly valid when it was given, 8 These are sections 35 and 39 of the original Bankrupt Act.

causes the judgment to be entered of record, how can it be said the debtor procures the entry at the time it is made? It is true the judgment is entered in virtue of his authority, an authority given when the confession was signed. That may have been years before; or, if not, it may have been when the debtor was perfectly solvent. But no consent is given when the entry is made where the confession becomes an actual judgment, and when the preference, if it be a preference, is obtained. The debtor has nothing to do with the entry. As to that, he is entirely passive. Ordinarily, he knows nothing of it, and he could not prevent it if he would. It is impossible, therefore, to maintain that such a judgment is obtained when his confession is placed on record." It follows, therefore, that if the authority to confess the judgment was given more than four months before the filing of the petition, the judgment can not be avoided, merely because it was entered within that time.10 The opinion of the Supreme Court of the United States, in the case of Clark v. Iselin, just cited, is undoubtedly in antagonism to the views of many of the subordinate judges; and some of them are very loath to be governed by it. The case of August Herpich is a good illustration of what we have just stated. Herpich, being insolvent, executed certain warrants of attorney in February, 1876, in consideration of prior indebtedness. A little more than two months later, judgments were entered on the warrants. Some ten days later, Herpich became an involuntary bankrupt. Conceding that the giving of the warrants was a fraudulent preference, the time within which they could be avoided had expired. The judge nevertheless refused to follow Clark v. Iselin, and held that the judgment based on the

9 Clark v. Iselin, 21 Wall. 360; 7 Ch. L. N. 185; 2 Cent. L. J. 210; 11 B. R. 337; reversing, 10 Blatch. 204.

10 Clark v. Iselin, cited above; Piper v. Baldy, 10 B. R. 517; 31 Leg. Int. 310; Field v. Baker, 11 B. R. 415; Sleek v. Turner. 10 B. R. 580; 1 A. L. T. 485; 31 Leg. Int. 308; Contra, Zahm v. Fry, 9 B. R. 546; 31 Leg. Int. 197; Hood v. Karper, 5 B. R. 358; 28 Leg. Int. 340; Golson v. Neihoff, 5 B. R. 56; 2 Biss. 434; In re Terry, 2 Biss. 356.

warrants should not be allowed as a valid lien against the estate of the bankrupt." A confession of judgment, or a warrant to confess judgment, given to secure a loan then made,12 or given by an insolvent to secure a preexisting debt, to a person who did not have reasonable cause to believe the debtor insolvent, is not an unlawful preference, and a judgment thereon is not void under the provisions of sections 5021 or 5128 of the Revised Statutes.13 To avoid any seizure or judgment by the aid of these sections, it is evident that these five circumstances must be established: 1st, that the debtor was insolvent, or contemplating insolvency; 2d, that while so, he procured or suffered the seizure or judgment; 3d, that the procuring or suffering was within the time specified by the Act; 4th, that it was with the view of giving a preference; and, 5th, that the person benefited had reasonable cause to believe the debtor insolvent, and that the latter was acting in fraud of the Act.14 When a creditor, knowing his debtor to be iusolvent, pursues the latter by the ordinary remedy for the collection of his debt, and the latter, also knowing his own insolvency, makes no defense, and permits judgment to be entered against himself by default, within four months before the commencement of proceedings in bankruptcy, all these five circumstances seem almost necessarily to co-exist. The only ones which can be absent in such a case are, the view on the part of the debtor of giving a preference, and the creditor's knowledge that the debtor is suffering judgment to be entered in fraud of the provisions of the Act. But, as the debtor is presumed to intend the necessary consequence of his own act, and as, in such a case, his inaction so uniformly leads to the obtaining of a preference in favor of the cred

11 In re Herpich, 9 Ch. L. N. 253.

12 Clark v. Iselin, cited above.

13 Mays v. Fritton, 20 Wall. 414; 11 B. R. 229.

14 Clark v. Iselin, 7 Ch. L. N. 185; 2 Cent. L. J. 210; 11 B. R. 337; Hoover v. Greenbaum, 61 N. Y. 305; Webb v. Sachs, 9 Ch. L. N. 156; 15 B. R. 168.

itor, and thereby accomplishes the result which the Bankrupt Act was intended to avoid, it was, for a considerable time, almost conceded that a judgment so permitted was necessarily "suffered "" with a view to give a preference,' and that the creditor knew it was so suffered; and that he could, therefore, derive no benefit from it out of the bankrupt's estate. 15 Different views finally prevailed in the Supreme Court of the United States. It was there maintained that, to render a judgment obnoxious to the Bankrupt Act, there must exist in the mind of the debtor a positive purpose or intent to defeat or delay the operation of the Act, or to accomplish something which the Act treated as unlawful; that it would be immoral for him to oppose or impede his creditor by false or dilatory pleas; that he was under no moral or legal obligation to file his petition in bankruptcy; and, as the result of these propositions, that the debtor could not be presumed to have been actuated by an unlawful purpose, from the fact that he neither perpetrated the wrong of defending against a just claim, nor made an application to the courts of bankruptcy, when he was under no obligation to make such application.16 In such cases the intent of the debtor is the turning-point; and what this intent was, must be determined from the consideration of all the attending circumstances. While an unlawful in

tent is not to be inferred from mere "passive non-resistance to regular judicial proceedings,' undoubtedly very slight

66

evidence of an affirmative character of the existence of a desire to prefer one creditor, or of acts done with a view to secure such preference, might be sufficient to invalidate the whole transaction. Such evidence might be sufficient to

15 Warren v. D. L. & W. R. W. Co., 7 B. R. 451; 5 Ch. L. N. 205; In re McGie, 2 Biss. 163; In re Heller, 3 Biss. 153; Wilson v. Brinkman, 2 B. R. 468; Buchanan v. Smith, 16 Wall. 277; 5 Ch. L. N. 277.

16 Wilson v. City Bank, 17 Wall. 489; 6 Ch. L. N. 149; 9 B. R. 97; Britton v. Payen, 9 B. R. 445; Partridge v. Dearborn, 9 B. R. 474; Henkelman v. Smith, 12 B. R. 121; 42 Md. 164; Loucheim v. Henszey, 77 Penn. St. 305.

17 Little v. Alexander, 21 Wall. 500; 7 Ch. L. N. 339; 12 B. R. 134.