and from the examples cited, it is evident that the object of the bankrupt system would not be attained if every insolvent debtor became a bankrupt. It therefore cannot be the policy of the system to require it.

This conclusion is strengthened by an examination of the law itself. If it were the policy of the law to force every insolvent debtor into bankruptcy, it might easily have been framed to accomplish that purpose. Such, however, is not the case. It will be observed that while none but insolvent debtors can go into bankruptcy voluntarily, it is left to their discretion whether they will avail themselves of "the benefit of this act" or not. The language of the statute is permissive, not mandatory. If they choose they may become bankrupts, but no penalty is provided in case they do not. This might easily have been done by making the discharge depend on the consent of creditors unless the estate paid a large percentage. In the first case of bankruptcy that percentage is made one-half, in the second, seven-tenths; that is, a man who has been bankrupt once must not allow himself to become so much involved as he may the first time. These provisions make it every man's duty to know the state of his affairs, but not his duty to become bankrupt as soon as he is insolvent. They permit him, though insolvent, to go on, but not too long.

Nor, on the other hand, is there any way in which creditors can compel a debtor to this course. If Congress had intended to give this power, it might easily have provided that, on proof of any act indicating insolvency, a petitioning creditor should be entitled to have his debtor adjudged a bankrupt; or it might have gone further, and thrown the burden on the debtor of proving his solvency, whenever reasonable cause was shown to doubt it. Since, then, the purpose claimed might so easily have been effectuated, it is hardly to be presumed that Congress would have relied on a single provision of doubtful interpretation to carry it out, leaving it in the power of many insolvent debtors to go on in spite of their creditors.

Again, the purpose and policy of this law are presumably the same with those of previous bankrupt acts. The particular provision under discussion is entirely new, but it can hardly be held to indicate a change of policy. It is merely another means to effect the same object. Now if the acts of 1800 and 1841, or the English statutes, on which ours are to a great extent founded, are examined, it will be found that there is no provision in any

of them which enables creditors, on proof of insolvency, to put a debtor into bankruptcy. Take, for example, the General Bankrupt Act of 1841. Here the acts which authorize involuntary proceedings against a debtor are departing from the State with intent to defraud; concealing himself to avoid being arrested; wilfully or fraudulently procuring himself to be arrested, or his goods to be attached; removing or concealing goods to prevent their being taken in execution; and making a fraudulent conveyance. These are in substance the acts of bankruptcy, and it is apparent that any or all of them might be committed by a perfectly solvent man; and, on the other hand, one hopelessly insolvent might keep out of bankruptcy by avoiding them. When, therefore, it is argued that it would be a serious defect in our system, if there were no provision by which creditors, on proof of insolvency, could demand a distribution of the debtor's effects, the answer is, that it is a defect which has existed in all systems, and further, that, on the most liberal construction which is claimed for the clause under discussion, it exists in the present law. For the interest of creditors demands that insolvency should be stopped in its early stages, while a suspension of payment on commercial paper generally marks the last stage of embarrassment, and if they must wait for this to prove insolvency, the power will profit them little. Indeed it would be hardly necessary, since to an honest debtor, so hopelessly involved, voluntary bankruptcy presents the only prospect of relief from his difficulties, and the power which creditors possess through the ordinary processes of law is all they need to insure this step. They only need the summary process of bankruptcy to protect their interests against fraud. In many cases of insolvency there is room for an honest difference of opinion as to whether the debtor will succeed in clearing himself from his embarrassments. The legislature, in framing the statute as it has, undoubtedly acted in view of such cases, and was influenced by the consideration, that an unrestricted power to compel bankruptcy on proof of insolvency would be liable to injure the debtor more than it would benefit the creditor.

Authorities may be cited in support of this conclusion. Thus Vice-Chancellor Knight Bruce, in a case where the debtor, for two years before his bankruptcy, had been continuously insolvent, says, "This is a fact requiring explanation, but it is not of itself conclusive. To say nothing of the wide mischief often caused by

a sudden stoppage to creditors themselves, a man may continue to carry on his trade in such circumstances with good intentions and fairly. He may have a well-grounded expectation and a reasonable hope of surmounting his difficulties. Such a course may be likely to be beneficial to existing creditors, and may be pursued without dishonesty." The duty of an insolvent debtor has been discussed in another class of cases, where the question what constitutes a fraudulent preference has been raised. It has been contended that "when a person subject to the bankrupt laws is insolvent and knows it, and pays one creditor in full, he necessarily prefers that creditor, and must be conclusively presumed to have intended the necessary consequence of his act, and that no evidence of actual intent can be admitted to control this inference."2 There has been some difference on the point, but the law as laid down by the Supreme Court of Massachusetts in Jones v. Howland is believed to be correctly stated. "In view of all the authorities we hold the law to be this: that though insolvency in fact exists, yet if the debtor honestly believes he shall be able to go on in his business, and with such belief pays a just debt, without a design to give a preference, such payment is not fraudulent, though bankruptcy should afterwards ensue. . . . Insolvency may be known to exist, and yet the debtor, though compelled to make sacrifices, be determined to go on in business, and not yield to the pressure, and thus make payment without any intention of giving a preference in contemplation of bankruptcy. Such instances arẻ not of very rare occurrence. In this case it was held that intent was a question for the jury, to be decided on the facts.

...

Here is a close analogy. In one case, the fact proved is a payment which works, in fact, a preference; in the other, a suspension for fourteen days. The law, in words, requires fraud in both cases, and in both the argument is that if the facts are proved, the law infers the fraud, because it is the insolvent debtor's duty to become bankrupt; this, it appears from the decisions just quoted, the law will not do, and hence the assumption upon which the argument rests must be rejected, and with it the conclusion drawn

1 Ex parte Dornford, 15 Jur. 278; 5 Eng. L. & Eq. 242.

2 Lowell, J., In re Worthington S. Locke, 2 B. R. 123.

3 Jones v. Howland, 8 Met. 385; In re J. P. Doan, 2 B. R. 182; Morgan, Root, & Co. v. Mastick, 2 B. R. 168.

.

from it, that a suspension for fourteen days is ipso facto fraudulent.

It follows, from the argument thus far, that the law does not regard it as an insolvent debtor's duty to become bankrupt, hence that it is not the policy of the law to make mere insolvency a ground for compulsory proceedings against a debtor, nor, of course, to give that effect to an act which is at best merely evidence of it.

If, on the other hand, it is assumed that suspension is an act of bankruptcy, when and because it is an act of fraud, the whole section will be found harmonious. Our law really combines the essential features of a bankrupt and of an insolvent system, which are entirely distinct in origin and purpose, though in practice the differences are overlooked. The object of the first is the benefit of the creditor; of the last, the relief of the debtor. The English system was, in its origin, a bankrupt system in the strict sense, and retained this character from the first act, 34 & 35 Henry VIII. c. 4, passed in 1542, till the 4 & 5 Anne, c. 17, passed in 1705, which last statute was the first to contain any provisions for the relief of debtors. The first insolvent law "An act for the relief of insolvent debtors in England"-was not passed till 1813. From its origin till a very recent date, it was a system of involuntary bankruptcy, containing no provision by which a debtor of his own motion simply could avail himself of its benefits. Its object is shown by the preambles and titles of the successive statutes. The preamble of the first reads, "Whereas divers and sundry persons craftily obtaining into their hands great substance of other men's goods, do suddenly flee to parts unknown, or keep their houses, not minding to pay or restore to any their creditors their duties, but at their own wills and pleasures consume debts and the substance obtained by credit of other men for their own pleasure and delicate living, against all reason, equity, and good conscience, be it enacted." The act 1 Jac. I. c. 15, was passed: "For that frauds and deceits, as new diseases, daily increase amongst such as live by buying and selling . . . by such as wickedly and wilfully become bankrupts." The act 4 & 5 Anne, c. 17, is entitled, "An act to prevent frauds frequently committed by bankrupts," and as late as 1732, the preamble of the statute, 5 Geo. II. c. 30, contains, " And whereas many persons have and do daily become bankrupt, not so much by reason of losses and unavoidable misfortunes, as to the

intent to oblige their creditors to accept such their unjust proffers and composition, and to defraud and hinder their creditors of their just debts."

These quotations show clearly the object of the statutes. Their plan was simple. Certain acts are enumerated called Acts of Bankruptcy, the commission of which entitled the creditor to put the debtor into bankruptcy, and from 1542 to 1705 this afforded no relief to the debtor. His discharge formed no part of the system. His property was divided among his creditors, but if they were not paid in full, they still had their remedy against him for the balance of their debts. He could hold no property, nor was he entitled to his liberty, if his creditors chose to use their rights, until every debt was fully satisfied. The system was intended to protect creditors against fraud, and the acts of bankruptcy were evidences of fraud. Blackstone says, a bankrupt is "a trader who secretes himself or does certain other acts tending to defraud his creditors," and it is to be observed that all the acts of bankruptcy enumerated in our statute, except that which gives rise to this discussion, had been created more than a century before this definition was given. Further, the English statutes expressly provided that the acts must be done with an intent to delay or defraud the creditors. The intent was part of the act.

was an

To this last remark, there is one exception. Lying in prison on arrest or detainer for debt, for the space of two months, a period which was gradually shortened in successive enactments, act of bankruptcy independently of the intent. Of this, Lord Rosslyn says, "The ground of an act of bankruptcy by lying two months in prison, evidently is, that if a man has not credit enough to procure bail and deliver himself from arrest, that is a good ground to hold that he is totally insolvent and therefore an object of the bankrupt laws." (Ex parte Bowes, 4 Ves. 168.) On the other hand, says Christian, "If a trader was committed for misdemeanor, and if a detainer for a debt was lodged against him, and this was not discharged within two months, if this were not an act of bankruptcy, he might be in jail for life, and set his creditors at defiance." The true cause of this provision seems to be suggested by this last remark. It was devised to meet a case where a man chose rather to spend his days in prison than to pay his debts (a choice which the English law sometimes gave), and his property could only be reached by bankrupt process.