verse claimant.22 Under this principle, an assignee in a deed of general assignment is not an adverse claimant, and can be proceeded against summarily, for that is an act of bankruptcy of itself, and is a matter of law, which the assignee must know, and therefore for which he cannot assert a colorable adverse claim.23

SAME TRUSTEE'S RIGHTS AGAINST PARTIES CLAIMING ADVERSELY UNDER ALLEGED VOID TRANSFERS, ETC.

59. The right to avoid transfers or illegal preferences under the bankruptcy act is vested in the trustee alone. Creditors of the bankrupt cannot proceed in their own names, though they allege that they have applied to the trustee and that he has refused to proceed; for the bankrupt act makes him the sole judge of the propriety of such procedure.24

The usual remedy resorted to for the purpose of avoiding transfers forbidden by the act is a bill in equity in the name of the trustee.25

22 In re Hartman (D. C.) 121 Fed. 940. See "Bankruptcy," Dec. Dig. (Key-No.) §§ 212, 293.

23 BRYAN v. BERNHEIMER, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814; In re Thompson (D. C.) 122 Fed. 174; Id., 128 Fed. 575, 63 C. C. A. 217. See “Bankruptcy," Dec. Dig. (Key-No.) §§ 116, 212, 293.

24 GLENNY v. LANGDON, 98 U. S. 20, 25 L. Ed. 43; Bankr. Act July 1, 1898, c. 541, § 70e, 30 Stat. 565 (U. S. Comp. St. 1901, p. 3452); In re Hurst (D. C.) 188 Fed. 707, 709. See "Bankruptcy," Dec. Dig. (Key-No.) § 209; Cent. Dig. § 318.

25 Cox v. Wall (D. C.) 99 Fed. 546; Wall v. Cox, 101 Fed. 403, 41 C. C. A. 408; Id., 181 U. S. 244, 21 Sup. Ct. 642, 45 L. Ed. 845 (although the decision of the lower court was reversed in the Supreme Court on the question of jurisdiction of the federal courts, it was not reversed on the question of the remedy); Allen v. Massey, 17 Wall. 351, 21 L. Ed. 542; Harmanson v. Bain, Fed. Cas. No. 6,072; Johnson v. Hanley, Hove Co. (D. C.) 188 Fed. 752. See “Bankruptcy," Dec. Dig. (Key-No.) § 209; Cent. Dig. § 318.

Under section 23 of the original act, it is settled by repeated decisions in the United States Supreme Court that the federal courts did not have jurisdiction over such suits, unless they would have had jurisdiction of the controversy in case bankruptcy proceedings had not been instituted, and the controversy had been between the bankrupt and adverse claimants.26

The effect of these decisions was to take from the federal courts all but their mere administrative jurisdiction, and to relegate to the state courts the most important class of controversies which arise under the bankrupt act. The amendment of February 5, 1903, was intended to restore this jurisdiction to the federal courts. It amended section 23b to read as follows, the added portion being in italics: "Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt whose estate is being administered by such trustee might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits for the recovery of property under section 60, subdivision 'b' and section 67, subdivision 'e.'" The act of June 25, 1910, further amended this by adding at the end the words "and section 70, subdivision 'e.'

It also added to section 60, par. "b" (the section avoiding illegal preferences), to section 67e (the section avoiding conveyances made to hinder, delay, and defraud), and to section 70e (the section authorizing the trustee to avoid illegal transfers) the following words: "For the purpose of such recovery any court of bankruptcy, as hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction."

26 Bardes v. First Nat. Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175; Jaquith v. Rowley, 188 U. S. 620, 23 Sup. Ct. 369, 47 L. Ed. 620. See “Bankruptcy," Dec. Dig. (Key-No.) §§ 210, 211; Cent. Dig. §§ 321-323.

Under section 1, subd. 8, courts of bankruptcy are defined as including the district courts of the United States, and the territories, the supreme court of the District of Columbia, and the United States courts of the Indian Territory and of Alaska. Hence, under this amendment, these federal courts would have concurrent jurisdiction with the state courts over such controversies. But in a case arising prior to the amendment of June 25, 1910, it was held that a suit by a trustee to set aside a fraudulent transfer of a bankrupt's property more than four months before the filing of the petition could not be sustained in the federal court unless the defendant consented; because such a suit would not fall under either section 60b or section 67e, but only under section 70e, which was not then excepted. The addition made by the act of June 25, 1910, though made before this decision, seems to remedy this difficulty.

27

These amendments however apply only to the cases therein named, that is, illegal preferences under section 60b, conveyances to hinder, delay and defraud under section 67e, and illegal transfers under section 70e. They do not apply to ordinary controversies not included in either of these classes.28

In a suit by the trustee to set aside an alleged illegal transfer, the bankrupt is not a necessary party, as he no longer has any interest in the result.20

27 Wood v. A. Wilbert's Sons Shingle & Lumber Co., 226 U. S. 384, 33 Sup. Ct. 125, 57 L. Ed. See "Bankruptcy," Dec. Dig. (Key

No.) §§ 210, 292, 293.

28 Harris v. First Nat. Bank of Mt. Pleasant, Texas, 216 U. S. 382, 30 Sup. Ct. 296, 54 L. Ed. 528. See "Bankruptcy," Dec. Dig.

(Key-No.) § 293.

29 Buffington v. Harvey, 95 U. S. 99, 24 L. Ed. 381. See "Bankruptcy," Dec. Dig. (Key-No.) § 299; Cent. Dig § 448.

SAME THE CIRCUMSTANCES AVOIDING AN ALLEGED ILLEGAL TRANSFER

60. The circumstances which will avoid an alleged illegal transfer are

(1) that the bankrupt must be insolvent, and

(2) that the party benefited must have had reasonable cause to believe that the bankrupt was insolvent, and that he intended to violate the provisions of the act.

Under sections 60 and 67, a suit to avoid an illegal preference is not sustainable unless the bankrupt is insolvent, and unless the person receiving it or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, or, in the case of liens, that the party had reasonable cause to believe that the defendant was insolvent and in contemplation of bankruptcy, or that the lien was sought and permitted in fraud of the provisions of the act. This applies simply to these two methods of creating an illegal preference. As to suits to set aside a conveyance with intent to hinder, delay, or defraud creditors, based on statutes similar to the statute of 13 Elizabeth, they are void, except as to purchasers in good faith, and for present, fair consideration.

In reference to preferences, therefore, two requisites. must concur before the trustee can recover: First, the bankrupt must be insolvent; and, second, the transferee must have had reasonable cause to believe he intended to give a preference, which involves reasonable cause to believe that he was insolvent; or, as to liens, that he was insolvent and in contemplation of bankruptcy, or that such lien was sought and permitted in fraud of the provisions of the act. Substantially, therefore, the bankrupt must, in the first place, be insolvent; and, in the second place,

the party benefited must have reasonable cause to believe · that he was insolvent, and that he intended to violate the provisions of the act.30

SAME-SAME-INSOLVENCY

61. A party is deemed insolvent, under the provisions of the first section of the act whenever the aggregate of his property exclusive of any property which he may have conveyed, transferred, concealed, or removed, or permitted to be concealed, or removed, with intent to defraud, hinder, or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts.

This marks a radical distinction between the present act and the act of 1867. Under the latter act a party was insolvent when he was unable to meet his debts as they accrued. Under the present act, if his property is sufficient to pay his debts, he is solvent, though he may go to protest and fail to provide for their payment. This is true. even as to the bankrupt himself, in passing upon the question whether he has committed those acts of bankruptcy which involve insolvency as an essential element.31

This meaning of insolvency is so different from its usual meaning in the law that even the appointment of a receiver on the ground of insolvency under a state statute, where the word has its old meaning, does not prove insolvency under the bankrupt act with its present meaning. If a fair estimate shows an excess of assets over liabilities, the bankrupt is not insolvent.32

30 Tumlin v. Bryan, 165 Fed. 166, 91 C. C. A. 200, 21 L. R. A. (N. S.) 960; In re The Leader (D. C.) 190 Fed. 624. See “Bankruptcy,” Dec. Dig. (Key-No.) §§ 160, 166; Cent. Dig. §§ 249-258.

31 In re Rogers' Milling Co. (D. C.) 102 Fed. 687. See "Bankruptcy," Dec. Dig. (Key-No.) § 160; Cent. Dig. § 249.

32 In re Doscher (D. C.) 120 Fed. 408. This is changed by the amendment of February 5, 1903, which makes the appointment of a