III. By insolvency.

It has been found necessary, in governments which authorize personal arrest and imprisonment for debt, to interpose and provide relief for the debtor in cases of inevitable misfortune; and

which the remark applied, was, that the damages given were recorded in full satisfaction of the damages sustained. In Moore v. Watts, 1 Lord Raym. 614, Lord Holt is made to say, that in replevin for cattle with adhunc detinet, damages given for the cattle will change the property. In the same case, as reported in 12 Mod. 428, he says, that in replevin, for cattle with an adhunc detinet, and judgment for damages against the defendant, by payment thereof, the property of the distress vests in him. The American cases leave the law in equal uncertainty. In Curtis v. Groat, 6 Johns. 168, Osterhout v. Roberts, 8 Cowen, 43, Prentiss J., in Sanderson v. Caldwell, 2 Aiken, 203, Jones v. M'Neil, 2 Bailey (S. C.) 466, and Walker v. Farnsworth, Supreme Court of Tennessee, September, 1844, the doctrine is, that a recovery in damages of the value of a specific chattel does not, of itself, work a change of title, and transfer it to the defendant or his vendee, without satisfaction of the value found. This is the better doctrine; property does not pass by the judgment, but only by satisfaction of the judgment; so it is adjudged in Sharp v. Gray, 5 B. Monr. 4, that a judgment in detinue without satisfaction does not change the right of property. On the other hand, it is declared in Murrell v. Johnson, 1 Hen. & Munf. 452, Floyd v. Browne, 1 Rawle, 121, March v. Pier, 4 Idem. 273, Fox v. The Northern Liberties, 3 Watts & Serg. 107, Rogers J., in Merrick Estate, 5 Watts & Serg. 17, Rogers v. Moore, 1 Rice (S. C.) 60, and Carlisle v. Burley, 3 Greenl. 250, that a recovery of the value of a chattel by judgment divests the plaintiff of his title, and transfers it to the defendant, though the judgment be not satisfied, and bars him from asserting his title in any other action. In the Am. Law Mag. for April, 1844, there is an able discussion of the authorities and of the legal principles applicable to the question of the "transfer of personal property by judgment;" and in King v. Hoare, 13 Mees. & W. 494, it was adjudged, after a full discussion, that a judgment against one or two joint debtors is a bar against the other. It is otherwise where the debt is joint and several. The right given by the judgment without satisfaction merges the inferior remedy by action for the same debt, and the same result follows in tort. The same principle of law was declared in Ward v. Johnson, 13 Mass. 148, Smith v. Black, 9 Serg. & Rawle, 142, and Robertson v. Smith, 18 Johns. 476. If one defendant in a joint contract and action can plead a sufficient bar as it respects himself, it will avail the other defendant; whereas, in the case of a joint and several contract, an unsatisfied judgment against one of the debtors is no bar to a subsequent action against the other. The case in the Supreme Court of the United States, in Sheehy v. Mandeville, 6 Cranch, 253, may be considered as having been completely overruled by our American authorities, long before the same decisions against it were made in the English Court of Exchequer. See Trafton v. United States, 3 Story, C. C. 646, for confirmation of the case of King v. Hoare.1

1 Payment of interest by one of two joint makers of a note, before the statute of limitations has attached, does not continue the liability of the other maker. Dunham v. Dodge, 10 Barb. (N. Y.) 566. Shoemaker v. Benedict, 11 N. Y. 176. Winchell v. Hicks, 18 N. Y. 558. The acceptance by a creditor of the separate liability of one of several joint debtors is a sufficient consideration for a discharge of the others. Lyth v. Ault, 11 Eng. L. & Eq. 580. Caldwell v. Sigourney, 19 Conn. 37.

this has been particularly the case in respect to insolvent merchants, who are obliged by the habits, the pursuits, and the enterprising nature of trade, to give and receive credit, and encounter extraordinary hazards. Bankrupt and insolvent laws are intended to secure the application of the effects of the debtor to the payment of his debts, and then to relieve him from the weight of them. (b)

(1.) The constitution of the United States gave to Congress the power to establish uniform laws on the subject of bankruptcies throughout the United States. Bankruptcy in the English law has, by long and settled usage, received an appropriate meaning, and has been considered to be applicable only to unfortunate traders, or persons who get their livelihood by buying and selling for gain, and who do certain acts which afford evidence of an intention to avoid payment of their debts. (c)

(b) Insolvency means the condition of a person unable to pay his debts as they fall due, or in the usual course of trade and business. Deeds of compositions with creditors frequently avoid the necessity of a resort to discharges under bankrupt and insolvent laws. By these contracts, the creditors agree to accept a composition for their debts, on a part of the whole, and discharge the debtor. They have been termed private bankruptcies, without the advantages attending a regular commission; but if they are made fairly, and in good faith, and strictly conducted, they are valid in equity and beneficial to all parties. See the case of Ex parte Vere, and note. Ibid. 19 Vesey, 93. A creditor who does not agree with other creditors to a composition is not bound; but if he does consent, an agreement in derogation of the composition is fraudulent in respect to the other creditors, and void. The composition binds him to good faith. Greenwood v. Litbetter, 12 Price (Exch.) 183. Acker v. Phoenix, 4 Paige, 305. Jackman v. Mitchell, 13 Vesey, 571. Ex parte Sadler & Jackson, 15 Idem. 52. Leicester v. Rose, 4 East, 372. Browne v. Stackpole, 9 N. Hamp. 488. See a collection of all the modern cases on the subject, Petersdorff's Abr. vol. vi. tit. Comp. with Creditors, and in the notes added to the case of Cumber v. Wane, 1 Str. 426, in Smith's Selections of Leading Cases, p. 146, in the Law Library, N. S. vol. (xix.) xxvii.2

(c) 2 Blacks. Com. 285, 471. The Bankrupt Act of 6 Geo. IV. enlarged the description of persons subject to the bankrupt laws, and extended it to persons following the vocation of "victuallers, keepers of inns, taverns, hotels, or coffee-houses." A bankrupt means a broken-up and ruined trader, according to the original signification of the term; a person whose table or counter of business is broken up, bancus ruptus Story J., in Everett v. Stone, C. C. 3 Story, 453.

2 Every composition deed, it is said, in Breck v. Cole, 4 Sandf. (N. Y.) 79, is in its spirit an agreement between the creditors as well as with the debtor, and is obligatory according to its terms on those who execute it. Renard v. Fuller, 4 Bosw. (N. Y.) 107. Any agreement giving advantage secretly to one creditor is void as to the other creditors and void as to the debtor himself, as obtained by moral duress and fraud. Hall v. Dyson, 10 E. L. & Eq. 424. Pinneo v. Higgins, 12 Abbott Pr. R. 334.

*The general principle that pervades the English bankrupt * 390 system is equality among creditors who have not previously and duly procured some legal lien upon the estate of the bankrupt; and in order to attain and preserve that equality, the bankrupt's estate, as soon as an act of bankruptcy is committed, becomes a common fund for the payment of his debts, and he loses the character and power of a proprietor over it. (a) He can no longer give any preferences among his creditors, and the race of diligence between them to gain advantages is wholly interrupted; and if the bankrupt acts fairly and candidly, he will ultimately be relieved from imprisonment, and even from the obligation of his debts. In this respect there is a marked difference in general between the bankrupt and insolvent laws, for while the bankrupt may be discharged from his debts, the insolvent debtor is usually only discharged from imprisonment. But the line of partition between bankrupt and insolvent laws is not so distinctly marked as to enable any person to say, with positive precision, what belongs exclusively to the one, and not to the other class of laws. It is difficult to discriminate with accuracy between bankrupt and insolvent laws; and therefore a bankrupt law may contain those regulations which are generally found in insolvent laws, and an insolvent law may contain those which are common to a bankrupt law. (b) 2 The

(a) The English law carries the lien of the assignees of the bankrupt back to the time of the act of bankruptcy committed, so that the sheriff, who on fi. fa. seizes and sells the goods of the bankrupt before the commission issued, but after the act of bankruptcy committed, and without notice of the act of bankruptcy, becomes liable in trover to the assignees, inasmuch as the assignment has relation back to the act of bankruptcy, and vests the title to the property in the assignees from that time. Cooper v. Chitty, 1 Burr. 36. Balme v. Hutton, 1 Cromp. & Mees. 262. S. C. 9 Bing. 471. This last decision was made in the Exchequer Chamber, after a very able and learned discussion, and the rule was considered as settled, as it had been uniformly recognized and acted upon ever since the decision under Lord Mansfield.

(b) Marshall C. J., in Sturges v. Crowninshield, 4 Wheaton, 195.

1 As to what will constitute a giving of preference, and when an act is considered as done "in contemplation of bankruptcy," see M'Lean v. Lafayette Bank, 3 McL. 587; Everett v. Stone, 3 Story C. C. 446; Winsor v. Kendall, Ibid. 507; Ashby v. Steere, 2 Wood. & M. 347; Hale v. Allnutt, 36 E. L. & Eq. 383; Utley v. Smith, 24 Conn. 290; Brouwer v. Harbeck, 5 Seld. (N. Y.) 589; McKenzie v. Garrison, 10 Rich. Law (S. C.) 234.

An agreement by a creditor, who has received an unlawful preference, to surrender the property received, and to share pro rata with other creditors, made before commencement of insolvent proceedings, but not consummated until afterwards, does not purge the illegality. Blodgett v. Hildreth, 11 Cush. 311.

2 See Towne v. Smith, 1 Wood. & M. 115.

legislature of the Union possesses the power of enacting bankrupt laws; and those of the states the power of enacting insolvent laws; and a state has likewise authority to pass a bankrupt law. (c) But no state bankrupt or insolvent law can be permitted to impair the obligation of contracts: and there must likewise be no Act of Congress in existence on the subject, conflicting with such law. (d) There is this further limitation, also, on the power of the separate states to pass bankrupt or insolvent laws, that they cannot, in the exercise of that power, act upon the rights of citizens of other states. (e) At present, there is not any *391 bankrupt * system in existence under the government of

the United States, and the several states are left free to institute their own bankrupt systems, subject to the limitations which have been mentioned. (a) The objection to a national

(c) Insolvent laws, quite coextensive with the English bankrupt system in their operations and objects, have not been unfrequent in our colonial and state legislation, and no distinction was ever attempted to be made in the same, between bankruptcies and insolvencies. Story's Com. on Const. U. S. vol. iii. sec. 1106.

(d) Sturges v. Crowninshield, 4 Wheaton, 122 See, also, Gibbons v. Ogden, 9 Ibid. 197, 227, 235, 238; Houston v. Moore, 5 Ibid. 34, 49, 52, 54. These cases have settled the doctrine that the power in Congress to pass bankrupt laws is not exclusive, but the same power may be exercised by the states respectively, under the restrictions which are mentioned in the text. Judge Story says, that Judge Washington maintained at all times an opposite opinion in favor of the power being exclusive in Congress; and he says that his opinion was known to have been adopted by at least one other of the judges. Story's Com. on the Const. vol. i. p. 428, note. Since the passage of the Bankrupt Act of the United States, in 1841, it has been decided, that a state insolvent Act may exist in full vigor, so far as it does not impede the operation of the bankrupt law. They do not come in conflict until the bankrupt law attaches upon the person and property of the bankrupt, and that is not until it is judicially ascertained that the petitioner is a person entitled to the benefits of the Act, by being declared a bankrupt by a decree of the court. Ex parte Ziegenfuss, 2 Ired. (N. C.) 463. This case has been overruled, and I think very justly, in Griswold v. Pratt, 9 Metcalf, 16, where it was adjudged, that while a bankrupt law of the U. S. is in force, it destroys the validity of the operation of a state insolvent law, even though no proceedings be had under it at the time. The one system supersedes the other, for they would, in their proceedings, be repugnant to each other.

(e) Ogden v. Saunders; 12 Wheaton, 213.

(a) Congress passed an Act, April 4th, 1800, establishing a uniform system of bank. ruptcy throughout the United States. The Act was limited to five years, and from thence to the end of the next session of Congress; but the Act was repealed within that period, by the Act of December 19th, 1803, and the system was not renewed until

1841.

An effort was made in Congress, in the spring of 1840, to reëstablish a uniform system of bankruptcy, and the subject received an able and thorough investigation and discus

bankrupt system consists in the difficulty of defining, to the satisfaction of every part of the country, the precise class of debtors

sion, but Congress could not agree on the principles of the system, and the effort failed. The bill which was reported and debated, enabled debtors of every description and class to take advantage of it at their option, and to be thereby completely discharged from their debts without the coöperation or assent of any creditor. Some of the members of Congress were opposed to any bankrupt system on the part of the United States, as it would enlarge the powers of the federal courts to a great extent, and lead to the creation of a crowd of officers and agents to administer it, and probably to much abuse and corruption. They preferred that the administration of bankrupt and insolvent laws should remain with the state governments. The compulsory process of bankruptcy, at the instance of the creditor, was urged by others as essential to the system, and that the provision should even be extended so as to include corporations instituted under state authority for banking, manufacturing, commercial, insurance, and trading purposes. But this last provision was objected to, as most inexpedient, if not absolutely beyond the purview of the constitution. It was apprehended that such a power would lead to infinite abuse, and become expensive and extremely oppressive, and would tend to break up all the moneyed and business institutions created under state laws, or render the power of control of them most formidable and dangerous. The advocates for the bill contended that bankruptcy was a general term, and meant failure, and was equally applicable to all persons of broken fortunes; that the constitution was not intended to be bound to the English system of bankruptcy, and that Congress had the same power as the British Parliament to extend the application of it, and that it might and ought to extend to all classes of debtors who had become disabled and overwhelmed in the peculiar and severe calamity of the times; that though the assent of at least a majority of the creditors to the debtor's discharge was deemed by the New York board of trade to be essential to the stability of credit, the rights of creditors, the claims of justice, and the reputation of the country, it was insisted upon, as a compensation for this omission, that the operation of the Act would be useful to creditors, though the debtor should be enabled to obtain the benefit of a discharge without their consent or action, for it would put an end to the pernicious practice of giving preference among creditors, and enable the assets of insolvents to be distributed equally among the creditors.

merce.

The bill was strongly opposed by other members of Congress on constitutional grounds reaching to the fundamental principles of the bill. It was contended that the power given to Congress to establish uniform laws on the subject of bankruptcy was one incidental to the regulation of commerce, and applicable only to merchants and traders, or persons essentially engaged, in various ways and modes, in trade and comThat the term bankruptcy was adopted in the constitution as it stood defined and settled in the English law, where it had a clear and definite meaning; that it was universally taken and understood in that sense, contemporaneously with the adoption of the constitution, and it received that practical construction, and none other, in the Bankrupt Act of 1800; that the English bankrupt laws discharge the bankrupt from his debts and contracts, and were coercive on the debtor, and put in action, at the instance of creditors, and at their instance only; that the proceeding was for the equal benefit of all the creditors, and its justice and policy, as applicable to that class of debtors, were founded on the peculiarly hazardous business of trade and commerce, and the necessity of large credits to sustain an extensive foreign and domestic trade; that there was a marked difference between bankrupt and insolvent laws, in the jurisprudence of England and of America, and which had been recognized by the Supreme Court of the