4. Besides the power vested in congress of making uniform laws for the regulation of bank rup:eies, Const. of U. S. art. 1, 8, it is provided, art. 1, 10, Coast. of U. S., that "no state shall pass any . . . law impairing the obligation of contracts" (q. v.). By these clauses it was gene rally understood that congress possessed the ex clusive regulation of both bankruptcy and insol vency. But the question, how far the states may legislate upon these subjects came to be fully dis cussed in the celebrated case Ogden vs. Saunders, 12 Wheat. 218. The decision of that case recog nized much larger powers in the states than had previously been supposed to exist. It was held that the power of making a bankrupt law which shall be applicable and binding upon all creditors and all descriptions of debts resides in congress ; when congress exercises its power, it is exclusive, and by its exercise the state insolvent laws (so called) are rendered inoperative, 9 Mete. Mass. 16; contra, 2 Ired. No. C. 463 ; but that a state insol vent law, whereby it is provided that a debtor on giving up his property to his creditors is abso lutely discharged from further liability, will, as long as there is no act of congress on bankruptcy, be valid in respect to creditors residing in such state, and to contracts made in the state subsequently to the passage of such insolvent law. 5 How. 295; 1 Cush. 430-434, n.; 14 N.H. 38; 10 Mete. Mass. 594; 12 id. 470; 26 Me. 110 ; 1 Woodb. & M. C. C. 115; 5 Gill, Md. 437. Therefore such an insolvent law cannot be made to apply to contracts made within the state between a oitizen of the state and one who is a citizen of another state, 12 Wheat. 213, nor to contracts not made within the state. 1 M'All. C. C. 226, 523. Consequently, an insolvent law of a state, however general its provisions, can have only a partial and limited effect as a bankrupt law. In eases where the state has oomplete juris diction, such a law may have all the essential ope ration of a bankrupt law, not being ,limited to a mere discharge of the person of the debtor on sur rendering his effects. If a creditor out of a state voluntarily makes himself a party to proceedings under the insolvent laws of the state, and accepts a dividend, he is bound by his own set, and is deemed to have waived his ex-territorial immunity and right. 4 Wheat. 122; 12 id. 213 ; 8 Pick. Mass. 194 ; 3 Pet. C. C. 411 ; 3 Story, Const. 252-256; 9 Conn. 314; 2 Blackf. Ind. 394; 1 Baldw. C. C. 296; 9 N. H. 478. See 8 Bornew. & C. 477 ; 3 Caines, N. Y. 154; 4 Barnew. & Ald. 654 ; 26 Wend. N. Y 43 ; 2 Gray, Mass. 43 ; 3 Gray, N. J. 551; 7 Cush. 15; 4 Boaw. N. Y. 459; 32 Miss. 246. In solvency may of course be simple or notorious. Simple insolvency is attended by no badge of no toriety. Notorious or legal insolvency, with which the law has to do, is designated by some public act or legal proceeding. This is the situation of a person who has done some notorious 'act to divest himself of all his property : as, making sn assign ment, applying for relief, or having been proceeded against in invitum under bankrupt or insolvent laws. 1 Pet. 195; 2 Wheat. 396; 7 Tonllier, n.45; Domat, liv. 4, tit. 5, nn. 1, 2; 2 Bell, Comm. 5th ed. 165.
5. It is with regard to the latter that the insol vency laws (so called) are operative. They are gene rally statutory provisions by which the property of the debtor is snrrendered for his debts; and upon this condition, and the assent of a certain proportion of his creditors, he is discharged from all farther liabilities. 9 Mass. 431; 16 id. 53; 2 Kent, Comm, 32] ; Ingraham, Insolv. 9. This legal insolvency may exist without actual inability to pay one's debts when the debtor's estate is finally settled and wound up. (See definition, 2d branch,
beginning of this article.) 3 Gray, Mass. 600. Insolvency, according 'to some of the state statutes, may be of two kinds, voluntary and involuntary. The latter is called the proceeding against the cre ditor in invitum. Voluntary insolvency, which is the more common, is the case in which the debtor institutes the procediugs, and is desirous of avail ing himself of the insolvent laws, and petitions for that purpose.
6. Involuntary insolvency is where the proceed ings are instituted by the creditors in and so the debtor forced into insolvency. The circum stances entitling either debtor or creditors to invoke the aid of the insolvent law are in a measul e pecu liar to each state. r their general churactesties are as follows. In eases of volnntary the debtor must owe a certain amount,—whieh amount, with 'his inability to pay the same, must be set forth in hi§ petition. The creditors are usually entitled to proceed in invitum to petition to have the debtor declared insolvent and his effects taken possession of and distributed, upon the fol lowing grounds: that the creditor has fraudulently concealed his property, or has conveyed it away, or has allowed it to he attached and to remain so for a certain length of time without dissolving the at tachment. The officers before whom insolvency proceedings may be had are, in the different states, judges (who arc frequently judges of probate also), commissioners in insolvency, masters in chancery, etc. They are appointed for the purpose, and pro ceedings are commenced by petition. which set forth the facts upon which the claim for relief is founded. Upon a petition of a debtor the facts are commonly taken to ,he true as set forth in the petition. A messenger or officer of the court is immediately Rfnt to take possession of the pro perty of the debtor, and a.call is issued to the va rious creditors to attend a meeting. In a proceed ing in inr;tom by the creditors, the facts alleged must be proved before the warrant can be issued.
And the debtor is usually entitled to notice of the proceedings instituted against him, and may appear and show eases, if any he has, why a commission should not issue against him. The first step token by the magistrate in a oase properly before him is to take possession, by means of his officer, of the debtor's effects, which in some eases the messenger may be directed to sell for the bene fit of all concerned (as in the case of perishable articles, ate.). Then, a meeting of creditors being stalled, an assignee is chosen in a way provided by statute. In his choice the creditors are oonsidcred both with regard to their numbers and amounts due them. To the assignee all the property is transferred, or ordered to ha transferred, by the magistrate, by virtue of the powers by law vested in him. This assignee becomes to all intents and purposes the owner of the property of the debtor, and, as agent for his creditors, has power to sell, dispose of, collect, and reduce to money all the pro perty of the debtor. He calls meetings of the cre ditors, when directed so to do by the magistrate, and transacts all the other business and performs all the duties by law imposed upon him. The right of a debtor to a discharge is very different in the various states of America. In some the honest debtor may obtain a discharge, however small a percentage of his debts he may pay. In others he is entitled to a discharge upon the payment of a certain percentage, or upon obtaining the assent of a majority of the creditors. It is also provided by the statutes of some of the states that the second or third discharge shall not be obtained at all, or as easily as in the first instance of insol vency.