§ 4953. Avoidance only where enforcement of creditor's right

obstructed

A creditor can avoid the act or obligation of his debtor for fraud only where the fraud obstructs the enforcement, by legal process, of his right to take the property affected by the transfer or obligation.

Subchapter III-Assignments for Benefit of Creditors

84971. When debtor may execute assignment

An insolvent debtor may in good faith execute an assignment of property in trust for the satisfaction of his creditors, in conformity with this subchapter; subject, however, to the provisions of this Code relative to trusts and fraudulent transfers, and to the restrictions imposed by law upon assignments by special partnerships, or by other specific classes or persons.

8 4972. Form of assignment

The assignment shall contain a list of the names of the creditors of the assignor, and their places of residence and amounts of their respective demands, and the amounts and nature of any security therefor; and shall, subject to the other provisions of this subchapter, be made to the marshal for the Canal Zone.

§ 4973. Custody of property; creditors' meeting; election of assignee

The marshal shall forthwith take possession of all the property assigned to him, and keep it till delivered by him, as provided in this subchapter.

When the assignment has been made, the marshal shall immediately, by mail, notify the creditors named in the assignment, at their places of residence as given therein, to meet at his office on a day and hour to be appointed by him, not less than 8 or more than 10 days from the date of the delivery of the assignment to him, for the purpose of electing one or more assignees, as they may determine, in the place and stead of the marshal in the premises. He shall also publish a notice of the meeting, and the purpose thereof, at least once before the meeting, in a newspaper of general circulation in the Canal Zone.

The notice to be mailed shall also contain a statement of the amount of the demand of the creditor, and the amount and nature of any security therefor, as set forth in the assignment. If a creditor does not find the amount of his claim to be correctly so stated, he may file with the marshal, at or before the meeting, a statement, under oath, of his demand, and his statement shall, for the purpose of voting, be accepted by the marshal as correct. When such a statement is not filed, the statement of amount as set forth in the assignment shall be accepted by the marshal as correct.

A creditor having a mortgage or pledge of property of the debtor, or lien thereon, for securing the payment of a debt owing to him from the debtor, may not be allowed to vote any part of his claim at the meeting of creditors, unless he has first conveyed, released, or delivered up his security to the marshal for the benefit of all creditors of the assignor.

At the meeting the marshal shall preside, and a majority in amount of demands present or represented by proxy shall control all questions and decisions. The creditors may adjourn the meeting from time to time, and may vote on all questions either in person or by proxy signed and acknowledged before any officer authorized to take acknowledgments, and filed with the marshal.

At the meeting, or any adjournment thereof, the creditors may elect one or more assignees from their own number, in the place and

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stead of the marshal, and the person or persons so elected shall afterwards be the assignee or assignees under the provisions of this subchapter. The marshal, by transfer in writing, acknowledged as required by section 4980 of this title, shall at once assign to the elected assignee or assignees upon the trusts in this subchapter provided, all the property so assigned to him, and deliver possession thereof.

All recitals in the assignment by the marshal of notices of the meeting, and the holding thereof, and of the due election of the assignee or assignees, shall be prima facie proof of the facts recited.

§ 4974. Marshal's fees

Before the delivery of the assignment, the marshal shall be paid the expenses incurred by him, and fees in such amount as would by law be collectible if the property assigned had been levied upon and safely kept under attachment.

§ 4975. Powers and duties of elected assignee

After the record of the assignment, as provided by this subchapter, the elected assignee or assignees shall take, and hold, and dispose of all such property and its proceeds, upon the trusts and conditions and for the purposes in this subchapter provided.

§ 4976. Insolvency defined

A debtor is insolvent, within the meaning of this subchapter, when he is unable to pay his debts from his own means as they become due. 84977. Transfers not affected

The provisions of this subchapter do not prevent a person residing in a State or country from making there, in good faith, and without intent to evade the laws of the Canal Zone, a transfer of property situated within it; but such a person can not make a general assignment of property situated in the Canal Zone for the satisfaction of all his creditors, except as in this subchapter provided; nor do the provisions of this subchapter affect the power of a person, although insolvent, and whether residing within or without the Canal Zone, to transfer property in the Canal Zone, in good faith to a particular creditor, or creditors, or to another person in trust for such particular creditor or creditors for the purpose of paying or securing the whole or part of a debt owing to the creditor or creditors, whether in his or their own right or otherwise.

84978. Debts which may be provided for

An assignment for the benefit of creditors may provide for any subsisting liability of the assignor which he might lawfully pay, whether absolute or contingent.

84979. Void assignments

An assignment for the benefit of creditors is void against a creditor of the assignor not assenting thereto, if it:

(1) gives a preference to one debt or class of debts over another;

(2) tends to coerce any creditor to release or compromise his demand;

(3) provides for the payment of a claim known to the assignor to be false or fraudulent; or for the payment of more upon any claim than is known to be justly due from the assignor;

(4) reserves an interest in the assigned property, or in a part thereof, to the assignor, or for his benefit, before all his existing debts are paid;

(5) confers upon the assignee a power which, if exercised, might prevent or delay the immediate conversion of the assigned property to the purposes of the trust; or

(6) exempts him from liability for neglect of duty or misconduct.

84980. Assignment to be in writing; acknowledgment; recording An assignment for the benefit of creditors must be in writing, subscribed by the assignor, or by his agent thereto authorized in writing, and the transfer by the marshal must also be in writing, subscribed by the marshal in his official capacity. Both the assignment and the transfer must be acknowledged, or proved and certified, in the mode prescribed by chapter 27 of this title, and be recorded as required by section 4985 of this title.

§ 4981. Compliance with formalities necessary to validity

Unless the provisions of section 4980 of this title are complied with, an assignment for the benefit of creditors is void against every creditor of the assignor not assenting thereto.

§ 4982. Title of assignee; rights of third parties

An assignee for the benefit of creditors is not to be regarded as a purchaser for value, and has no greater rights than his assignor had, in respect to things in action transferred by the assignment.

§ 4983. Inventory

Within 20 days after an assignment is made for the benefit of creditors, the assignor shall make and file, in the manner prescribed by section 4985 of this title, a full and true inventory, showing:

(1) all the creditors of the assignor;

(2) the place of residence of each creditor, if known to the assignor, or if not known, that fact must be stated;

(3) the sum owing to each creditor and the nature of each debt or liability, whether arising on written security, account, or otherwise;

(4) the true consideration of the liability in each case, and the place where it arose;

(5) every existing judgment, mortgage, or other security for the payment of any debt or liability of the assignor;

(6) all property of the assignor at the date of the assignment, which is exempt by law from execution; and

(7) all property of the assignor at the date of the assignment, of every kind, not so exempt, and the encumbrances existing thereon, and all vouchers and securities relating thereto, and the value of the property according to the best knowledge of the assignor.

§ 4984. Assignor's affidavit; assignee's inventory; examination of assignor; production of papers

An affidavit must be made by every assignor executing an assignment for the benefit of creditors, to be annexed to and filed with the inventory provided for by section 4983 of this title, to the effect that it is in all respects just and true according to the best of the assignor's knowledge and belief.

If the assignor neglects or refuses to make and file the inventory and affidavit within 20 days, the assignment is not, for that reason, affected in any way, but in that event the assignee or assignees elected by the creditors shall within 20 days thereafter make and file in the office of the registrar of property, a verified inventory of all assets received by them; and the assignee or assignees may at any time, or from time to time, after the transfer to them by the mar

shal, by petition to the district court, cause the assignor by order or citation to appear before the court, or a commissioner or referee to be appointed by it, at a time and place designated in the order or citation, to be examined touching the matters mentioned in section 4983, and any other matters relative to the assignment, and to have with him all books of account, vouchers, and papers relating to the assigned property; and the court may by its order require the surrender to the assignee or assignees of the books, vouchers, and papers to be by them retained until their trust is fully completed and performed.

§ 4985. Recording assignment and filing inventory

An assignment for the benefit of creditors must be recorded, and the inventory required by section 4983 of this title filed with the registrar of property.

§ 4986. Invalidity for failure to record assignment and file in

ventory

An assignment for the benefit of creditors is void against creditors of the assignor and against purchasers and encumbrancers in good faith and for value unless it is recorded as provided in this subchapter, and unless either the inventory required by section 4983 of this title, or the inventory required of the assignee or assignees by section 4984 of this title is filed in the manner provided in this subchapter and within the time designated.

§ 4987. Marshal's bond; assignee's bond; removal of assignee

A bond need not be given by the marshal, but he is liable on his official bond for the care and custody of the property while in his possession. Within 40 days after date of the transfer by the marshal, the assignee shall enter into a bond in such amount as may be fixed by the district judge, with sufficient sureties to be approved by the judge, and conditioned for the faithful discharge of the trust and the due accounting for all moneys received by the assignee, which bond must be filed in the same office with the inventory; and any assignee failing to comply with the provisions of this section may be removed by the district court on petition of the assignor or any creditor, and his successor appointed by the court.

§ 4988. Assignee's authority; notice to creditors; dividends; delayed claims; secured creditors

(a) Until a verified inventory has been made and filed, either by the assignor or assignee, as required by the provisions of this subchapter, and the assignee has given the bond required by section 4987 of this title, the assignee has no authority to dispose of the property of the estate, or any part of it (except in the case of perishable property, which in his discretion he may dispose of at any time and receive the proceeds of sale thereof); nor has he power to convert the property, or the proceeds of any sale of perishable property, to the purposes of

the trust.

(b) Within 10 days after the filing of his bond, the assignee must commence the publication (and the publication shall continue at least once a week for 4 weeks), in a newspaper of general circulation in the Canal Zone, of a notice to creditors of the assignor, stating the fact and date of the assignment, and requiring all persons having claims against the assignor to exhibit them, with the necessary vouchers, and verified by the oath of the creditor, to the assignee, at his place of residence or business, to be specified in the notice; and he shall also, within 10 days after the first publication of the notice, mail a copy of the notice to each creditor whose name is given in the instrument of assignment, at the address therein given. After

the notice is given, a copy thereof, with affidavit of due publication and mailing, must be filed with the registrar of property with whom the inventory has been filed, which affidavit shall be prima facie evidence of the facts stated therein.

(c) At any time, or from time to time, after the expiration of 30 days from the first publication of the notice, if it has also been mailed as in this section provided, the assignee may declare and pay dividends to the creditors whose claims have been presented and allowed. A dividend already declared is not disturbed by reason of claims being subsequently presented and allowed; but the creditor presenting the claim is entitled to a dividend equal to the percent already declared and paid, before any further dividend is made, if there are assets sufficient for that purpose, and if the failure to present the claim did not result from his own neglect, and he attaches to the claim a statement, under oath, showing fully why it was not before presented.

(d) When a creditor has a mortgage or pledge of property of the debtor, or a lien thereon, for securing the payment of a debt owing to him from the debtor, and has not conveyed, released, or delivered up the security to the marshal, as provided for by section 4973 of this title, he shall be admitted as a creditor only for the balance of the debt after deducting the value of the mortgage, pledge, or lien, to be ascertained by agreement between him and the assignee, or by a sale thereof, to be made in such manner as the district court directs; or the creditor may release or convey his claim to the assignee upon the property, and be admitted to prove his whole debt.

If the value of the property exceeds the sum for which it is so held as security, the assignee may release to the creditor the debtor's right of redemption thereon on receiving the excess; or he may sell the property, subject to the claim of the creditor thereon; and in either case the assignee and creditor, respectively, shall execute all writings necessary or proper to consummate the transaction. If the property is not sold or released, and delivered up, the creditor may not be allowed to prove any part of his debt.

84989. Accounting of assignee

After six months from the date of an assignment for the benefit of creditors, the assignee may be required, on the petition of any creditor, to account before the district court.

§ 4990. Exempt property

Property exempt from execution, and insurance upon the life of the assignor, do not pass to the assignee by a general assignment for the benefit of creditors unless the instrument specially mentions them and declares an intention that they should pass thereby.

84991. Commissions of assignees

The elected assignee for the benefit of creditors is entitled to a reasonable commission on assignments, to be fixed by the court. The assignee is also entitled to all necessary expenses in the management of his trust.