Opinion of the court. by showing, even in a collateral proceeding, the fraud or collusion by which the judgment was obtained.* Third persons only, however, can set up such a defence, as the rule is well settled that neither the parties nor those entitled to manage the cause or to appeal from the judg ment are permitted to make such defence in any collateral issue.t Unquestionably a judgment may be impeached for the purpose of showing that it was procured by the debtor for the purpose of avoiding the operation of the Bankrupt Act. Evidence for that purpose is admissible to show-(1.) That it was procured within four mouths prior to filing the peti tion in bankruptcy, and with a view of giving the plaintiff a preference over the other creditors. (2.) That the debtor was insolvent at the time. (3.) That the plaintiff had at the time reasonable cause to believe that the defendant was insolvent, and that he procured the judgment to give the plaintiff such a preference.‡ Competent evidence is admissible to prove those facts, but a judgment is no more liable to collateral impeachment in proceedings under the Bankrupt Act, except for the purpose of showing that the judgment in question was designed as a means of avoiding the equal distribution of the debtor's estate among his creditors, than it is to such impeachment in the courts where it was rendered.§ Power to establish uniform laws upon the subject of bankruptcy throughout the United States is conferred upon Congress, and Congress having exercised the power it has be Crosby v. Leng, 12 East, 409; Insurance Co. v. Wilson, 34 New York 281; Hall v. Hamlin, 2 Watts, 354; Pond v. Makepeace, 2 Metcalf, 116; Sidensparker v. Same, 52 Maine, 488. Homer v. Fish, 1 Pickering, 435; Railroad Co. v. Sparhawk, 1 Allen, 448; Atkinson v. Allen, 12 Vermont, 624; Granger v. Clark, 22 Maine, 130; Hammond v. Wilder, 25 Vermont, 316; Coit v. Haven, 30 Connecticut, 198; Hollister v. Abbott, 11 Foster, 448; 2 Philips on Evidence, 80, note 291 (5th Am. ed.); Christmas v. Russell, 5 Wallace, 306; Peck v. Woodbridge, 8 Day, 30. Buchanan v. Smith, 16 Wallace, 277; Wager v. Hall, 16 Id. 590. Opinion of the court. come an exclusive power. By the act of Congress the juris diction to adjudge such insolvent debtors as are described in the thirty-ninth section of the act to be bankrupts is vested in the District Courts, and it follows that such a judgmeut is entitled to the same verity, and is no more liable to be impeached collaterally than any other judgments or decrees rendered by courts possessing general jurisdiction, which of itself shows that the case before the court is controlled by the general rule that where it appears that the court had jurisdiction of the subject-matter, and that the defendant was duly served with process or voluntarily appeared aud made defence, the judgment is conclusive and is not open to any inquiry upon the merits.* Exactly the same rule is applicable to the case before the court, as it is clear that the District Court had jurisdiction of the petition and that there is not even a suggestion that the notice required by law was not given as the law directs.† Such a decree adjudging a debtor to be bankrupt is in the nature of a decree in rem as respects the status of the party, and in case the court rendering it has jurisdiction it is only assailable by a direct proceeding in a competent court, if due notice was given and the adjudication is correct in form.t III. Preferences as well as fraudulent conveyances, if made within four months before the filing of the petition by or against the bankrupt, are forbidden by the Bankrupt Act; but three things must concur in order that the transac * 2 Smith's Leading Cases (7th ed.), p. 622; Freeman on Judgments (2d ed.), sec. 606; Hampton v. McConnel, 3 Wheaton, 234; Nations v. Johnson, 24 Howard, 203; D'Arcy v. Ketchum, 11 Id. 166; Webster v. Reid, Ib. 460. In re Robinson, 6 Blatchford, 255; Wimberly v. Hurst, 33 Illinois, 172; Corey v. Ripley, 57 Maine, 69; Ocean Bank v. Olcott, 46 New York, 15; Fortman v. Rottier, 8 Ohio State, 556; Revell v. Blake, Law Reports, 7 C. P. 308. Way v. Howe, 108 Massachusetts, 503; Ex parte Wieland, Law Reports, 5 Chancery Appeals, 489; Woodruff v. Taylor, 20 Vermont, 65; Mankin v. Chandler, 2 Brockenbrough, 126; Shawhan v. Wherritt, 7 Howard, 643, Imrie v. Castrique, 8 C. B., New Series, 407; Carter v. Dimmock, 4 House of Lords Cases, 346. Opinion of the court. tion may come within the prohibition and be affected by it as an illegal payment, security, or transfer: (1.) That the payment, pledge, assignment, transfer, or conveyance was made by the bankrupt, within the period mentioned, and with a view to give a preference to one or more of his creditors, or to a person having a claim against him, or who was under some liability on his account. (2.) That the person making the payment, pledge, assignment, transfer, or conveyance was insolvent or in contemplation of insolvency at the time the preference was secured. (3.) That the person receiving such payment, pledge, assignment, transfer, or conveyance, or to be benefited thereby, had reasonable cause to believe that the person was insolvent and that the payment, pledge, assignment, transfer, or conveyance was made in fraud of the provisions of the Bankrupt Act.* Creditors are forbidden to receive such a preference from such a debtor, and the provision is that if such a debtor shall be adjudged a bankrupt the assignee may recover back the money or other property so paid, conveyed, sold, assigned, or transferred contrary to that act, provided the person receiving such payment or conveyance had reasonable cause to believe that a fraud on the Bankrupt Act was intended, or that the debtor was insolvent; and the farther provision is, that such creditor shall not be allowed to prove his debt in bankruptcy.† Evidently that part of the decree which is the subject of the third complaint is founded upon that provision, and inasmuch as the facts exhibited in the record bring the case in all respects within the regulation there prescribed, it is clear that it was competent for the Circuit Court to render such a decree, and the court here sees no reason to question the action of the Circuit Court. DECREE AFFIRMED. * Wager v. Hall, 16 Wallace, 595; Scammon v. Cole, 5 National Bank ruptcy Register, 259. +14 Stat. at Large, 586. Statement of the case. DILLON V. BARNARD ET AL 1. A demurrer to a bill in equity does not admit the correctness of averments as to the meaning of an instrument set forth in or annexed to the bill. 2. To create, for future services of a contractor, a lien upon particular funds of his employer, there must be not only the express promise of the employer to apply them in payment of such services, upon which the contractor relies, but there must be some act of appropriation on the part of the employer relinquishing control of the funds, and conferring upon the contractor the right to have them thus applied when the services are rendered. 3. In an indenture of mortgage executed by a railroad corporation to trustees to secure bonds issued to raise moneys to pay off its existing indebtedness, and to complete and equip its road, the corporation covenanted with the trustees, among other things, that the expenditure of all sums of money realized from the sale of the bonds should be made with the approval of at least one of the trustees, and that his assent in writing should be necessary to all contracts made by the company before the same should be a charge upon any of the sums received from such sales; held, that a contractor, agreeing with the corporation to construct a portion of the road, and obtaining the assent of two of the trustees to his contract, and subsequently doing the work, did not acquire any lien for the payment of his work, under this covenant of the indenture, upon the funds received by the corporation from the bonds. APPEAL from the Circuit Court for the District of Massa chusetts; the case being thus: The Boston, Hartford, and Erie Railroad Company, a corporation existing under the laws of Massachusetts, Rhode Island, Connecticut, and New York, and having a railway (then partially constructed and subject to certain mortgages and other liens) between certain points in those States, on the 19th of March, 1866, by its indenture of mortgage of that date, conveyed to Berdell and others all its railways, rights, leases, privileges, and franchises, and all its property then owned or thereafter to be acquired, to be held by them and their successors in trust upon the terms and for the pur poses set forth in the indenture. The object of its execution was to secure certain bonds of the company, in sums of $1000 each, to the amount of $20,000,000, to be thereafter Statement of the case. issued and disposed of to raise the funds required to provide for and retire all the then existing mortgage debts and prior liens upon the line of its road, and to complete and equip the road, and to lay down a third rail thereon. The road in its then existing state was of less value than the amount of the bonds proposed to be issued. The company, however, expected that, upon its completion, the road would be of great value and afford ample security for the bonds. The indenture provided that the mortgage should be the first and only lien on the property and franchises of the company when the existing mortgage debt was retired, and it contained the following covenants on the part of the company: "1st. That of the bonds issued there shall be retained in the hands of the trustees such portion as will be equal to the whole amount of the bonds and mortgage notes outstanding from time to time, as a lien upon any of the property or franchises conveyed, to be delivered to the company only on the cancellation of a corresponding amount of such outstanding bonds or mort gage notes; and, "2d. That the expenditure of all sums of money realized from the sale of the bonds shall be made with the approval of at least one of the trustees, whose assent in writing shall be necessary to all contracts made by the company before the same shall be a charge upon any of the sums received from such sales." In October, 1867, one Dillon entered into a contract with the corporation for the construction of a portion of its railroad at certain specified rates of compensation, the work to be commenced on the 1st of December, 1867, and completed on the 1st of June, 1869; payments to be made monthly of 90 per cent. of the work done, as estimated by the engineer of the company, the remaining 10 per cent. to be retained until the completion of the work. This contract was approved and assented to in writing by two of the trustees under the mortgage. After the work was done, but before the time fixed for payment for it came round, the company became bankrupt and had no property from which payment could be got, except such as was then claimed under the mortgage and was now held by the trustees under it; certain persons who had |