RECENT CASES 855 debtor's insolvency at the time of the preference the petition and adjudication in involuntary bankruptcy. The petition alleged that the defendant had re- ceived a preference, and the adjudication found that the bankrupt had been in- solvent for four months preceding the filing of the petition. The defendant did not appear in the bankruptcy proceedings. The trial court ruled this evidence conclusive on the grounds that the proceedings were in a sense in rem and that aU creditors were parties. Held, that the evidence is not conclusive against the defendant. Gratiot State Bank v. Johnson, U. S. Supreme Court, October Term, 1918, No. 148. It is held that an adjudication, being in rem, determines the debtor's status as a bankrupt against everybody. Michaels v. Post, 21 Wall. (U. S.) 398, 428; New Lamp Chimney Co. v. Ansonia Brass &" Copper Co., 91 U. S. 656. The question of what other determinations, if any, will be resjiidicata has given rise to difference of opinion. See i Remington, Bankruptcy, 2 ed., §§ 444, 445. Thus, a finding of insolvency has been held conclusive because it is in rem and because creditors are parties since they may appear under sections 18 i and 59/ of the Bankruptcy Act. (Act of July i, 1898, c. 541, §§ 186, 59/, 30 Stat. 544. Act of February 5, 1903, c. 487, § 6, 32 Stat. 797, 798.) Cook v. Robinson, 114 C.'C. A. 505, 194 Fed. 785; In re American Brewing Co., 50C. C. A. 517, 112 Fed. 752. Cf. Sheppard-Strassheim Co. v. Black, 128 C. C. A. 147, 151, 211 Fed. 643, 647. Contra, In re McCrum, 130 C. C. A. 555, 214 Fed. 207; Silvey b" Co. v. Tift, 123 Ga. 804, 51 S. E. 743. See Hansen v. Williams, 213 U. S. 453, 455. Parties in interest are considered creditors and are therefore allowed to appear. Jackson v. Wauchula Mfg. & Timber Co., 144 C. C. A. 551, 230 Fed. 409; In re Everybody's Store, 125 C. C. A. 290, 207 Fed. 752. Cf. In re Eureka Anthracite Coal Co., 197 Fed. 216. See 17 Harv. L. Rev. 131. And such parties might similarly have been held bound. The principal case ends this confusion and establishes that only the condition of bankruptcy is, by the adjudication, binding on those not actually parties. This is the correct view, for the adjudication creates only the condition it decrees. Furthermore, section 59/ merely provides for validating the petition. In re Mackey, no Fed. 355. See 23 Harv. L. Rev. 479. Section 18^ merely provides, as is pointed out in the principal case, that the creditors may, if they choose, protect themselves. Whether a finding is admissible in evidence, however, has been left open. It is submitted that it is not admissible, since a judgment, except so far as it may be in rem, affects only the parties or their privities. Lewis v. Sloan, 68 N. C. 557; Silvey &° Co. v. Tift, supra. Bills and Notes — Purchaser for Value without Notice — Rights of a Payee against an Irregular Indorser. — The defendant indorsed an incomplete note for the accommodation of the maker, which was later im- properly filled in by the latter and transferred to the plaintiff, the payee. The note was dishonored at maturity and the plaintiff sues the defendant as indorser. Held, that he may recover. Johnston v. Knipe, 105 Atl. 705 (Pa.). Under the Bills of Exchange Act, a payee is not a holder in due course. Herdman v. Wheeler, [1902] i K. B. 361. See Brannan, Neg. Inst. Law, § 14 (c). In a later case, however, the English court allowed recovery by a payee on the theory that the maker was estopped from setting up that a third party had filled up the blanks in excess of his authority. Lloyd's Bank V. Cooke, [1907] I K. B. 794. The theory of estoppel does not extend to the case where the blanks were filled in without awy authority from the maker. Smith V. Prosser, [1907] 2 K. B. 735. Under the Negotiable Instruments Law, a payee has also been held not a holder in due course. Vander Ploeg v. Van Zuuk, 135 Iowa, 350, 112 N. W. 807. But the New York and Massa- chusetts courts have declined to follow the latter decision, giving "negotia- tion" a broader interpretation than is warranted by a literal construction of
