QJorn^U ICatu Brlinnl ICibtary Cornell University Library KF 1524.C69 1921 V.2 The law and practice in banltruptcy under 3 1924 019 341 779 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019341779 THE LAW AND PRACTICE IN BANKRUPTCY Under The National Bankruptcy Act of 1898 BY WM. MILLER COLLIER, LL.D. FOTJETH EDITION BY WILLIAM H. HOTCHKISS TWELFTH EDITION With Amendments of Statutes and Rules, and all Decisions to August 15, 1920, 'Including Amendments to Bankruptcy Act of February 5, 1903, June IS, 1906, June 25, 1910, and March 2, 1917 FRANK B. GILBERT Of the Albany Bar, Author of "Annotated (N. Y.) Code of Civil Procedure," Author "Commercial Paper," and Joint Editor of "Annotated Consolidated Laws of New York," etc. FRED E. ROSBROOK Of the Rochester Bar IN TWO VOLUMES VOL. II ALBANY, N. Y. MATTHEW BENDER & COMPANY INCORPORATED 1921 copykioiit, 1898, 1890 bt wm. miller COLLIEE Copyright, 1900, 1903, 1905 By MATTHEW BENDER COPYKIGHT, 1907, 1909, 1910, 1912, 1914 By MATTHEW BENBEB & COMPANY Copyright, 1917, 1921 By MATTHEW BENDER & COMPANY INCORPOKATED Sixth Printing TABLE OF CONTENTS. VOLXJME n. SECTION 59. WHO MAY PILE AND DISMISS PETITIONS 837 I. FiuNO Petitions Geneeallt ■. 839 a. Comparative legislation 839 b. Scope of section 840 c. Liability of petitioning creditors when unsuccessful 840 II. Who Mat File Voluntaet Petitions 840 a. In general 840 b. Where involuntary petition has been filed 841 c. Form of petition and practice 842 III. Who May File Involtjntakt. |'etitions 842 a. In general >. . . . .^^ ' 842 b. Stockholders and officers of corporations 843 c. Creditors who were not such at time of commission of act of bankruptcy. 843 d. Number of creditors and amount of claims 843 ( 1 ) Time controlling number and amounts 843 (2) Buying claim or inducement not to join 844 (3) Transactions affecting number of creditors and amount of claims 844 (4) Creditors who are estopped from filing petition not to be counted 846 e. Creditors who have provable claims 846 f . Secured creditors not to file 848 g. Creditors who have received preference 848 h. Creditors who have attachments 849 i. Creditors who have an advantage through fraud 850 j. Estoppel of creditors 850 ( 1 ) In general 850 (2) Assent to or participation in assignment or receivership 851 k. Counting creditors when but one creditor petitions 852 1. Involuntary petitions must be in duplicate 853 ( 1 ) In general 853 (2) Waiver of duplicate 853 IV. Practice if Answer Atebs MoitE Than Twelve Creditors 853 a. In general 853 b. Filing " list of creditors " '. 853 c. Practice 854 V. Exclusion op Employees, Relatives and Officers 854 VI. Intervention by Other Creditors 855 a. In general 855 b. Who may intervene ; 857 c. Practice 857 d. Notice to creditors 858 VII. Amendments of Petitions 858 VIII. Dismissals of Petitions 859 SECTION 60. PEEFEEEBD CEBDITOES 861 I. Pbepebences in BANiaUPTCY ,• 864 a. Historical statement 864 b. Comparative legislation 865 (1) In England ! 865 (2) In the United States 865 (3) In Canada 865 c. Definition of a preference under present law 865 d. Effect of definition prior to amendments of 1903 866 e. Distinction between preference and fraudulent trai;sfer 867 n. Elements op a Peepbrencb 867 a. In general 867 iii 1"^ Table of Contents. SECTION 60 — Continued. page b. While insolvent 869 ( 1 ) In general 869 (2) Time of insolvency 86* (3 ) Proof of insolvency 870 (4) Valuation of property 870 c. Within four months 871 ( 1 ) In general -. 871 (2) When time begins to run 871 (3) Performance of agreement made prior to four months period. 872 (4) Date of contract governs 873 ( 5 ) Possession within four months period 874 ( 6 ) Assignment of property within four months 875 (7 ) Prior to the amendments of 1903 875 ( 8 ) Running of time where recording is required 876 (I) In general 876. (tl) Eegistering or recording required by state law 877 (III) Transfers prior to four months period recorded within such period , 880 d. Procured or suffered a judgment 881 e. Made a transfer of his property 881 ( 1 ) In general 881 (2) Method of transfer ; 881 (I) In general 881 ( II ) Transfer by indirection 882 (III) Partnerships and individual assets 883 ( IV ) Contract of conditional sale 884 (3) Intent or good faith 884 (4) Estate must be diminished 885 (I) In general 885 (II) Fair consideration for present loan 886 ( III ) Payments on account ; net result rule 886 (IV) Substitution of securities 887 (5) Payment of antecedent debts 887 (6) Mortgage of property 889 (7) Notes and checks 891 (8) . Transaction of banking business 892 ( 9 ) Deposit of money 893 ( 10 ) Payment of wages 894 (11) Transfers that are voidable 894 f . Effect, a greater percentage 894 ( 1 ) Provisions of statute 894 (2) Class of creditors 894 (3) Who are creditors of the same class 895 (4 ) Test a greater percentage 896 ( 5 ) Intent immaterial 896 g. Creditors only may be preferred 897 ( 1 ) In general 897 ( 2 ) Transfer to another for benefit of creditor 897 (3 ) Indorser or surety 899 (4 ) Misappropriation or conversion of funds 900 h. Illustrative cases 901 III. What Peepekencbs are Voidable. . : 902 a. In general , 902 b. Reasonable cause to believe a preference will result 902 (1 ) In general 902 (2) Time of cause to believe 902 (3) Intent to prefer; effect of amendment of 1910 903 (4) Actual knowledge not required 904 (5) Mere guess or suspicions insufficient 907 (6) Knowledge of insolvency 909 (I) Effect of amendment of 1910 909 ( II ) Presumption where fact of insolvency is known 909 (III) Proof of reasonable cause to believe in solvency... 910 (IV) Belief of insolvency question of fact, burden of proof 911 (V) Payments by insolvent in ordinary course of business 912 (VI) Knowledge of debtor's financial difl5culties 912 (VII) Pleading cause to believe insolvency 913 Table of Contents. SECTION 60 — Continued. pagb (7 ) PurpoEe and effect to he considered 913 (8) Evidence of reasonable cause to believe 914 (9) Sale of entire stoclc 915 e. Belief or knowledge of agent or attorney 916 d. Recovery of preference 917 ( 1 ) In general 917 (2) Eecovery by trustee only 91tj (3 ) Against whom action brought 013 (4) In what court; the amendments of 1903 919 (5) Permission to sue 921 (6) Practice 921 (7) Dower in property covered by preferential transfer S'ii e. Property or its value 922 ( 1 ) In general 922 (2) Damages 923 (3) Costs 924 IV. Set-Off of a Subseqihsnt Credit 924 a. Prior to amendments of 1903 924 b. Meaning of subsection c 924 V. Peepeeences to Bankbupt's Attoenet 925 a. In general 925 b. Practice 927 c. Illustrative cases 928 SECTION 61. DEPOSITORIES FOR MONEY 929 SECTION 62. EXPENSES OF ADMINISTERING ESTATES 931 I. Expenses of Administemng Estates 932 a. Scope of section 932 b. Priority of payment 932 c. Auctioneer's services 932 d. Appraiser's services and fees 933 e. Sums paid for preservation of property 933 f . Allowances to assignees for the benefit of creditors 933 g. Practice on allowance 934 11. Employment and Compensation op Attoeneys 924 a. In general 934 b. Employment of attorney for the trustee '. . 935 c. Compensation for attorneys 935 ( 1 ) In general 935 (2) For claimants 937 (3) For petitioning creditors in' involuntary cases 937 (4) For receivers 938 (I) Appointed in bankruptcy 938 (II) Appointed by state court 939 ' ( 5 ) For Tjankrupts in involuntary cases 940 (6) For bankrupts in voluntary cases 940 (7) For trustees 941 (8) For assignee prior to bankruptcy 943 d. Effect of amendments of 1903 943 SECTION 63. DEBTS WHICH MAY BE PROVED 944 I. HiSTOEY AND COMPARATIVB LEGISLATION 947 II. Determination of PEOvAsiLiTy 947 a. As affected by statute 947 b. Defenses to allowance 947 c. Proved and allowed . . . . : 948 d. Ex contractu and ex delicto 949 ( 1 ) In general 949 (2) Rule under former law 949 (3 ) Rule under present law 949 ( 4 ) Claims tortuous in character on contract 949 (5) Fraud or connivance 951 e. Th? debt must have existed when the petition was filed 951 f . Equitable debts 952 g. Debts aeainst more than one person 953 h. Provability as affected by the person proving 954 ( 1 ) In general . . , 954 (2) Transactions between husband and wife 955 (3 ) Services of minor child 955 ▼i Table of Contents. SECTION 63 — Continued. pagh i. Provability as affected by fraud or preference 95a j. Cross-references 958 III. Fixed Liability Absolutely Owing 95a a. In general 956 b. Whether then payable or not 957 C. Evidenced by a judgment 957 ( 1 ) In general 957 (2) Impeaching judgments 959 d. Evidenced by an instrument in writing , 960 ( 1) In general 960 (2) Bills and notes 960 (I) In general 960 (II) Who may prove because of promissory note 960 (III) Notes of corporations 961 (3) Stipulation for payment of collection fees 962 (4) Interest 962 e. Indorser and surety debts 963 ( 1 ) Liability of indorsers 963 (2) Surety and corporate bonds 964 f. Liabilities for taxes 965 g. Other debts falling within this paragraph 965 IV. Open Accounts ; Contracts 965 a. Debt founded on open account 965 b. Debt founded on a contract, express or implied 966 ( 1 ) In general 966 (2) Gambling transactions 967 (3) Owing at time of filing petition 968 (4) Breach of warranty 968 (i) Breach of executory contract 968 (I) In general 968 (11) Anticipatory breach 969 ( 6 ) Contingent contractual liabilities 970 ( 7 ) Continuing contracts 970 (8) Contracts of employment and for commissions 971 (9) Breach of covenant in lease 972 ( 10) Implied contracts 972 V. Judgments Bntebed After Bankruptcy 973 VI. Claims for Costs 973 a. In general 973 b. Costs against an involuntary bankrupt 974 c. Costs incurred in good faith in an action to recover a provable debt .... 974 d. Costs in attachment suits 975 VII. Unliquidated Claims 975 a. In general 979 h. Effect and purpose of subsection 976 c. Injuries to person or property 976 d. Liquidation, how accomplished 977 e. Contingent liabilities 977 Vin. What Debts are not Pbovable 979 a. In general 979 b. Judgments for fines and penalties 979 c. Alimony due to accrue 980 d. Rent to accrue 980 e. Debts outlawed by a statute of limitation 983 f. Commissions of trustee 984 g. Cross-references 984 SECTION 64. DEBTS WHICH HAVE PRIOEITY 985 I. Fbiobities in General 987 a. Comparative legislation 987 b. Construction of section 988 c. Priorities versus liens 988 d. Debts due the United States 990 e. Order of priority 990 ( 1 ) In general 990 (2) Trust funds 990 f. Practice 991 Table or 'Contents. vii SECTION 64 — Continued. PAG2 II. Payment op Taxes 092 a. In general 992 b. Construction and effect 992 c. Federal courts to determine questions 993 d. Taxes not debts and need not be proved 994 e. Payment out of proceeds of sale 995 f . Taxes entitled to priority 996 ( 1 ) In general 996 (2) Local assessments; water rents 997 (3) License fees, franchise and corporation taxes 997 g. Right to subrogation upon payment of taxes 998 h. Taxes accrued since proceedinga were instituted. , ^■. .- 999 1. Interest on -taxes and penalties 999 j. Illustrative cases 999 III. Preserving Estate ; Filing Fees 1000 a. Cost of preserving the estate 1000 ( 1) In general 1000 (2) Expenses of creditors in recovering property 1000 b. Filing fees in involuntary cases 1001 IV. Cost op Administration 1002 a. In general 1002 b. Witness fees and mileage 1002 c. Attorney's fees 1002 V. Payment op Wages 1005 a. In general 1005 b. Construction and effect 1005 c. Assignee of claim for wages 1006 d. When services performed 1008 e. Persons entitled to priority 1009 ( 1 ) Workmen, clerks or servants 1009 (2) Traveling or city salesmen 1012 VI. Debts Entitled to Priority under State Laws 1013 a. In general 1013 b. Liens under state laws and bankrupt act 1013 c. Priority of debts due the state 1017 d. Conflicting or overlapping state priorities 1017 e. Liens 1018 f. Attorney's liens 1018 g. Fees and expenses of general assignee and receivers and their attorneys 1019 h. SheriflF's fees 1020 i. Sheriff's disbursements 1021 j. Other illustrative cases 1021 SECTION 65. DECLARATION AND PAYMENT OF DIVIDENDS 1022 I. Dividends Generally 1023 a. Comparative legislation 1023 b. Cross-references 1024 c. Declaration of dividends 1024 II. First and Subsequent Dividends 1024 a. Time and amount 1024 b. Amendment of 1903 1025 c. Creditors entitled only to what the bankruptcy law gives them 1025 d. Garnishment of dividends in hands of trustee .'. 1025 e. Practice 1027 f . Illustrative cases / 1027 III. Rights of Creditors Whose Claims are Allowed Subsequent to Payment of Dividends 1027 a. In general ,'. 1027 b. Final dividends 1027 rv. Preference to Residents op the United States 1028 SECTION 66. UNCLAIMED DIVIDENDS 1029 a. Comparative legislation 1029 b. In general 1029 c. Payment of balance to bankrupt 1030 d. Illustrative cases 1030 viii Table of Contents. PAGE SECTION 67. LIENS 1031 I. Ijens in Geneeal 1035 a. Comparative legislation :• • • • ^ 1035 b. Scope of section 1035 c. Construction and general effect , 1036 d. Cross-references ■ • • ■ ■ 1036 II. Claims Void fob Want op Record or Other Reasons 1036 a. In general 1036 b. State law controls v 1037 c. Want of record 1038 ( 1 ) In general 1038 (2) What constitutes want of record affecting validity 1039 ( 3 ) Chattel mortgages and contracts for conditional sale 1039 (I) In general 1039 (II) Effect of failure to file or record; New York rule. . . 1040 (III) Bankrupt remaining in possession 1042 (IV) Withholding from record or filing 1043 (V) Recording or filing within four months' period 1044 (VI) Place of filing or recording 1045 (VII) Unrecorded contracts for conditional sale 1045 (VIII) Effect of amendment of § 47a (2) 1046 d. Invalid for other reasons 1046 III. Stibeogation of Trustee to Rights of Cbbditoes 1047 a. In general 1047 b. Is the trustee a " judgment creditor! " 1048 ( 1 ) Rule under former act 1048 (2) Rule under present act 1049 (3) Effect of amendments of § 47a (2) by amendment of 1910 1049 IV. Valid Liens 105O a. In general 1050 b. Good faith of transaction 1050 c. Jurisdiction of bankruptcy court to determine validity of lien 1051 d. Miscellaneous valid liens 1052 e. Mechanics' liens 1053 f . Landlord's liens 1054 g. Mortgages to secure further advances, and on after-acquired property. . 1056 h. Mortgagor in possession 1057 i. Liens on special funds; mingling with other funds 1057 j. Lien of pledgee 1058 k. Other valid liens 1059 ( 1 ) Vendor's lien 1059 (2) Equitable liens 1060 (3) Attorney's lien 1060 (4) Banker's lien; liens for services 1060 (5) Maritime liens 1061 (6) Factor's lien 1061 (7) Trust and other transfers 1061 1. Effect of valid liens on distribution 1062 V. FRAtrDULENT ThANSS'EBS AND LlENS 1062 a. In general 1062 b. Scope of subsection 1063 c. Insolvency not essential 1063 d. Within four months prior to filing the petition 1063 e. Intent to hinder, delay or defraud 1064 ( 1 ) In general 1064 (2) Revival of outlawed debt 1065 (3 ) Evidence of intent 1065 ( I ) In general 1065 (II) Payments without fraudulent intent 1065 (III) Fraudulent intent implied from circumstances 1068 (IV) Sales of goods on account; bulk sales 1069 _(V) Burden of proof 1070 f . Purchasers in good faith and for present fair consideration 1070 g. Transfers and incumbrances under state laws 1072 h. Suits to recover property IO72 ( 1) In general IO72 (2) Amendment of 1903 1072 Table of Contents. i^ SECTION 67 — Continued. PAGE i. Miscellaneous invalid transfers or incumbrances 1073 ( 1 ) In general 1073 (2) Mortgages to secure antecedent debts 1073 (3) Chattel mortgages 1074 (4) Voluntary settlements 1075 ( 5 ) General assignments 1076 j. Practice 1076 VI. Liens Theottoh Legal PaocEEDn^GS 1076 a. In general ,. 1076 b. Comparative legislation 1077 c. Confusion concerning subs. c. and subs, f 1077 d. When subs. c. applies 1078 e. Insolvency essential 1079 f . Four months prior to the filing of the petition 1079 g. Miscellaneous invalid liens through legal proceedings. . '. 1080 ( 1 ) By judgment and execution 1080 (2) Garnishment -proceedings 1083 (3 ) By attachment 1084 (4) By creditor's bill 1087 h. Practice on suits to annul liens 1088 i. Preserving liens 1088 j. Saving clause 1089 SECTION 68. SET-OFFS AND COUNTBECLAIMS 1090 I. Set-offs in Bankeuptct 1091 a. Comparative legislation i . 1091 b. Cross-references '. 1091 c. Section is not self -executing; general principles 1091 d Mutual. debts or mutual credits 1092 e. Time when set-oflf may be made 1093 f . Time when right to set-off is determined 1094 g. Nature of liability. . 1094 ( 1 ) In general 1094 (2) Set-off by bank 1095 h. Being in the same right. 1098 i. Joint and several claims 1099 j. Waiver of set-off. , 1099 k. Practice 1099 11. When not Allowed 1099 a. Not provable against the estate 1099 b. Purchased after bankruptcy or within four months before 1100 ( 1 ) In general 1100 (2) With a view to such use and with knowledge. 1101 SECTION 69. SEIZURE OF BANKRUPT'S PROPERTY 1102 a. Cross-references 1103 b. Scope of section 1103 c. Bond of petitioning creditors 1103 d. Bonding the property back 1 104 e. Remedy where property is claimed by a third person 1104 f . The marshal's liability 1104 g. Practice 1105 SECTION 70. TITLE TO PROPERTY 1106 I. Section in Genebal 1111 a. Comparative legislation 1111 b. Scope of section 1111 c. Conflict between bankruptcy act and state law 1111 II. Tbusteb Vested with Titl|: oe Bankrupt 1112 a. In general- 1112 b. When title vests 1112 ( 1 ) In general 1112 (2) Title vests at date of adjudication relating back to date of filing petition 1113 c. Bankrupt's title between petition filed and ( 1 ) adjudication and ( 2 ) ap- pointment of trustee 1114 d. What vests 1115 ( 1 ) In general .' 1115 (2) Property acquired before filing petition 1116 Table of Contents. [ON 70 — Continued. pagk e. Subject to all claims, liens and equities. . , 1117 ( 1 ) In general 1117 (2) Disposition of property subject to lien or incumbrance 1120 (3 ) Property in possession of bankrupt 1121 (4) Effect of amendment of 1910 to § 47a (2) 1122 I. Title to Specific Peofebtt 1122 a. In general 1122 b. Documents relating to bankrupt's property 1122 c. Patents, copyrights, and trade-marks 1123 d. Personal powers 1123 e. Property fraudulently transferred 1124 ( 1 ) In general 1124 (2) Property affected; character of transfer 1124 (3) Actual or implied fraud 1124 (4) Voluntary transfers; transfers to wife or children 1125 (5) Effect of a general assignment 1125 (6) Beceivership ; dissolution of corporation 1126 (7) Assignment of claims against the United States 1126 t. Property which might have been transferred or levied upon 1127 (1) In general 1127 (2) Test to be applied 1127 (3) Property pledged 1128 (4) Stock brokerage transactions 1129 (5) Property included generally 1130 (6) Property in which others have an interest 1131 (7) Equities in property 1132 (8) Remainders and contingent interests 1133 (9) Trust interests and property in trust 1133 (I) Kesulting or constructive trusts 1133 (II) Express trusts ; interest of beneficiary 1134 (III) Mingling trust funds; following such funds 1135 (10) Dower and curtesy rights 1136 (11) Licenses, franchises, and personal privileges 1137 (I) In general 1137 (II) Personal contracts 1137 (III) Franchises and licenses 1137 (IV) Seat in stock exchange 1138 '( 12 ) Life insurance policies 1139 (I) In general 1139 (II) Cash surrender value 1139 (III) Effect of assignment 1141 (IV) Payable to wife or designated beneficiaries 1141 (V) Bankrupt as beneficiary 1144 ( 13 ) Fire insurance policies 1 144 ( 14) Property sold to the bankrupt on condition 1145 ( I ) In general 1145 (II) Lease with privilege of purchase 1147 (in) Go.ods consigned for ss^le'; 1148. (IV) Option to' purchase or return 1150 (15) Property affected- by fraudulent representations 1150 g. Beclamation proceedings 1151 (1) In general 1151 (2), Time within which petitions should be filed 1151 (3) Sale or bailment; agency 1152 (4) Purchase of goods without intent to pay 1153 ( I ) Concealment of insolvency or false representation as to solvency 1 153 (II) Intent not to pay 1155 (III) When right exercised; who may defeat right 1155 (IV) Proof of insolvency, or of intent not to pay 1155 (5) Property sold subject to approval; rental contracts 1156 (6) Payment on delivery; stoppagein transit 1157 (7) Troof of identity 1158 (8) Practice 1155 i. Bights of action 1158 ( 1 ) In general 1158 (2) Actions for personal injuries; torta affecting jproppptjffiof ba«ik- rupt /. ' 1159 (3) Actions by corporations, and against stockholders, directors, and oflScers IISO Tabc-e of Coktents. xi eECTION 70 — Continued. page IV. BtTBDENSOME AND EXEMPT PBOPEBTT 1162 a. Burdensome property and contracts 1162 ( 1 ) In general 1162 (2) Executory contracts and leases 1192 (3) Practice 1163 b. Exempt property 1161 ( 1 ) In general 1164 (2) Conflict between $ 6 and § 70-a (5), as to rights of benefici- aries under life insurance policies 1164 (3) Title vests subject to charge for support of widow and minor children 1165 V. Appbajsebs asd Appbaisal 1165 a. In general 1165 b. Practice 1163 VI. Sai,es of Pbopeety 1166 a. In general 1 166 b. Practice on sales; conduct of sales 1166 ( 1 ) In general 1166 (2) Jurisdiction of referee as to sales 1167 (3) By whom conducted 1167 (4) Property to be sold , 1168 (5) Conduct of sale; bids; rights and obligations of bidders. II 63 (6) Confirmation or approval of sales 1170 c. Sales at public auction or by private sale under general order XVIII. . . 1171 d. Sales of incumbered property 1171 (1) In general 1171 (2) Sales free of dower 1173 (3) Proceeds of sale subject to liens; rights of lienors 1173 (4 ) Payment of taxes 1174 (5) Pajrment of expenses of sales 1174 (6) Determination of validity, priorities or amounts of liens 1175 ( 7 ) Sales subject to incumbrances. 1176 (8) Practice on sales of incumbered property 1176 e. Resale; when granted 1176 VII. Tbansfeb of Tbustee's Title to Puechaseb 1177 yill. Title of Tbustee whebb Composition is set Aside, Dischaboed ob Revoked; Effect op Confirmation 1177 a. Setting aside^ discharging or revoking composition 1177 b. E£fect of confirmation of composition 1178 IX. Tbansfebs Fbattdulent undbb State Laws mat be Avoided by Tbustee 1178 a. In general 1178 b. The saving clause 1181 c. The amendment of 1903 1181 SECTION 71. INDEXES AND SEARCHES OF CLERKS 1182 SECTION 72. LIMITATION ON FEES OF CERTAIN OFFICERS 1183 TIME OF TAKING EFFECT 1186 GENERAL ORDERS IN BANKRUPTCY 1189 PREAMBLE 1190 Gen. Order I. Docket 1190 II. Filing of papers 1191 III' Process 1191 rV. Conduct of proceedings 1192 V. Frame of petitions 1192 VI. Petitions in diflFerent districts 1192 VII. Priority of petitions 1194 viii. Proceedings in partnership cases 1194 IX. Schedule in involuntary bankruptcy 1196 X. Indemnity iox expenses 1196 XI. Amendments 1197 XII. Duties of referee 1198 XIII. Appointment and removal of trustees 1200 XrV. No official or general trustee 1202 XV. Trustee not appointed in certain cases 1202 XVI. Notice to trustee of his appointment 1203 Xll Table of Coitteitts. PEEAMBLE — Continued. Gen. Order XVII. XVIII. XIX. XX. XXI. XXII. XXIII. XXIV. XXV. XXVI. XXVII. XXVIII. XXIX. XXX. XXXI. XXXII. XXXIII. XXXIV. XXXV. XXXVI. XXXVII. XXXVIII. OFFICIAL FORMS IN BANKRUPTCY. SUPPLEMENTARY FORMS Duties of trustee Sale of property Accounts of marshal ,. Papers filed after reference Proof of debts Taking of testimony Orders of referee -. Transmission of proved claims to clerk Special meeting of creditors Accounts of referee Review by judge Redemption of property and compounding of claims. Payment of moneys deposited Imprisoned debtor Petition for discharge Opposition to discharge or composition Arbitration Costs in contested adjudications Compensation of clerks, referees, and trustees Appeals General provisions Forms RULES OF PRACTICE FOR THE COURTS OF EQUITY OF THE UNITED STATES. THE BANKRUPTCY ACT OF 1898 • PAGE 1203 1205 1206 1206 1206 1210 1211 1212 1212 1212 1212 1214 1215 1216 1217 1217 1218 1218 1219 1221 1222 1223 1227 1298 1453 1483 THE BANKRUPTCY ACT OF 1867 1519 THE BANKRUPTCY ACT OF 1841 1547 THE BANKRUPTCY ACT OF 1800 1553 CANADIAN BANKRUPTCY ACT 1565 INDEX TO CANADIAN ACT 1600 GENERAL RULES UNDER CANADIAN ACT..... 1609 GENERAL INDEX ._,.. 1623 SECTION FIFTY-NINE WHO MAY FILE AND DISMISS PETITIONS. § 59. Who May File and Dismiss Petitions.— a Any qualified per- son may file a petition to be adjudged a voluntary bankrupt. b Three or more creditors who have provable claims against any person which amount in the aggregate, in excess of the value of secur- ities held by them, if any, to five hundred dollars or over ; or if all of the creditors of such person are less than twelve in number, then one of such creditors whose claim equals such amount may file a petition to have him adjudged a bankrupt. c Petitions shall be filed in duplicate, one copy for the clerk and one for service on the bankrupt. d If it be averred iii the petition that the creditors of the bankrupt are less than twelve in number, and less than three creditors have joined as petitioners therein, and the answer avers the existence of a larger number of creditors, there shall be filed with the answer a list under oath of all the creditors, with their addresses, and thereupon the court shall cause aU such creditors to be notified of the pendency of such petition and shall delay the hearing upon such petition for a reasonable time, to the end that parties in interest shall have an opportunity to be heard; if upon such hearing it shall appear that a sufficient number have joined in such petition, or if prior to or during such hearing a sufficient nunaber shall join therein, the case may be proceeded with, but otherwise it shall be dismissed. e In computing the number of creditors of a bankrupt for the pur- pose of determining how many creditors must join in the petition, such creditors as were employed by him at the time of the filing of the petition or are related to him by consanguinity or affinity within the third degree, as determined by the common law, and have not joined in the petition, shall not be counted. / Creditors other than original petitioners may at any time enter their appearance and join in the petition, or file an answer and be heard in opposition to the prayer of the petition. g A voluntary or involuntary petition shall not be dismissed by the petitioner or petitioners or for want of prosecution or by consent of parties until after notice to the creditors, and to that end the court shall, before entertaining an application for dismissal, require the bankrupt to file a list, under oath, of all his creditors, with their [837] 838 Who Mat File and Dismiss Petitions. [§ 59. addresses, and shall cause notice to he sent to all such creditors of the pendency of such application, and shall delay the hearing thereon for a reasonable time to allow all creditors and parties in interest opportunity to be heard* Anologous provisions: In U. S.: As to who may file voluntary petitions, Act of 1867, § 11, E. S., § 5044; Act of 1841, § 7; As to who may file involuntary petitions. Act of 1867, § 39, E. S., § 5021; Act of 1841, § 1; Act of 1800, §§ 1, 2; As to intervention by other creditors. Act of 1867, E. S., § 5026. InEng.: Act of 1883, §8 4, 5, 8, 7; General Rules 143 to 153. In Can.: Act of 1919, §§ 4, 9. Cross-references: To the law: Definition of creditor, § 1 (9) ; of petition, { 1 (20) ; of secured creditor, § 1 (23). Jurisdiction to adjudge persons to be bankrupts, § 2(1). Acts of bankruptcy; against whom petition may be filed; when bond must accom- pany petition, § 3. Who may become bankrupts, § 4. Adjudication of partnership, § 5. Process, pleadings and adjudications, § 18; verification, § 18-c; determination of issues raised by pleadings, § 18-d. Transfer of cases where petitions are filed in different courts, 5 32. Jurisdiction of referee to consider petitions, § 38-a ( 1 ) . Debts which may be proved, § 63. To the General Orders: Process to issue out of court. III. Frame or form of petition, V. Petitions in different districts; amendment of earlier petition; jurisdiction of dis- trict first receiving petition, VI. Priority of petitions, how determined, VII. Creditor to file schedule of creditors, IX. Amendment of petition and schedules, XI. To the OfScial Forms: Debtor's petition and schedules, No. 1. Partnership petition. No. 2; Petition of creditor, No. 3; order to show cause otf creditor's petition, No. 4; subpoena to alleged bankrupt. No. 5. Adjudication that debtor is not bankrupt. No. 11. See also Supplementary Forms, post; Hagsr and Alexander's Bankruptcy Forms (2d Ed.) SYNOPSIS OF SECTION. flTHO MAY file: AND DISMISS PETITIONS. I. Filing Petitions Generally, 839. a. Comparative legislation, 839. b. /Scope of section, 840. c. lAability of petitioning creditors when unsuccessful, 8401 n. Who May File Voluntary Petitions, 840. a. In general, 840. b. Where involuntary petition has been filed, 841. c. Form of petition and practice, 842. 'Amendments of 1910 in italics. § 59. J Filing Petitions Generally. 839 m. Who May File Involuntary Petitions, 842. a. In general, 842. b. Stockholders and officers of corporations, 843. c. Creditors who were not such at time of commission of act of bankruptcy, 843. d. Number of creditors and amount of claims, 843. (1) Time contbolling number and amounts, 843. (2) Buying claim or inducement not to join, 844. (3) Transactions affecting number of creditors and amount OF claims, 844. (4) Creditors who are estopped from filing petition not to be counted, 846. 8. Creditors who have provable claims, 846. f . Secured creditors not to file, 848. g. Creditors who have received preference, 848. h. Creditors who have attachments, 849. i. Creditors who have an advantage through fraud, 850. ]. Estoppel of creditors, 850. (1) In general, 850. (2) Assent to or participation in assignment or receivership, 851. k. Counting creditors when but one creditor petitions, 852. 1. Involuntary petitions must be in duplicate, 853. (1) In general, 853. (2) Waiver of duplicate, 853. IV. Practice if Answer Avers More Than Twelve Creditors, 853. a. In general, 853. b. Filing " list of creditors," 853. c. Practice, 854. V. Exclusion of Employees, Relatives and Officers, 854 VI. Intervention by Other Creditors, 855. a. In general, 855. b. Who may intervene, 857. c. Practice, 857. d. Notice to creditors, 858. Vn. Amendments of Petitions, 858. Vin. Dismissals of Petitions, 859. I. FILING PETITIONS GENERALLY, a. Comparative legislation. — In most of the continental countries, a single creditor, no matter what his debt, may petition. The English law permits one creditor, as well as two or more, in not less than £50, to apply.^ Thel same is true of the Canadian actj the minimum amount being $500.-^ Our laws as to voluntary petitions are considered elsewhere.^ As to involuntary, the law of 1800 permitted a petition "by any one creditor" in $1,000, or 1. English Act of 1883, S fl(l)-a. *. See under Section Four of this work. la. Can. Bankr. Act of 1919, { i. 840 Who May File and Dismiss Petitions. [§ 59. two creditors in $1,500, or three creditors in $2,000 ; the law of 1841 allowed one creditor in $500 to petition; while the law of 1867, which originally gave the right to one or more creditors in $250, was, in 1874, so amended that it could be exercised only by one-fourth in number of the creditors the aggregate of whose provable debts amounted to one-third of all. The present act seems a compromise.^ b. Scope of section. — This section has to do primarily with: (1) who may file petitions; and secondarily with: (2) the practice where an answer denies that the creditors are less in number than twelve, (3) the intei^ vention of creditors other than the petitioning creditors, and (4) the dismissal of petitions other than on the merits. It should always be read in connection with § 18. Its limited scope and the other sections controlling on the frame of, the allegations in, the verification of, and the service of process under, involuntary petitions, are indicated elsewhere. 0. Liability of petitioning creditors when unsuccessful.* — A petition filed by hona fide creditors, without malice, without libelous and slanderous charges, with reasonable grounds for believing tTie allegations contained in the petition, with probable cause, and upon legal advice, although not successfully prose- cuted, will not sustain an action for damages;^ but where a bankruptcy pro- ceeding is instituted without probable cause and with malicious intent, an action for malicious prosecution will lie.® Material allegations in a petition in bankruptcy are absolutely privileged and cannot be made the basis of an action for libel.'' A State court has the power to restrain, by injunction, a creditor from prosecuting a fraudulent and oppressive petition in bankruptcy against a debtor, especially in cases where the petitioning creditor has, prior to filing the petition, sought the aid of the State court with reference to the claim held by him;* II. WHO MAY FILE VOLUNTARY PETITIONS.s a. In general. — Subsection a provides that any qualified person may file a petition to be adjudged a voluntary bankrupt. Section 4 prescribes who may become a voluntary bankrupt. The discussion under that section may prove useful in determining whether a person is qualified. "Any qualified person " means, therefore, " any person except a municipal, railroad, insur- 5. See "Analogous ProTlelons," supra. petition In bankruptcy alleging that the bank- 4. See also Am. B. E. Dig., 8 286. rupt had made a fraudulent general asslgn- 6. Harvey v. Gartner, 34 Am. B. H. SOI, 07 ment and had remored and concealed property So. 107; Matter. of Terusakl (D. C, Wash.), S9 with Intent to defraud his creditors, the prop- Am. B. R. 256. 238 Fed. 934. erty so removed and concealed Including goods 6. Wilkinson v. Goodfellow-Brooks Shoe Co. recently purchased from defendants, and that a ^"*" ^" °E.de^ of adjudication. In re 81a. As to who are creditors, see discussion Hyan {D. C, Pa.), 7 Am. B. R. 563, 114 nnder Section I, ante. Fed. 373. 22. Unless this requitement is observed Fed. 373. jurisdiction is not conferred upon the court. 27. In re Corwin Mfg. Co. (D. C, Mass.), In le Gillette (D. C, N. Y.), 5 Am. B. R. 26 Am. B. R. 269, 185 Fed. 976; In re Brown 11«, 125, 104 Fed. 769; In re Rogers Milling (D. C, Mo.), 7 Am. B. R. 102, III Fed. 979, Co. (D. C, Ark.), 4 Am. B. R. 540, 102 Fed. holding that, where the petition in an in- 687. Although it may be that such a de- voluntary proceeding avers that the creditors feet is waivable since it pertains merely to of the alleged bankrupt are less than twelve, want of jurisdiction of the person or thing. and his answer alleges that his creditors are In re Mason (D. C, N. Car.), 3 Am. B. R. more than twelve, and gives a list of thirteen 899, 9Q Fed. 256. creditors with their addresses and the 23. See under Sections Two, Three, Four, amounts owing to them, and the proof shows ~5'ive and Eighteen of this work. that one of the creditors has assigned his a. In re J. M. Ceballos & Co. (D. C, K. claim' and joined in the petition, and that an- J.), 20 Am. B. R. 459, 161 Fed. 445, 451. other alleged creditor claims that he is not 25. See post, this section, creditors who a creditor at all, there are still twelve cred- have provable claims. itors, including the petitioning creditor, and 26. Effect of reduction of amount of claims the petition must be dismissed. prior to adjudication. — Where, in an invol- § 59-b.J Number of Ceeditoes; Amount of Claims. 843 the creditors are favorable to a general assignment for creditors.^ The holders of composition notes given by a debtor, which were assumed by a corporation organized to take over the debtor's business are creditors entitled to file a petition against the corporation.^ b. Stockhalders and officers of corporation. — iStockholders as such are not cred- itors of a bankrupt corporation and may not file an involuntary petition against the corporation,*" but creditors of a corporation, who are also directors, are not precluded from petitioning for the adjudication of the corporation on the ground of inability to pay its debts merely because their presence at a meeting of the board of directors when the admission was made was neces- sary to its validity.*^ c. Creditors who were not such at time of commission of act of bankruptcy. — There are a number of cases holding that a creditor who was not such at the time of the commission of an alleged act of bankruptcy cannot petition his debtor into bankruptcy.*^ This appears to be not only the conclusion of the courts in well-considered cases, but a reasonable construction.** It is unques- tionably based upon the well-established principle that creditors cannot com- plain of an act of bankruptcy, consisting of a transfer or preference by the debtor prior to the time they became creditors, unless such transfer or prefer- ence was made with the direct purpose of defeating their claim.** This doctrine has been disapproved, on the ground that the statute does not specifically declare that petitioning creditors must have been such at the time of the commission of the act of bankruptcy,*^ and it would appear that the weight of authority now favors the proposition that creditors having provable claims at the time of filing the petition may join therein.*® d. Number of creditors and amount of claims.*'' — (1) Time coiiTTEOLLiNG wum- BEE AND AMOUNT. — The time when the petitioning creditors must be sufficient in nuihber and amount is at the time of the adjudication.*^ Creditors other 28. In re Perry & Whitney Co. (D. C, creditor after the act of bankruptcy alleged Mass.), 22 Am. B. E. 772, 172 Fed. 745. in the petition was committed. In the ease 29. Matter of Fleig Mercantile Co. (C. C. of In re Perry & Whitney Co. (D. C, Mass.), A., 7th Cir.), 38 Am. B. R. 113, 237 Fed. 178. 22 Am. B. E. 772, 172 Fed. 745 (affd. 23 Am. 30. In re Eureka Anthracite Coal Co. (D. B. E. 695, 175 Fed. 52), the court stated C, Ark.), 28 Am. B. E. 758, 197 Fed. 216. that it should not be held that a creditor is 31. Home Powder Co. v. Geis (C. O. A., disqualified as a petitioner for no other 8th Cir. ) , 29 Am. B. E. 580, 204 Fed. 568. reason than that the claim owned by him' 32. In re Callison (D. C, Fla. ), 12 Am. was not transferred to him imtil after the B. E. 344, 130 Fed. 987; affd. sub. nom. ac' of bankruptcy. Brake v. Callison (C. C. A., 5th Cir.), 11 3G. Emerine v. Tarault (C. C. A., 6th Cir.), Am B. E. 797, 129 Fed. 201; In re Stone 34 Am. B. E. 55, 219 Fed. 68; Matter of (D. C., Pa.), 30 Am. B. E. 392, 206 Fed. Kehoe (C. 'C. A., 2d Cir.), 36 Am. B. E. 891) ; 356. See also Am. B. E. Dig. § 205. In re Perry & Whitney (C. C. A., 1st Cir.), 33. In re Brinckmann (D. C, Ind.), 4 Am. 23 Am. B. E. 695, 175 Fed. 52; Matter of Van ■R T! ';=i1 inq Fed fi";- -RpIt^ V TTanlin Horn (C. C. A., Sd Cir.), 41 Am. B. E. 12; 246 ,A T; X \ , A 4, 1?' r,.f L ^ r' I^l Fed. 822; Matter of Page Motor Car Co. (D. C, (D. C, Or.), 3 Am. B. E. 745, 99 Fed. 695; Mass.), 41 Am. B. E. 546, 251 Fed. 318. In re Muller, Fed. Cas. 9,912; In re Burke, 37. See also Am. B. R. Dig., § 211. Fed. Cas. 2,156. 38. in re Plymouth Cordage Co. (C. C. A., 8tli 34. Brake v. Callison (C. C. A., 5th Cir.), Cir.), 13 Am. B. E. 665, 135 Fed. 1,000. In 11 Am. B. E. 797, 129 Fed. 201. Text quoted ^""""^ I' ^?*'"'°/^ C. A 1st Cir.), 12 Am. T oi /T\ o Ti \ on A T> T> B. E. 553, 557, 131 Fed. 201, the court said : m In re Stone (D. C, Pa.), 30 Am. B. E. ..„ i, true that, according to Express proTlsions 392, 206 Fed. 356. of the statute, the sufficiency of the number of 35. Matter of Hanyan (D. C, N. Y). 24 petitioning creditors is to be determined as of Am. B. K. 72, 180 Fed. 498, holding that -^« ^ate of hearing, and not as of the date of a creditor may join in a petition in an in- ^""^ the original petition." . ^ ^ voluntary proceeding, if he have a provable State of claim when petition is filed gov- claim against the alleged bankrupt at the eins- The fact that a petitioning creditor tini,e the petition is filed and he is not dis- having a provable claim at the time of filing qualified to act as such where he became a the petition subsequently became liable to 844 Who Mat File and Dismiss Petitions. [§ 59-b. than original petitioners may join in at any time before adjudication and be counted to make the required number of creditors and amount of claims,^^ even though the original creditors had no provable claims,*" unless, perhaps, in a case where the original petition shows on its face that an insufficient number of creditors or an insufficient amount of claims had united in the petition.*^ But debts created subsequent to the filing of the petition not being provable, it follows that creditors whose claims were created after such time may not be counted in making up the required number.*^ Neither can the purchaser of a claim, bought after the filing of the petition in bankruptcy for the purpose of creating an additional creditor, be counted in making up the statutory number.*^ Where only two petitioning creditors have qualified, and six out of nine intervening creditors are of unquestioned competency, the proceeding will be sustained.** (2) Buying claims ob inditcement not to join. — A person may buy up claims to make the required amount ;*^ the debtor may importune his creditors to proceed and the adjudication still be valid ; *® and if a creditor solicits other creditors to join, the bankrupt may solicit them not to do so.*'' (3) Transactions affecting number of creditors and amount of claims. — Where several claims are purchased for the purpose of instituting proceedings in bankruptcy the purchaser will be deemed a single creditor in counting the number of creditors;** where the main purpose of such a trans- the bankrupt's nssignce for creditorb because of 4i wrongful attachment is immaterial. In re Bevins (C. C. A., 2d Cir.), 21 Am. B. R. 344, 185 Fed. 434. Amount of claims of petitioning creditors. — In determining tlie propriety of making an ad- judication on an involuntary petition, it is not necessary to determine tlie exact amounts due the petitioning creditors but it is enough that the petitioning creditors have shown that they are creditors, and to an extent sufBcient to satisfy the act. In re Hughes (D. C, N. T.), 25 Am. B. R. 556, 183 Fed. 872. Jurisdictional facts. — The existence of prov- able claims to the requisite amount is juris- dictional in an involuntary proceeding. Doty V. Mason (D. C, Fla.), 40 Am. B. B. 58, 244 Fed. 587. 39. Creditors other than original peti- tioners may at any time 'before an adiudi- cation of bankruptcy or the dismissal of the • original petition, and whether before or after the expiration of four months from the act of bankruptcy, join therein in order to supply any deficiency in the amount of provable claims originally set forth in the petition, insuflSciency in amount of such claims not being an incurable jurisdictional defect. In re Mackey (D. C, Del.), 6 Am. B. R. 577, 110 Fed. 355; In re Plymouth Cordage Co. (C. C. A., 8th Cir.), 13 Am. B. R. 665, 135 Fed. 1000; In re Crenshaw, (D. C, Ala.), 19 Am. B. E. 503, 156 Fed. 638; In re Bed- dingfield (D. C, Ga.), 2 Am. B. R. 355, 96 Fed. 190; Hoffschlaeger Co. v. Nap (D. C, Hawaii), 12 Am. B. E. 515, 2 U. S. D. C. Hawaii, 96; In re Romanow (D. C, Mass.), 1 Am. B. R. 461, 92 Fed. 510; In re Charles Town Light & Power Co. (D. C, W. Va.), 25 Am. B. R. 687, 183 Fed. 160; In re Merour (D. C, Pa.), 2 Am. B. R. 626, 95 Fed. C34. 40. In re Mammoth Pine Lumber Co. (D. C., Ark.), 6 Am. B. R. 84, 109 Fed. 308. 41. In re Beddingficia (D. C, Ga.), 2 Am. B. R. 355, 96 Fed. 190. 42 Moulton v. Coburn (C. C. A., 1st Cir.), 12 Am. B. R. 553, 557, 131 Fed. aOl. 43. Emerine v. Tarault (C. C. A., 6tb Cir.), 34 Am. B. R. 55, 219 Fed. 68; Matter of Kehoe (C. C. A., 2d Cir.), 36 Am. B. R. 891. 44. In re Vastbinder (D. C. Pa.), 11 Am. B. R. 118, 126 Fed. 417. See In re Romanow (D. C, Mass.), 1 Am. B. R. 461, 92 Fed. 510. 45. In re Woodford, Fed. Cas. 17,972; In re Shouse, Fed. Cas. 12,815; In re Bevins (C. C. A., 2d Cir.), 21 Am. B. R. 344, 165 Fed. 434; Matter of Kehoe (C. C. A., 2d Cir.), 36 Am. B. R. 891. 46. In re Bouton, Fed. Cas. 1,706; Matter of Brown (D. C, Mo.), 7 Am. B. R. 102, 111 Fed. 979. It is not illegal for an attorney to agree to pay a creditor's claim upon his joining in an involuntary petition. Bernard v. Fromme, 22 Am. B. R. 585, 132 App. Div. 922, 116 N". Y. Supp. 807. 47. In re Brown (D. C, Mo.), 7 Am. B. R. 102, 111 Fed. 979; Matter of Kehoe (C. C. A., 2d Cir.'), 36 Am. B. R. 947. 48. Intervening petitioners whose claims are in fact owned by the original petitioner are not existing " creditors who have prov- able claims," and cannot be considered in making up the requisite number of petition- ers for an involuntary adjudication; such procedure is an obvious subterfuge, and the intervening petitions will be summarily dis- missed. In re Burlington Malting Co. (D. C, Wis.), 6 Am. B. R. 369, 100 Fed. 177, citing In re Worcester County (C. C. A., Ist Cir.), 4 Am'. B. E. 496, 505, 102 Fed. 808, § 59-b.J Number of Ceeditoes ; Amount, of Clai:,is. 845 action is to take the administration of an estate out of the State court where nearly all of the creditors are satisfied that it should remain, the bankruptcy court should be slow to lend its aid, and "should resolve every doubtful question of law or fact against the petitioning creditor."*® As where two notes given by the bankrupt to a creditor were assigned by an agent under claim of authority, but without the creditor's knowledge, the assignees could not both be counted as petitioning creditors, it appearing that the transaction was for the purpose of securing advantage in the proceedings.^" A debtor, by reducing the amount of his indebtedness to less than $1,000 by a settlement with certain creditors after a general assignment, cannot prevent other creditors holding claims sufficient in number and amount, who refused to so settle, from filing an involuntary petition.^^ A transaction devised and entered into for the purpose of preventing a petition by a single creditor by continuing the number of creditors at more than twelve, being an indirect method of defeating the statute, is unlav^ful and void.^^ The act does not sanction the splitting ■is. Lowenstein v. McSliane Mfg. Co. (D. C, Md.), 13 Am. B. R. 601, 130 Fed. 1007. But where only a comparatively inconsider- able minority of the creditors desire the ad- ministration of their debtors' estate in bank- ruptcy, and the greater proportion of them in number and amount regard the general assignment as more for their interests, the facts do not warrant the court in resolving every doubtful question of fact or law against the petitioning creditors, if there are three hona fide creditors whose claims, amounting in all to $500, insist upon bankruptcy admin- istration. In re Perry & Whitney Co. (D. 0., Mass.), 22 Am. B. E. 772, 172 Fed. 745, affd. 23 Am. B. E. 695, 175 F'ed. 52. 50. Ill re Perry & WTiitney Co. (D. C., Mass.), 22 Am. B. E. 772, 172 Fed. 745, affd. 23 Am. B. E. 695, 175 Fed. 52. 51. Reduction below $1,000 by settlement with certain creditors after general assign- ment and before filing of petition. — An al- leged bankrupt, owing over $4,000, committed an act of bankruptcy by making an assign- ment for the benefit of creditors and there- after made a settlement with certain of his creditors by paying them a percentage of their claims, receiving releases discharging him and his assignee from all further liabil- ity to them, which reduced the amount of his indebtedness to less than $1,000, the amount required by § 4-b of the bankruptcy act to enable him to be adjudged an involun- tary bankrupt. It was held, that other cred- itors holding claims sufficient in number and amount who refused to so settle could not be thus debarred from filing a petition in in- voluntary bankruptcy subsequent to such settlement and within four months of the commission of such act of bankruptcy, as, it would seem, the amount of debts owing was intended by § 4-b to be ascertained as of the date of the act of bankruptcy charged, but even if that were not so, the effect of an adjudication would be to annul the general assignment and the dealings thereunder be- tween the alleged bankrupt and the assenting creditors, created, feo far as the petitioners' rights were concerned, a preferential or fraudu- lent transfer, which, upon adjudication, they were entitled to have recovered by the trustee In bankruptcy, and for that reason the debts of the assenting creditors should be counted as debts owing at the date of the petition. In re Jacobson (D. C, Mass.), 24 Am. B. E. 927. 181 Fed. 870. See also Matter of Boston -West Africa Co. (D. C, Mass.), 43 Am. B. E. 382, 258 Fed. 924. 52. Assignment of claims to prevent cred- itors' petition. — Where the assignee under a general assignment for creditors made within the four months' period and prior to the filing of a petition in bankruptcy against the assignor, toclc assignments in writing to himself of the claims of twelve creditors pay- ing therefor by checks signed by him as as- signee and four days before the petition in bankruptcy was filed, each of the said claims were assigned by the assignee to different persons for the same amount that he had paid for them, the purpose of the parties being to keep claims enough alive to prevent a single creditor from maintaining a petition in bankruptcy against the assignor, is an at- tempt to artificially create a new condition for the specific purpose of defeating, by in- direct methods, the scheme of the banJcruptcy statute, and cannot receive the approval of the court. Leighton v. Kennedy (C. C. A., 1st Cir.), 12 Am'. B. E. 229, 120 Fed. 737. Judge Putnam, in delivering the opinion in this case, said: "An attempt to create such a condition, and thus by indirect methods to defeat the scheme of the statute, is un- lawful and void, and so clearly so that we need not elaborate the proposition." Where a creditor in consideration ol the transfer to him of all assets of his debtor assumes the payment of all his debts, except one, and imder the State law becomes abso- lutely liable to the creditors so preferred to the full amount of their claims, they may not, in the absence of dissent on their part to such transfer, be counted as credi+nrs in an effort to prevent the single creditor from maintaining an involuntary petition in 846 Who May File and Dismiss Petitions. [§ 59-b. of a claim into parts in order to create the requisite number of petitioning creditors. °* (4) 'Ceeditoes who aee estopped feom filing petition not to be COUNTED. — It is only such creditors as may be petitioners who should be counted.^ A creditor who has a voidable preference may not be counted against the petitioner in computing the number of creditors that must join in a petition, until he surrenders his preference. If he surrenders before adjudication he may be counted,®^ but in determining whether the debts of the dleged bankrupt aggregate $1,000, not only those which exist unpaid at the time of filing the petition, but also those which the debtor may have paid by preferential or fraudulent transfers within four months, are to be counted.^^ Where the creditors are protected by a guaranty from another creditor to whom the assets of the bankrupt have been assigned, they are not to be counted as creditors in an effort to prevent the guarantor creditor from maintaining an involuntary proceeding.^'' But where one of two or more joint makers or en- dorsers of a note is petitioned against each of the co-makers or co-endorsers who are required to pay the note has a separate provable claim against the alleged bankrupt and may be counted.^^ e. Creditors who have provable claims. — Under this section it is absolutely necessary that each creditor joining in an involuntary petition should be the owner of a demand or claim provable against the bankrupt within the provi- sions of the act.*® Whether the petitioning creditor's debt is provable or not is the important test in determining whether his petition will be entertained. The meaning of "provable debts"®" is discussed in detail under § 63. There bankruptcy against the assignor. In re Blount (D. C, Ark.), 16 Am. B. R 97, 142 Fed. 263. 53. In re Tribelhom (C. C. A., 2d Cir.), 14 Am. B. R. 491, 137 Fed. 3, holding that, where the attorney for the petitioning cred- itors becomes a creditor by an assignment of a part of the claim of one of the petitioning creditors in an involuntary bankruptcy made after the filing of the petition he may not be counted as a petitioning creditor; In re In- dependent Thread Co. (D. C, N. J.), 7 Am. B. R. 704, 113 Fed. 998, holding that, where a sufficient number of creditors are not will- ing to file an involuntary petition against a, corporation, and for the purpose of evading the requirements of the statute it procures one ereditor to assign part of its claim to third persons, in order to create the neces- sary number of creditors, their petition will be dismissed. 54. In re Miner (D. C, Mass.), 4 Am. B. E. 710, 104 Fed. 520, holding that creditors who have assented to a general assignment are npt to be counted. 55. Creditors holding voidable preferences. — Matter of Murphy (D. C, Mass.), 35 Am. B. R. 635, 225 Fed. 392; Stevens v. Nave- McCord Co. (C. C. A., 8th Cir.), 17 Am. B. R. 609, 150 Fed. 71, in which the court says: "But after a thoughtful considera- tion of this and other contentions of counsel, the evil of preferences which the bankrupt law was enacted to remove, the remedy of an equal distribution of the property of the bankrupt which it was passed to provide, the prohibition of the use of their claims by pre- ferred creditors until they surrender them which the act contains, the general scope of the law and all its provisions considered together, and the duty to give it a rational and sensible interpretation have forced our minds to the conclusion that it was the in- tention of Congress that creditors who hold voidable preferences should not be counted either for or against the petition for an adjudication in bankruptcy until they sur- render their preferences." Compare McMur- trey v. Smith (Ref., Tex.), 15 Am. B. R. 427; Leighton v. Kennedv (C. C. A., 1st Cir.), 12 Am. B. E. 229, 232, 129 Fed. 73&. 66. In re Cain (Ref., 111.), 2 Am. B. R. 378; In re Norcross (Ref., Mo.), 1 Am. B. R. 644; In re Tirre (D. C, N". Y.), 2 Am. 3. E. 493., 95 Fed. 425; Boston-West Africa Trading Co. v. Quaker City Morocco Co. (C. C. A., 1st Cir.), 44 Am. B. K. 315, 261 Fed. 665. 57. In re Blount (D. C, Ark.), 16 Am. B. E. 97, 142 Fed. 263. 58. Wright v. Eumph (C. C. A., 6tli Cir.), 38 Am. B. E. 235, 238 Fed. 138. 59. Matter of HoweU (C. C. A., 2d Cir.), 32 Am. B. E. 572, 215 Fed. 1; Hansen v. Uniform Seamless Wire Co. (C. C. A., 1st Cir.), 39 Am. B. E. 627, 243 Fed. 177. 60. Provable and allowable claims distin- guished. — The distinction between " proved " and " allowed " is always made apparent throughout the bankruptcy act, and the term " provable claims " in section 59d, is not to be given the same meaning as allowable claims. Matter of Hornstein (D. C, N. Y.), 10 Am. B. R. 308, 122 Fed. S66. 59-b.j NuMBEK OF Ceeditoes; Amount of Claims. 847 are munerous cases under the present law where a creditor's petition has been attacked on this ground ; these will be considered here. The provability of the creditors should be established by at least prima facie evidence, although it is not essential that formal proof be presented.*^ As to the person petitioning, it has been held that a wife may do so,®^ also where the petitioner is the only cred- itor and is such by virtue of a judgment for breach of promise,** and that, if also creditors, stockholders may petition against their corporation,®* or a partner against his partnership, but not as mere stockholders or partners;®^ It is clear too, that the creditors of a partnership may file against an indi- vidual partner.®® Depositors in an insolvent bank may join in a petition against a stockholder of the bank, where a State statute makes the stockholder personally liable for deggsits.®^ A tax collector cannot file a petition with- out alleging that the taxes are a provable claim under the State law.®* An unliquidated claim, under the present law, not being yet "provable," will not sustain a petition.®® But it has been held that a creditor, having an unliquidated debt, may file a petition, provided the debt is provable.™ Whether a surety on a debt not due may file a" petition is a question.''^ That an indorser can is not doubted, his claim being provable,''^ so also, if the surety has, on default of his principal, assumed the latter's obligation ; '^ 61. In re McNally Co. (Ref., N. Y.), 29 Am. B. E. 772. 62. In re Novak (D. C, Iowa), 4 Am. B. R. 311, 101 Fed. 800. 63. In re Penzansky (Ref., MasB.), 8 Am. B. E. 99. 64. In re Rollins, etc., Co., 2 N. B. N. Rep. 988. 65. See In re Schenkin & Coney (Ref., N. Y.), " Am. B. R. 162, dffd. on this point, 113 Fed. 421 . 66. Ill re Mercur (D. C, Pa.), 2 Am. B. R. 326, 05 Fed. 634. See also Matter of BcUpsa Poultry Co. (C. 0. A., 3d Cir.), 42 Am. B. R. 49, 250 Fed. 96. 67. In re Walker (C. C. A., 9th Clr.), 21 Am. B. R. 132, 164 Fed. 680. Such >. liability is con- tractual. In re Brown (C. C. A., 9th dr.), 21 Am. B. R. 123, 164 Fed. S73. 68. Petition by tax collector. — ^Where pe- titioner in involuntary bankruptcy proceed- ings was a tax collector and there was no al- legation that at the date of the petition the taxes had remained unpaid for three months after being committed to the collector, the collector had no provable claim and was in- capable of maintaining the petition, as, undter the Massachusetts law, such allegation was necessary in order to maintain an action. In re Corwin Mfg. Co. (D. C, Mass.) , 28 Am. B. E. 269, 185 Fed. 976. 69. Unliquidated claim. — Beers v. Hanlin, (D. C, Oreg.), 3 Am. B. R. 745, 99 Fed. 695; In re Brinckmann (D. C, Ind.), 4 Am. B. R. 551, 103 Fed. 65; In re Morales (D. C, Fla.), 5 Am. B. E. 425, 105 Fed. 761; In re Big Meadows Gas Co. (D. C, Pa.), 7 Am. B. E. 697, 113 Fed. 974. See also Am. B. R. Dig. § 206. 70. In re Manhattan Ice Co. (D. C, N. Y.), 7 "Am. B. R. 408, 114'Ped. 400, affd. as In re Stem (C. C. A., 2d Cir.), 8 Am. B. R. 569, 116 Fed. 604. And compare In re Hilton (D. C, N. Y.), 4 Am. B. R. 774, 104 Fed. 981. A claim for damages for breach of war- ranty upon the sale of personal property is a provable debt, and the amount may be liquidated upon a jury trial demanded upon a petition filed against the debtor. In re Grant Shoe Co. (D. C, N. Y.), 11 Am. B. R. 48, 125 Fed. 576. The amount to be paid a subcontractor for work and materials in the construction of a building, under a contra'et providing that the contractor shall pay to the subcon- tractor a certain portion of the sum received from the owner, is not i provable claim against the contractor, where the owner has not paid anything to him. In re Ellis (G. C. A., 6th ar.), 16 Am. B. R. 331, 143 Fed. 103. 71. Philips V. Dreher Shoe Co. (D. C, Pa.), 7 Am. B. R. 326, 112 Fed. 404, holding that, where the maker of promissory notes not yet due executes a general assignment for the benefit of creditors, thus committing an act of bankruptcy, . the sureties upon the notes, unless they have paid them, has no provable claim, and no standing to institute proceed- ings to have the maker adjudged an involun- tary bankrupt. 72. In re Gerson (D. C, Pa.), 5 Am. B. R. 89, 105 Fed. 891; affd. s. c, 6 Am. B. R. 11, 107 Fed. 897. 73. Surety on defaulting contractor's bond may file petition.— Where in the absence of evidence that the authorities of a munic- ipal corporation acted fraudulently in for- feiting and canceling a contract for the execution of certain work in connection with the city's water works, 'because the work was not proceeding satisfactorily, and the surety company upon the contractor's bond under its contract of indemnity with its principal, 848 Who May File and Dismiss Petitions. [§ 59-b. r."-id CO can the holder of a note not yet due, indorsed by the alleged bank- rupt.^* The provability of such debts is considered elsewhere.''^ Numerous cases under the former law will be found in point.'" f. Secured creditors not to file. — Creditors who are fully secured may not petition. This seems to have been otherwise under the former law, the peti- tion being considered a waiver of the security.''^ But the intention under the present act is clear. A secured debt can be counted in dollars only to the amount unsecured ; ''^ if there be no such amount, it should not be counted at all. But a secured creditor may surrender his security and prove his whole claim and thereby entitle himself to file a petition.''*^ It is doubtful whether the doctrine of implied waiver will apply under the phrasing of the present law. If, on the other hand, the claim is not fully secured, it may sustain a petition, provided, when reckoned at the unsecured amount, the required aggregate of $500 is reached.™ The cases seemingly contra ^'^ under the former law are not in point, referring, as they do, to the number of the creditors, rather than the existence of a petitioning creditor's debt. g. Creditors who have received preferences. — Prior to the amendatory act of 1903, all partial payments after insolvency were preferences. Thus, the objection was often made to involuntary petitions that the creditors had not provable debts. That, in such cases, it was well taken is sustained by a number of authorities under both the former and the present law.*^ If a payment to a creditor was made more than four months prior to the date of the petition, it is not preferential, and does not disqualify him as a petition- ing creditor.*^ The use of the word "provable" has been thought to refer to the proof of a debt as distinguished from its allowance.^* Some question has arisen as to whether a preferred creditor has a " provable " 'claim before the surrender of his preference, so as to give him any rights as a petition- ing creditor. All debts can be "proved" whether secured, or preferred, or fraudulent; they cannot be "allowed" unless the advantage is surrendered. It would seem within reason to assert that "provable" must be here con- sidered the equivalent of " allowable." ^* But at the present time the weight and with the permission of the municipal Cas. 9,282; In re Broich, Fed. Cas. 1,921; In re authorities, assumes charge of and completes Noesen, Fed. Cas. 10,288; In re Cornwall, Fed. the work at an expenditure in excess of the Cas. 3,250. contract price, the surety company is entitled 77. In re Stansell, Fed. Cas. 13,293. Compare to be regarded as having been lawfuUy substl- also In re Bergeron, Fed. Cas. 1,342; In re Hatie, tuted in the place of the contractor for the Fed. Cas. 6,215. execution of the work which it had guaranteed, 78. Emerine v. Tarault (C. C. A., 6th Clr ) 34 and is entitled to file a petition against the Am. B. E. 55, 219 Fed. 68. Compare In re contractor. Boyce v. Guaranty Co. (C. C. A., Smith (D. C, N. Y.), 23 Am. B. E. 864, 176 Fed. 6th Cir.), 7 Am. B. E. 6, 111 Fed. 138. 4J6. , cu 74. In re Eothenberg (D. C., N. Y.), 15 Am. 78a. Morrison t. Eieman (C. C. A., 7th Cir.). B. E. 485, 140 Fed. 798, holding that, under the 41 Am. B. E. 325, 249 Fed. 97. present act, the simple test Is whether the 79. See In re Hazena, Fed. Cas. 6,285. claim Is provable. The fact that it Is not yet 80. In re Frost, Fed. Cas. 5,134; In re Scraf- allowable is immaterial. ford. Fed. Cas. 12,556. Pendency of a suit in the State court between 81. In re Rogers Milling Co. (D. C, Ark ) 4 tlie payee ind endorsers of a note in relation Am. B. E. 540, 102 Fed. 687; In re Gillette (D thereto is not a sufficient reason from striking C, N. Y.), 5 Am. B. E. 119, 104 Fed. 769- In re the name of the payee from an involuntary Hunt, Fed. Cas. 6,882; In re Rado, Fed. Cas. petition against one of the endorsers. Doty v. 11,522; In re Israel, Fed. Cas. 7,111: Clinton v. Mason (D. C, Fla.), 40 Am. B. E. 58, 244 Fed. Mayo, Fed. Cas. 2,899. 587. „ , „ . „ 8a. In re Girard Glazed Kid Co. (D. C, Pa.). IB. See under Section Sixty -three of this work. 12 Am. B. E. 295, 129 Fed. 841 M. Michaels V. Post, 21 Wall. 398; Sloan v. 83. See In re Norcross (Ref., Mo.), 1 Am. B. iewis, 22 Wall. 150; Linn v. Smith, Fed. Cas. E. 644. 8,375; In re Alexander, Fed. Cas. IGl; In re 84. This seems sustainable under the nuthnr Western Savings, etc Co. Fed Cas. 17,442; Ity of In re 0X1'^ D C ,V¥)^ Am B E In re Nickodemus, Fed. Cas. 10,254; In re 119; In re Fishblate Clothine Co (D C N Chamberlin, Fed. Cas. 2,580; In re Matot Fed. Car.), 11 Am BE 2047 125 rfd. 986. § 59-b.J Ceeditoes Who Have Attachments. 849 of authority is opposed to this doctrine, and the rule now is that a preferred creditor holding a voidable preference may present, or may join in, a petition for an adjudication of bankruptcy.*^ It is probable, in any event, that where a preferred creditor petitions, or joins in a petition, he should set up his willingness to surrender his preference.*' h. Creditors who have attachments.^^ — The cases are not uniform as to the right "of an attaching creditor to file a petition. A number of creditable cases are to the effect that such a creditor may not petition.** There is some doubt whether an attachment less than four months old amounts to a "pref- erence;"*® it more nearly resembles a security. On broad principles of equity, however, it is an advantage, placing the creditor having it out of that class which alone can file an involuntary petition. Only after a sur- render of it, or at least an offer to surrender, should he be allowed to file.*" 85. Stevens v. Nave-McCord Co. (0. C. A., 8th Cir.), 17 Am. B. E. 609, 150 Fed. 71; In re Douglass Coal & Coke Co. (D. C, Tenn.), 12 Am. B. R. 539, 551, 131 Fed. 769; Matter of Murphy (D. C., Mass.), 35 Am. B. E. 635, 225 Fed. 392. See also Am. B. R. Dig. § 202. Preferred creditor's claim provable. — Judge Eay, in the case of Matter of Hornstein (D. C, N. Y.), 10 Am'. B. E. 308, 321, 122 Fed. 266, insists that equity demands that those creditors who have received a preference he allowed to file petitions even if they have not surrendered their preferences. He emphati- cally dissents from the text as contained in the 4th edition" of this work, p. 407, and says: ^•' That ' provable ' as used in the bankruptcy act, is to be considered as the equivalent of ' allowable,' as used in the same act, is a con- tention that ought not to prevail. Those words are not used in the act as equivalents, or as expressing the same meaning. Nor are the acts of or proceedings for 'proving a claim ' and of ' allowing a claim,' the same." In the case, of In re Herzikopf (D. C, Cal.), 9 Am. B. R. 90, 118 Fed. 101, it is held that a creditor may be a petitioner in bankruptcy notwithstanding the receipt of a preference which is unsurrendered. Citing In re Nor- cross (Eef., Mo.), 1 Am. B. E. 644; In re Cain (Eef., 111.), 2 Am. B. E. 378; In re Bloss, Fed. Cas. No. 1,562; In re California Pacific Ey. Co., Fed. Cas. 2,315; In re Stan- sell Fed. Cas. No. 13,293 ; Bankin v. Eailway Co., F'ed. Cas. No. 11,567. 86. Return of preference. — In the case of lii re Vastbinder (D. C, Pa.) 11 Am. B. E. 118, 126 Fed. 417, it was held that a creditor may surrender his preference and thus qualify as a petitioner, and it is suflBcient if he offers to do so in the petition. In re Fishblate Clothing Co. (D. C, N. Car.), 11 Am. B. E. 204, 125 Fed. 986, holding that, where in an involimtary proceeding it ap- pears that one of the petitioning creditors had received a payment on his claim within the four monthsi' period which he had not surrendered, and that the petitioners had not asked for leave to amend the petition to 54 conform to the provisions of the bankrupt law, the petition will be dismissed. A preference which has not been fraudu- lently obtained does not estop the preferred creditor from filing a petition, provided he surrenders such preference. In re Miller (D. C, N. Y.), 5 Am. B. E. 140, 104 Fed. 764. A creditor who has received a voidable preference, which he has not mentioned in an involuntary petition, but which he offers to return on a hearing before the referee, and before the court, may be counted as a peti- tioning creditor, upon deposit of the amount of the preference with the clerk, to be paid over to the trustee upon the latter's appoint- ment. Matter of Murphy (D. C, Mass.), 35 Am. B. E. 635, 225 Fed. 392. 87. See also Am. B. E. Dig. § 204. 88. In re Burlington Malting Co. (D. C, Wis.), 6 Am. B. E. 369, 109 Fed. 777, hold- ing that a creditor with an attachment ob- tained and permitted by his debtor while insolvent may not follow up his attachment with a petition for an adjudication of bank- ruptcy against his debtor based upon the same claim without a formal release of his, levy; In re Schenkein, 113 Fed. 421, revg. on this point, s. c, 7 Am. B. E. 162. 89. Compare In re Schenkein (Eef., N. Y.), 7 Am. B. E. 162, with In re Hazens, Fed. Cas. 6,285, and In re Broich, Fed. Cas. 1,921. 90. In re Schenkein (Eef., N. Y.), 7 Am. B. E. 162; In re Burlington Malting Co. (D. C, Wis.), 6 Am. B. E. 369, 109 Fed. 777, holding that a creditor with an attach- ment obtained and permitted by his debtor while insolvent may not follow up his attach- ment with a petition againist his debtor based upon the same claim without a formal re- lease of his levy. A creditor who has received an attach- ment within the • four months' period may be a petitioner in proceedings to have his debtor adjudged a bankrupt, but before an order of adjudication is made he must for- mally surrender his attachment lien, and in the meantime the court of bankruptcy will restrain all persons from interfering 850 Who May File and Dismiss Petitions. t§ 59-b. i. Creditors who have an advantage through fraud. — ^As has been seen proofs of debt are not allowed if objection is made by a party in interest and that objection is sustained,®^ Thus, debts paid in part by a fraudulent transfer would probably be refused allowance. It is thought such claims will not sustain a creditor's petition, unless the petitioner surrenders his fraudulent advantage. Creditors who have merely connived at a " fraud on the law," '^ as well as those who have attempted or accomplished a fraud on the other creditors, cannot institute an involuntary proceeding. Neither class, it seems, comes into court with clean hands. But the adjudication of an insolent corpo- ration may not be defeated because its directors and stockholders join in the petition, thus preventing a sale of corporate property under an execution.*' j. Estoppel of creditors.**— (1) In genebal. — If it appears that the act of bankruptcy was secured by the connivance of a creditor, he should not be per- mitted to institute the proceedings.®* A petition may not be filed by a creditor who procures a judgment creditor to issue execution for the sole and express pur- pose of enabling him to file a petition against the debtor,*® or by two petitioning creditors who fraudulently compelled the bankrupt to pay the claim of a third creditor, thereby reducing the requisite number.®'' It is not immoral or illegal for petitioning creditors to solicit the alleged bankrupt not to defend, where he is in fact insolvent and has committed an act of bankruptcy, and this fact alone will not preclude them.'* On general principles of equity it would seem that a creditor who is also an officer of a corporation ought not to be per- mitted to petition his debtor (such corporation) into bankruptcy on the ground with the attached property until an adju- dication is had and a trustee appointed, or the petition in bankruptcy is dismissed. Matter of Hornatein (D. C, N. Y.), 10 Am. B. E. 308, 12?-Fed. 266. 91. See generally under Section Fifty-seven of this work. 92. Consult In re Gutwillig (C. C. A., 2d Cir.), 1 Am. B. E. 388, 92 Fed. 337; West v. Lea, 174 U. S. 590, 2 Am. B. E. 463. 93. First Nat. Bank v. Wyoming Valley Ice Co. (D. C, Pa.), 14 Am. B. E. 448, 136 Fed. 466. 94. See also Am. B. E. Dig. S 209. 95. In re Marks Bros. (D. C, Pa.), 15 Am. B. E. 457, 142 Fed. 279; Clark v. Henne (C. C. A., 5th Cir.), 11 Am. B. E. 583, 127 Fed. 288; Moulton v. Coburn (C. C. A., 1st Cir.), 12 Am. B. E. 553, 131 Fed. 201; In re Curtis (D. C, 111.), 1 Am. B. E. 440, 91 Fed. 737, affd. 2 Am. B. E. 440, 91 Fed. 737, affd. 2 Am. B. K. 226, 94 Fed. 830. And see, for what acts do not constitute on estoppel, Simonson v. Sinsheimer, 96 Fed. 579', as affirmed by C. C. A., 6th Cir., 3 Am. B. E 824, 100 Fed. 426; In re Winston (D. C, Tenn.), 10 Am. B. E. 171, 122 Fed. 187; Matter of Taylor House Association (D. C, N. Y.), 31 Am. B. E. 727, 732, 209 Fed. 924; Perry v. Langley, Fed. Cas. 11,006; Spicer v. Ward, Fed. Caa. 13,241. Preference made with approval of cred- itors. — Where an alleged banknipt_ conduct- ing its business under the direction of a creditor's committee, with the approval of the latter, borrowed money from a bank within four months preceding the filing of a petition against it, and gave collateral se- curity to an amount greater than the loan, and the trust company applied the excess to the bankrupt's past indebtedness to it, the creditors who were members of the commit- tee are estopped from objecting to the transfers as acts of bankruptcy. Matter of Freeman Cotting Coat Co. (D. C, Mass.), 32 Am. B. E. 489, 212 Fed. 548. 96. In re Marks Bros. (D. C, Pa.), 15 Am. B. E. 457, 142 Fed. 279. 97. Fraudulently reducing number of creditors. — ^Where two of three petitioning creditors after filing their petition colluded in an attempt to compel the alleged bank- rupt to pay the claim of the third and by various means procured a judgment by a justice of the peace, which the alleged bank- rupt was compelled to and did pay and satisfy; and that thereupon there was a failure of the requisite number of petition- ing creditors, it was held that the two peti- tioning creditors being responsible for the situation and the third creditor having ob- tained the judgment and payment thereof and been allowed to withdraw, the remaining two were estopped' from proceeding further as petitioning creditors. Cummins Grocery Co. V. Talley (C. C. A., 6th Cir.), 26 Am. B. E. 484, 187 Fed. 507. 98. In re Billing (D. C, Ala.), 17 Am. B E. 80, 145 Fed. 395. § 59-b.J Estoppel of Ceeditoes. 851 that such corporation has oommitted an act of bankruptcy, which act he himself brought about and caused to be committed.** (2) Assent to ob participation in assignment ob eeceiveeship. — Where a creditor has voluntarily assented to the administration of the bankrupt's estate by means of an assignment, as by accepting its terms, or otherwise actively co-operating in its execution, he is estopped from thereafter filiiig an involuntary petition ;^'"* and this disability extends to their subsequent vendees, disqualifying the latter from filing an involuntary petition in bankruptcy.*"^ However a creditor may not be estopped v^here it appears that he was misled into the assignment by misstatements,*"^ or where the petitioning creditors had 99. Per Judre Ray in Matter of Taylor HouBe Association (D. C, N. Y.), 31 Am. B. R. 727, 733, 209 Fed. 924. 100. Assent to general asslgrnment. — Doty v. Mason (D. C, Fla.), 40 4.m. B. E. 58, 244 Fed. 587; Utz & Dunn Co. v. Regulator Co. (C. C. A., Sth Cir.), 32 Am. B. R. 167, 213 Fed. 315; Des- pres V. Galbraith (0. C. A., Sth Cir.), 32 Am. B. E. 170, 213 Fed. 190; Matter of Oampe & Co. (D. C, Cal.), 38 Am. R. R. 792 ; Durham Paper Co. v. Seaboard Knitting Mills (D. C, N. Car.), 10 Am. B. R. 29, 121 Fed. 179; In re Miner (D. C, Mass.), 4 Am. B. R. 710, 104 Fed. 520; In re Perry & Whitney Co. (D. C, Mass.), 22 Am. B. R. 722, 172 Fed. 745, affd. 23 Am. B. R. 695, 175 Fed. 52; in this same case (22 Am. B. R. 780), on the petition of one of the bank- rupt's creditors to intervene it was held that where the holder of a note against a debtor had knowledge that he had made an assign- ment for creditors, allowed four months to elapse without any attempt to become a party to bankruptcy proceedings, charging said as- signment as an act of bankruptcy, both he and the assignee of the note are estopped from maintaining the bankruptcy petition. Compare Hays v. Wagner (C. C. A., 6th Cir.) , 18 Am. B. R. 163, 150 Fed. 533. In the case of Simons v. Sinsheimer, 3 Am. B. R. 824, 37 C. C. A. 337, 95 Fed. 948, Judge Taft said: "Where a debtor makes a general assignment for the benefit of his cr^itors, and judicial proceedings are insti- tuted to enforce and carry out the assi^- ment, creditors who, on being made parties to such proceedings, do not repudiate the as- signment, nor begin proceedings in bank- ruptcy, but file their claims under the as- signment, and participate in the administra- tion of the estate, and suffer the assignee to sell the property and collect the proceeds. Involving a delay of several months, and the incurring of costs and expenses, are estopped thereafter to file a petition in involuntary bMikruptcy against the assignor based solely on the ground of the assignment." Where, upon an insolvent debtor's making a general assignment for the benefit of cred- itors, certain creditors have voluntarily be- come parties to such assignment proceedings, such creditors by assenting to the assign- #ent are estopped from Instituting involun- tary bankruptcy proceedings against their debtor, bas^.. upon such assignment as- an act of bankruptcy. In re Romanow (D. C. Mass.), 1 Am. B. R. 461, 92 Fed. 510, citing Perry v. Langley, 19 Fed. Cas. 283, 283, where the court said: "If the proof was that Perry had advised the making of the assignment, or after its execution had expressly given his assent to it, as a creditor of Langley, he would have been precluded from Insisting on It as an act of bankruptcy, and could not have maintained a standing in this court as a petitioning creditor." Creditors, assenting in writing to a com- mon-law assignment for the benefit of cred- itors, are not, except under special circum- stances, entitled to join in an involuntary petition; alleging as the sole act of bank- ruptcy the making of such assignment. Moul- ton V. Coburn (C. C. A., 1st Cir.), 12 Am. B. R. 553, 131 Fed. 201, affg. 11 Am'. B. R. 212. Where, upon the proposal made at a meet- ing of all the creditors but one, of an insolv- ent debtor, he executes a transfer In the form of a deed of trust or chattel mortgage in the usual form, with power of sale and con- dition of defeasance of his stock of goods, etc., to a trustee, the creditors are estopped from setting up such conveyance as a ground of bankruptcy. Clark v. Henne ( C. C. A., 5th dr.), 11 Am. B. R. 583, 127 Fed. 288. In the Territory of Hawaii, there being no insolvent laws, creditors assenting to an assignment for the benefit of creditors, and acting under it to the extent of filing claims, are not thereby -estopped from petitioning for a decree of bankruptcy against the as- signor. Matter of Hlrose (D. C, Hawaii), 12 Am. B. R. 154, 2 U. S., D. C. Hawaii, 111. Creditor participating in proceeding under State law. — ^A creditor participating in pro- ceedings under a State insolvency law which are void because the operation of such law has been suspended by the bankruptcy act, is not estopped from attacking such proceed- ings and joining in a petition to have the dd>tor adjudicated an involuntary bankrupt. In re Weedman Stave Co., (D. C. Ark.), 29 Am. B. E. 460, 199 Fed. 948. 101. Utz & Dunn Co. v. Regulator Co. (C. C. A., Sth Cir.), 32 Am. B. "R. 167, 213 Fed. 315. 102. Matter of Canner (Ref., Mass.), 21 Am. B. R. 199, affd. sub nom. Canner t. Tapper Co. (G. C. A., Ist Cir.), 21 Am. B. R..8;72, 168 Fed. .619. 852 Who May File and Dismiss Petitions. [§ 59-b. simply filed their claims as required by the State law, but had not by any other act assented to or participated in or made themselves parties to the assignment complained of as an act of bankruptcy.^"^ The same estoppel -exists where the creditor has been an active and voluntary participant in ^ receivership proceedings in a. State court/"* but the mere fact that such pro- ceedings have been brought and a creditor has filed a claim with the receiver appointed therein as required by the practice of the court, will not prevent his subsequent participation in bankruptcy proceedings against the debtor.^"® But if the participation in receivership proceedings extends so far as the accept- ance of dividends the creditor is estopped.^"® k. Counting creditors when but one creditor petitions.^"' — Subsection h also provides that where all the creditors are less than twelve, one of such creditors whose claim equals the sum of $500 may file a petition. The doctrines already declared also apply where the sole question is the number of creditors in a given case. Only persons having provable 'debts -^"^ can be counted. The term " creditor " does: not include those who have small current monthly accounts against the bankrupt for groceries, fuel, and the like.-^"^^ Where the total of the indebtedness is at isaue, all debts preferentially paid must be counted.^"' A preferred creditor may not be counted against a petition, nor in computing the number of creditors that musit join in the petition, unless ho first surrenders his preference. But, if he surrenders his preference before the adjudication, he may counted after the surrender.^^* Were it not for these rules, a debtor might often successfully resist a petition by collusion with creditors whom he had preferred. It seems to be the rule that where, upon the filing of an involuntary petition in bankruptcy, there are not the proper number of petitioning creditors nor a sufficient amount of claims to support the petition, but subsequently and before the adjudication other cred- itors enter their appearances and join in the petition, such creditors and the amounts of their claims will be reckoned in making up the number of the 103. In re Curtis (D. C, 111.), 1 Am. B. R. appointed in such proceedings will not op- 440, 91 Fed. 737, affd. 2 Am. B. R. 226, 94 erate to estop the creditor from thereafter Fed. 630. See also Durham Paper Co. v. joining in a petition to have the insolvent Seaboard Knitting Mills (D. C, N. Car.), adjudged bankrupt, still, if with full knowl- 10 Am. B. R. 29, 121 Fed. 179. edge of hia rights, a creditor delays such 104. Loweustein v. McShane Mfg. Co. (D. action, making no suggestion to those inter- C, Md.), 12 Am. B. R. 601, 130 Fed. 107; ested in the administration of the estate Woodford v. Diamond State Steel Co. (D. until the property is sold, expenses incurred, C, Del.), 15 Am. B. R. 31,' 138 Fed. 582. and the rights of innocent persons attached. Matter of Commonwealth Lumber Co. (D; C, he will not be permitted to proceed in a Wash.), 35 Am. B. R. 202, 223 Fed. 667; In bankruptcy court after long delay, upon the re Gold Run Mining & Tunnel Co. (D. C, sole ground that an assignment was madfe or Col.), 29 Am. B. R. 563, 200 Fed. 162; Ohio a receiver appointed. Matter of McKinnon Motor Car Co. v. Eiseman Magneto Co. (C. Co. (D. C, IN". C), 38 Am. B. R. 727, 237 a A., 6th Cir.), 36 Am. B. R. 237. 230 Fed. Fed. 869. 370 ' Fed. 869. lbs. Filing claim in receivership proceed- ctr'cir°K'°36Tm.'B'^."R.V-23d'F™.%^S'.- ^^ ^- mgs.— The fact that proceedmgs have been 107. See also Am. B. E. Dig., § 211. instituted in a State court and are being con- 108. Bankr. Act, § 1(9) ; note the exception of ducted under a statute authorizing any cred- employees and laborers, discussed later. Com- ftor of an insolvent corporation to institute l^^' °° *''"' ^" '^ «'^"«« C"- 2 N. B. N. Rep. an action In the nature of a creditor's bill, for ioga. Matter of Burg (D. C, Tex.) 40 Am the purpose of winding up the business, and, B. R. 126, 245 Fed. 173. through the medium of a receiver, bringing to io9. In re Norcross (Ref,. Mo.), 1 Am B K sale it«- property and paying the proceeds to the 644; In re Tirre (D. C, N. Y.), 2 Am' b' r' creditors according to their priorities, does not 493, 95 Fed. 425. See also In re Cain (ilef' preclude the creditors from petitioning to have 111), 2 Am. B. R. 378, and In re Barrett Co" the corporation adjudged a bankrupt and have 2 N. B. Rep. 80, , Its assets administered In the bankruptcy court. 110. ^teven? v. Nave-McCord Co. (CCA Rth While the mere filing of a claim with a receiver Cir.), 17 Am. B. R. 609, 617, 150 Fed' 7i § 59-c, d.] Answee Avees Moee Than Twelve Ceeditoes. 853 creditors and the amount of claims necessary to support an involuntary petition in bankruptcy. The number, of creditors should be reckoned as of the date of the petition. ^^^ 1. Involuntary petitions must be in duplicate. — (1) Ik geneeal. — Although this seems to mean two petitions, each an original and not an original and a copy/'^ it has been held that the statute is fully satisfied by filing an origioial and a certified copy of the original prior to the four months' period.^^* These papers must be filed with the derk; handing them to him out of his office, while not usual, is enough. ^^* The duplicate is served with the subpoena on the alleged bankrupt. (2) Waivee of duplicate. — As the only benefit of filing a duplicate petition is to enable the debtor to answer more speedily and conveniently, an answer without a demand of the privilege is a waiver of it. It estops the debtor from thereafter insisting upon it, becatise it leads the petitioner to proceed and to incur expense in reliance upon the renunciation of the privilege which has become functus officio by the answer. ■'^^ IV. PRACTICE IF ANSWER AVERS MORE THAN TWELVE CREDITORS. a. In general. — Though the policy of the law is to require the concurrence of at least three .creditors in a petition, subsection d, in connection with sub- section /, in practice, results in petitions by one creditor in most cases where there is neither time nor opportunity to ascertain whether the alleged debtor has twelve or more. As a consequence, even if an answer alleging that num- ber of creditors is interposed, the quota of three is easily supplied by inter- veners, and a bankruptcy through one creditor in $500 is nearly as easy as it was under the former law before the amendments of 1874. The allegation Ihat the creditors are less than twelve can, nay, often must be, on information and belief, and, if so, it seenis, sufficient. -^^^ Insufficiency in the allegation as to the number of creditors is not an incurable jurisdictional defect.-^" b. Filing "list of creditors." — The "list of creditors" required of the defendant debtor by § 59-d of the statute, when he sets up as a defense to a petition by a single creditor that the number of his creditors is more than twelve, must contain, besides the bare names and addresses of such creditors, at least a statement of the amount due each creditor, the date of the debt, when due, whether due by note or account or by some form of contract, the consideration therefor, whether owned jointly with another, as partner or otherwise, and such full particulars as will enable the petitioning creditor to 111. Moulton V. Coburn (C. C. A., 1st 113. Millan v. Exchange Bank of Manning- Cir.), 12 Am. B. R. 553, 131 Fed. 201, affg. ton (C. C. A., 4th Cir.), 24 Am. B. R. 889, 11 Am. B. R. 212, holding that, in deter- 183 Fed. 753. mining whether, upon a, petition filed by a 114. Compare under Section Eighteen of single creditor, the number of creditors of this work. See also Am. B. R. Dig. §§ 232- an alleged bankrupt is less than twelve, 234. thirteen creditors, induced by the bankrupts' 115. In re Plymouth Cordage Co. (C. C. A., assignee under a. general assignment acting 8th Cir.), 13 Am. B. R. 666, 139 Fed. in behalf of creditors not to join in the peti- 1000. tion, should be counted. 116. In re Scamman, Fed. Cas. 12,427; 112. In re Dupree, 97 Fed. 28; In re Ste- Perrin & Gaff Mfg. Co. v. Peale, Fed. Cas. venson (D. C, Del.), 2 Am. B. R. 66, 94 10,981; In re Mann, Fed. Cas. 9,033. Fed. 110. In each of these cases a single 117. Matter of Haff (C. C. A., 2d Cir-), 13 paper had been filed within the four months' Am. B. R. 362, 68 C. C. A. 340, 136 Fed. 78. period. In each of them an application was See infra this section, Amendments of. Peti- made after the four months had expired to tion. permit the filing nv/nc pro tunc of a copy or a duplicate original. 854 Who May File and Dismiss Petitions. [§ 59-e. negotiate with others to join with him in the petition and save the necessity 'and cost of a reference to ascertain the facts. There should be no concealment of these particulars by the debtor in making such a defense. If the particulars of the debts contained in the list of creditors, where it is alleged by debtor that his debts are more than twelve in number, are not disclosed in the answer of the defendant, the court will, if necessary, refer the case to ascertain them, and thus settle any dispute between the parties concerning them.^^* c. Practice. — The practice on such an answer is distinctly marked out in this subsection. ^^® A. practical difficulty arises where a reference has been made to a special master. He is not " the court " and cannot, therefore, give the notice to the other creditors. This difficulty is usually met either by obtaining from the court an order directing him so to do, or by a stipulation of the parties. The mode of service of the notice is left to the discretion of the court; if the creditors named were actually served in time to intervene, the mode of service is immaterial. ^^'* If other "creditors " join in," they must do so in the court proper and not before the special master. Where such an answer raises other questions and other creditors do not intervene, the evidence should at first be confined to the single question of the number of creditors; the burden is on the alleged bankrupt. If the decision is with him, the petition must be dismissed. The words "such hearing" clearly refer to a trial of this issue only. Creditors may join in at any time before the evidence thereon is closed. The cases under the former law are often in point.^^ V. EXCLUSION OF EMPLOYEES, RELATIVES AND OFFICERS. .Subsection e excludes from the computation the bankrupt's employees and relatives within the third degree. While claimants who have an advantage in dollars are not excluded in ascertaining the number of creditors, those pre- sumably in the control of the bankrupt are. The purpose — to prevent the creation of fictitious debts and thereby the number of creditors where less than twelve are alleged — is clear. But the subsection hardly goes far enough to prevent that evil. In line with its policy, it has been held that the officers of a bankrupt corporation, who are also its creditors, should be excluded. *^^ This may be doubted. ^^ The subsection is by way of limitation and should be construed strictly. Only employees at the time of the bankruptcy and relatives by consanguinity or affinity within .the third degree should be excluded. The statute is silent concerning whether, being so excluded, these classes may be petitioning or intervening creditors. It has been held that a relative who may not be counted in computing the number of creditors may bring a petition.*** 118. W. A. Gage & Co. v. Bell (D. C, titioning for the adjudication of the cor- Tenn.), 10 Am. B. R. 696, 124 Fed. 371. poration in bankruptcy on the ground that 119. That the list of creditors must be it had admitted its inability to pay its debts "under oath,'' compare In re Steinman, Fed. and its willingness to be adjudged a bank- Cas. 13,357; In re Hymes, Fed. Cas. 6,986. rupt on that ground, merely because their See also "Supplemental Forms," post. presence at the meeting of the board of 120. In re Tribelhorn (C. C. A., 2d Cir.), directors, when such admission was made, 14 Am. B. E. 491, 137 "Fed. 3. was i;ecessary ■ to its validity. Home Pow- 121 Robinson v. Hanway, Fed. Cas. 11,- der Co. v. Geis (C. C. A., 8th Cir.), 29 Am. 953- in re Sheffer, Fed. Cas. 12,742. B. R. 580, 204 Fed. 568. 122 In re Barrett Co., 2 N. B. N. Rep. 80. 124. Perkins v. Dorman (D. C, N. Mex.), 123. (ire^itors of a corBoration, .w.h 16,981. Contra: In re Boston, etc., Co., Fed. preference charged In the amended nptitin-V Cas. 1,679; and, under the law of 1841, Dutton In re Cleary (D. C Pa) 24 Am E ^r --l' V. Freeman, Fed. Cas. 4,210; In re Tallmadge, 179 Fed. 990. ' " 858 Who May File and Dismiss Petitions. [§ 59-f. is to "join in" the petition, it may be by a verified petition, and is usu- ally beard ex parte. If granted, tbe applicant becomes as mucb a petition- ing creditor as if be bad joined in tbe original petition."* Wbetber a new act of bankruptcy can be alleged in sucb a petition is doubted. If sucb act was committed more tban four montbs before, tbougb witbin four montbs of tbe filing of tbe original petition, it certainly sbould not he^^ In any event, a petition wbicb tbus cbanges tbe issue sbould not be made, save on notice to all parties. Tbe better practice is to amend tbe original petition,^'^ after tbe order of intervention is granted. All parties to tbe proceeding sbould be notified of tbe entry of tbe order; tbis is usually done by tbe intervener's attorney. Professional courtesy suggests tbat sucb notice be accompanied by copies of tbe petition and order, if any. Any party to tbe proceeding may respond tbat tbe intervener is not a creditor ;^^^ otberwise, a reply is usually unnecessary. If tbe order bas been granted, sucb a response can be brougbt upon motion to vacate or an order to sbow cause. Notice sbould be given all parties wbo bave appeared. Wbere tbe validity of tbe claim of a petition- ing creditor is put in issue and tbe claim is adjudged valid, tbe adjudication is res adjudiccda in tbe bearing of a subsequent objection to tbe allowance of tbe claim on tbe same ground.^^* d. Notice to creditors^ — Tbe bankruptcy statute carefully selects and specifies tbe instances in wbicb it intends to give tbe creditor tbe rigbt to notice. Tbe filing of a petition in involuntary proceedings by proper parties, making tbe jurisdictional allegations, operates as lis pendens, and is noticeto all tbe world ; and no otber notice to creditors of tbe proceeding is necessary.^^^ Tbe only instance in wbicb any right to notice is .given tbe creditor, as to tbe dispo?ition of an involuntary petition, is wben it is proposed to dis- miss tbe proceedings by consent of tbe parties, or for want of prosecution.^^ Vn. AMENDMENTS OP PETITIONS.16S Amendments relating to tbe number of tbe petitioning creditors and tbe amount and nature of tbeir claims can be made more tban four montbs after tbe commission of tbe act of bankruptcy. Wben so made tbey relate back to tbe date of tbe filing of tbe original petition.-'^* But wbere an alleged bank- rupt fails to answer or plead to an involuntary petition filed against bim, it may not tbereafter be amended so as to allege acts of bankruptcy prior to tbe acts of bankruptcy set fortb in a second petition.^" And an application to amend by alleging an additional act of bankruptcy sbould be denied wben 149. Compare In re Beddingfleld (D. C, Ga.), ton (C. C. A., 4th Cir.), 24 Aro. B. E. S89, ISa 2 Am. B. E. 355, 96 Fed. 190. Fed. 753; State Bank v. HasweU (C. C. A., 8th IjO. For a sufiScJent reason, see In re Lacy. Cir.), 23 Am. B. E. 330, 174 Fed. 209; Eyan v. Fed. Gas. 7,965. Hendricks (C. C. A., 7th Cir.), 21 Am. B. E. 570, 151. See under Section Eighteen of this work. 166 Fed. 94 In re Plymouth Cordage Co. (C. 152. Compare In re Taylor, 1 N. B. N. 412. C. A., 8th Cir.), 13 Am. B. E. 685, 135 Fed. 1000- 153. Ayres v. Cone (C. C. A., 8th Cir.), 14 Am. Matter of Haff (C. C. A., 2d Cir.), 13 Am. B e! B. E. 739, 138 Fed. 778. 362, 68 C. C. A. 340, 136 Fed. 78; Matter of 153a. Gratiot County State Bank v. Johnson Jones (D. C, Tenn.), 31 Am. B. E 693 209 Fed (U. S. Sup. Ct.), 43 Am. B. E. 357, 39 Sup. Ct. 717, holding that a petition to amend the orig- 263, rev'g 38 Am. B. E. 518, 160 N. W. 544; inal petition so aa to allege a preference Coppard v. Gardner (Tex. Ct. of Civ. App.), 40 through legal proceedings, should be denied Am. B. E. 777, 199 S. W. 650, citing Collier on where it does not appear that the preference Bankruptcy (Uth ed.) 858. was made within four months prior to the filing 154. In re Billing (D. C, Ala.), 17 Am. B. E. of the original petition; Matter of Condon (C 80, 145 Fed. 395. C. A., 2d Cir.), 31 Am. B. E. 754, 209 Fed. 800, 155. See also discussion under f 18, ante, and atfg. 29 Am. B. E. 907, 198 Fed. 947. Am. B. E. Dig., § 231. 107. In re Harris (D. C, Ala.), 19 Am. B E 156. Doty T. Mason (D. C, Fla.), 40 Am. B. 204, 156 Fed. 875. ' E. 58, 244 Fed. 587; Millan v. Bank of Manning- § 69-g.J Dismissals of Petitions. 859 it does not appear when the act was committed or who was benefited thereby/* The discretion of the Bankruptcy Court in granting or refusing amendments in petitions will not be interfered with unless an abuse of discretion is shown. ^^* VIII. DISMISSALS OF PETITIONS. A petitioning creditor cannot withdraw^^ and thus reduce the number to less than three. A proceeding once begun must result either in an adjudica- tion or a dismissal. Subsection g has to do only with dismissals, other than on the merits. Dismissal for "want of prosecution" is not justified by the mere failure of creditors to present evidence in support of their petition, with- out notice to creditors, where it appears that the petitioning creditors and the alleged bankrupt agreed to such dismissal.^^ It is provided by the amendment of 1910 that before the court will entertain an application for a dismissal, the bankrupt must file a list of his creditors with the addresses, and will cause notices to be served on such creditors. A dismissal may be had on motion of bankrupt without notice to creditors who have not intervened where there is no suggestion of collusion, ^^ Its close connection with § 58-a (8) should be noted ; also a practical diflSculty previously mentioned.*** The fact that after adjudication the bankrupt appears to be solvent is not of itself sufficient grounds for dismissal.*^ It is clearly intended to prevent the use 158. Matter of Lewis Shoe Co. (D. C, Mass.), 38 Am. B. E. 134, 235 Fed. 1017. 159. Sabin, Blake-McFall Co. (C. C. A., 9th Cir.), 35 Am. B. R. 179, 223 Fed. 501. Discretion of court. — ^Amendments are freely allowed, but are within the discretion of the court, which discretion will not ordi- narily be disturbed. The court should not permit the filing of an amended petition in which the petitioners swear to positive aver- ments of facts, where they had testified that they had no such knowledge as would justify the averments. Matter of Frank (C. C. A., 3d Cir.), 38 Am. B. E. 674, affg. 37 Am. B. E. 19, 234 Fed. 665. 160. In re Eosenfields, Fed. Cas. 12,061; In re Philadelphia Axle Works, Fed. Cas. 11,091. But see In re Sargent, Fed. Cas. 12,361. Three out of four petitioning cred- itors should not be permitted to withdraw on the claim that the other petitioner is not a creditor. See In re Quincy Granite Quar- ries Co. (D. C, Mass.), 16 Am. B. E. 833, 147 Fed. 279. Where one of three petition- ing creditors has withdravm and the other two are estopped from proceeding because of conduct in violation of their duty, the peti- tion may be dismissed. Cummins Grocery Co. V. falley (0. C. A., 6th Cir.), 26 Am; B. E. 484, 187 Fed. 507. 161. "Want of prosecution." — Where pe- titioning creditors follow up a petition in all formal matters, and duly attend before the referee, their failure to offer any evidence to sustain the petition does not constitute a " want of prosecution," within the meaning of section 59-g of the Bankruptcy Act, pro- viding that an involuntary petition shall not be dismissed " for want of prosecution or by consent of parties " until after notice to the creditors. Matter of Chalfeu (D. C., Mass.), 35 Am. B. E. 257, 223 Fed. 379. 162. Matter of Levi (C. C. A., 2d Cir.), 15 Am. B. E. 294, 142 Fed. 962. Dismissal of proceedings. — ^Where prac- tically all of an alleged bankrupt's creditors assent to a dismissal of involuntary bank- ruptcy proceedings, either aflBrmatively or by failure to oppose, and the statutory three creditors are not found insisting on a con- tinuance thereof, and no deception is sug- gested to have been practiced on creditors, the proceedings should be dismissed. In re Eosenblatt & Co. (C. C. A., 2d Cir.), 28 Am. B. E. 401, 193 Fed. 638. Compare Matter of Ortiz & Co. (D. C, Porto Eico), 44 Am. B. R. 123. Notice to creditors.— Section 59-g of the Bankruptcy Act, providing for notice to cred- itors of a motion to dismiss a petition, does not require service of notice upon all the creditors of the alleged bankrupt; notice to petitioning creditors who have appeared in the proceeding is sufficient. Matter of Ma- son-Seaman Transportation Co. (D. C, N. Y.), 37 Am. B. E. 677, 235 Fed. 974. 163. See ante, under this section, and also Bankr. Act, '% 58-a (8). Where the dismissal is on the Initiation of the court, notice to creditors is not required. Matter of Crisp (D. C, Tenn.), 38 Am. B. R. 658. 164. In re Jamaica Slate Hooflnsr & Supply Co. (D. C, N. Y.), 28 Am. B. R. 763, 197 Fed. 240. 860 Who May File and Dismiss Petitions. [§ 59-g- of the court as a means to compel a settlement with the petitiomng creditor. It is in line with the principle that the filing of a petition confers jurisdiction as to all creditors as well as over all property; it guarantees them notice of the step which may end such jurisdiction,^"^^ The cases under the present law and the practice have already been considered."^ 164a. Matter of MaUcan (O. 0- A-, 3d Dig. §§ 271-374. For forma, see " Supple- Cir.), 44 Am. B. R. 433, Z&l Fed. 894. mentary Forms," post; Hagar and Alexau- 165. See under Sections Eighteen and der's Bankruptcy Forms (3d Ed.). Fifty-eight of this work. See also Am. B. E. SECTION SIXTY. PREFERRED CREDITORS. § 60. Preferred Creditors.— a.. A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer wiU be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. "Where the preference consists in a transfer, such period of four months shall not expire until four months after the date of the recording or registering of the transfer, if by law such recording or registering is required. h If a bankrupt shall have procured or suffered a judgment to he entered against him in favor of any person or have made a transfer of any of his property, and if, at the time of the transfer, or of the entry of the judgment, or of the recording or registering of the trans- fer if by law recording or registering thereof is required, and being within four months before the filing of the petition in bankruptcy or after the filing thereof and before the adjudication, the bankrupt be insolvent and the judgment or transfer then operate as a preference, amd the person receiving it or to be benefited thereby, or his agent acting therein, shall then have reasonable cause to believe that the enforcement of such judgment or transfer would effect a preference, it shall be voidable by the trustee and he may recover the property or its value from such person* And, for the purpose of such recovery, any court of bankruptcy, as hereinbefore defined, and any State court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.! c If a creditor has been preferred, and afterwards in good faith gives the debtor further credit without security of any kind for prop- erty which becomes a part of the debtor's estates, the amount of such new credit remaining unpaid at the time of the adjudication in 'Amendments of 1910 in italics. tAmendment of 1903 added last sentence, [861] 862 Peefekeed Ceeditoes. [§ 60. bankruptcy may be set off against the amount which would other- wise be recoverable from him. d If a debtor shall, directly or indirectly, in contemplation of the filing of a petition by or against him, pay money or transfer property to an attorney and counselor at law, solicitor in equity, or proctor in admiralty for services to be rendered, the transaction shall be re- examined by the court on petition of the trustee or any creditor and shall only be held valid to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the trustee for the benefit of the estate. Analogous provisions: In TT. S.: As to voidable preferences. Act of 1867, ! 36, R. S., §§ 5128, 5130A; Act of 1841, § 2; Act of 1800, § 28; As to fraudulent conveyances. Act of 1867, S 35, R. S., §§ 5129, 5130A; As to transfers out of the ordinary course of business being presumptively fraudulent. Act of 1867, § 35, R. 8., § 5130; As to fraudulent preferences being an objection to a discharge. Act of 1867, § 44, R. S., S 5110. In Eng.: As to "fraudulent" preferences, Act of 1883, § 48; as to "undue" preferences being an objection to a discharge, Act of 1890, § (3) (i). In Can.: Act of 1919, §§ 31, 32, 33. Cross-references: To the law: Definition of transfer, § 1(35). Suffering or permitting preference through legal proceedings, act of bankruptcy, I 3-a(3) ; transfer of property to prefer creditor, act of bankruptcy, § 3-a(2). Fraudulent transfer ground for refusing discharge, § 14-b(4)., Jurisdiction of suits for recovery of preferences, § 23-b. Liens created within four months' period void, § 67-b; liens obtained through legal proceedings, § 67-f. Trustee may avoid preferential transfers, § 70-e. SYNOPSIS OF SECTION. FREFBRRBD ORBDITORS. I. Preferences in Bankruptcy, 864. a. Historical statement, 864. b. Comparative legislation, 865. (1) In England, 865. (2) In the United States, 865. (3) In Canada, 865. c. Definition of a preference under present law, 865. d. Effect of defindtion prior to amendments of 1903, 866. e. Distinction between preference and fraudulent transfer, 86T. H. Elements of a Preference, 867. a. In general, 867. b. While insolvent, 869. (1) In geneeax, 869. (2) Time of insolvency, 869. ,.^ (3) Peoof op insolvency, 870. (4) Valuation of Peopeety, 870. § 60.J Synopsis of Section. 863 II. Elements of a Preference — Continued, c. Within four months, 871. (1) In general, 871. (2) When time begins to run, 871. (3) Performance of agreement made prior to four months' PERIOD, 872. (4) Date of contract governs, 873. (5) Possession within four months' period, 874. (6) Assignment of property within four months, 875. (7) Prior to the amendments of 1903, 875. (8) Running of time where recording is required, 876. (I) In general, 876. (II) Registering or recording required by state law, 877. (Ill) Transfers prior to four months' period recorded within such period, 880. d. Procured or suffered a judgment, 881. e. Made a transfer of his property, 881. (1) In general, 881. (2) Method of transfer, 881. (I) In general, 881. (II) Transfer by indirection, 882. (III) Partnerships and individual assets, 883. (IV) Contract of conditional sale, 884. (3) Intent or good faith, 884. (4) Estate must be diminished, 885. (I) In general, 885. (II) Fair consideration for present loan, 886. (III) Payments on account; net result rule, 886. (IV) SvLstitution of securities, 887. (5) Payment of antecedent debts, 887. (6) mtjrtgage of property, 889. (7) Notes and checks, 891. (8) Transaction of banking business, 892. (9) Deposit of money, 893. (10) Payment of wages, 894. (11) Transfers that are voidable, 894. f. Effect, a greater percentage, 894. (1) Provisions of statute, 894. (2) Class of creditors, 894. (3) Who are creditors of the same class, 895. (4) Test a greater percentage, 896. (5) Intent immaterial, 896. g. Creditors only may be preferred, 897. (1) In general, 897. (2) Transfer to another for benefit op creditor, 897. (3) Indobser or surety, 899. (4) Misappropriation or conversion op funds, 900. h. Illustrative cases, 901. 864 Pbefeeeed Ceeditoes, [§ 60. m. What Preferences are Voidable, 902. a. In general, 902. b. Reasonable cause to believe a preference will result, 902. (1) In general, 902. (2) Time of cause to believe, 902. (3) Intent to prefer; effect of amendment of 1910, 903. (4) Actual knowlsdge not required, 904. (5) Mere guess or suspicion insufficient, 907. (6) Knowledge of insolvency, 909. (I) Bjfect of amendment of 1910, 909. (II) Presumption where fact of insolvency is Tcnown, 909. (III) Proof of reasonable cause to ielieve insolvency, 910. (IV) Belief of insolvency question of fact, burden of proof, 911. (V) Payments by insolvent in ordinary course of business, 912. (VI) Knowledge of debtor's financial difficulties, 912. (VII) Pleading cause to believe insolvency, 913. (7) Purpose and effect to be considered, 913. (8) Evidence of reasonable cause to believe, 914. (9) Sale of entire stock, 915. c. Belief or knowledge of agent or attorney, 916. d. Recovery of preference, 917. (1) In general, 917. (2) Recovery by trustee only, 918. (3) Against whom action brought, 918. (4) In what court; the amendments of 1903, 919. (5) Permission to sue, 921. (6) Practice, 921. (7) Dower in property covered by preferential transfer, 922. e. Property or its value, 922. (1) In general, 922. (2) Damages, 923. (3) Costs, 924. IV. Set-0£f of a Subsequent Credit, 924. a. Prior to amendments of 1903, 924. b. Meaning of subsection c, 924. ; V. Preferences to Bankrupt's Attorney, 925. a. In general, 925. b. Practice, 927. c. Illustrative cases, 928. I. PREFERENCES IN BANKRUPTCY, a. Historioal statement. — A preference is a "conventional fraud;" the debtor merely prefers to pay one creditor more than, or to the exclusion of, others. At common law, such a payment or transfer was not even con- structively fraudulent, though as early as 1635, preferential transfers were regulated by statute and, for more than a century, were punishable as crimes. § 60-a.J Definition of Peefere-nce, 8G5 Our modem doctrine that preferences are wrongs on other creditors was first declared by Lord Mansfield.^ b. Comparative legislation. — (1) In England. — There was no statutorj definition of a preference prior to the English act of 1869 ; though the insolvent debtor acts, beginning with that of 1824, contained clauses declaring what were preferences in cases where debtors other than traders sought the refuge of the courts.^ Even now the English law explains, rather than defines what is a preference. Prior to these enactments, the courts had construed the word "preference" with considerable elasticity; the elements of proof varied from decade to decade, and many hair-splitting and sometimes inex- plicable distinctions were made. The statutory definition in England is thus the result of more than a century of decisions, some of them by judges whose names have become household words. By § 48 of the act of 1883, the elements of a preference are: (1) A payment or transfer or conveyance, (3) by a person unable to pay his debts as they become due, (3) with a view to giving the person to whom it is made an advantage over other creditors, provided (4) such payment is made within three months of the bankruptcy. The English law specifically protects payments in due course of trade, and has since the middle of the ei^'teenth century;^ hence, what are known as "pro- tected transactions." (2) In the United States. — Our first definition of preferences in a bankruptcy law appears in that of 1841.* It is somewhat unscientific. That in the law of 1867 was identical with the present English definition, save in the time limit — ' four months instead of three — and the additional elements on the part of the creditor of (1) reasonable cauae to believe that the debtor was insolvent, and (2) knowledge that the payment was in fraud of the act.^ (3) In Canada. — The elements of a preference in Canada are the same as Ihose under the English Act of 1883 mentioned above, with the proviso that payments for an adequate consideration received without notice of' the com- mission of an act of bankruptcy by the debtor, are protected. ^^ c. Definition of a preference under present law.— Subsection a has been held to be a controlling definition of a preference.® We have "already referred to the term as so defined under § 1. It has been doubted whether this is altogether accurate.'' Certainly a preference which amounts to an act of bankruptcy must still show intent,^ and the so-called definition does not exactly dovetail into another subsection.® It is, however, a definition when applied to a transaction voidable under subsection h. The wide gap between the term as defined in subsection a and all definitions heretofore recognized should always be borne in mind. It makes many of the cases under the former law inapplicable. Briefly, it differs from the present English definition in (1) the elimination of "intent" and the sub- stitution of "the result of the act," and (2) in making the preference period four months instead of three ; while, when considered as an act that is voidable, 1. Worsely v. de Mattos, 1 Burr, 467; Alder- Sn2, 112 Fed. 406; Stern, Falk & Co v Louis- son v; Temple, 4 Burr. 2235. Tillo Trust Co. (C. C. A., eth Cir.), 7' Am B 2. For historical review, see In ro Hall (Ref., R. 305, 112 Fed. 501. N. T.), 4 Am. B. B. 671. 7. It has been held merely a "rule of evi- 3. English Act of 1883, § 40. Jence" (In re Piper, 2 N. B. N. Rep. 7) See 4. Act of 1S41, § 2. also Stern, Falk & Co. v. Louisville Trust Co 5. Act of 1867, § 35, E. S., § 5128. The (C. C. A., 6th Cir.), 7 Am. B. R. 305, 112 Fed' amendatory act of 1874 changed "-belief" of a 501. fraud on the act to "knowledge." 8. See Bankr. Act, § 3-a (2), and the cases 5a. Can. Bankr. Act of 1019, i§ 31, 32. cited. «. Swarts V. Fourth Nat. Bank (C. C. A., 8th 9. Bankr. Act, § 67-c (1). Compare In re Mc- Cir.), 8 Am. B. R. 673, 117 Fed. 1; In re Steers Lam. (D. C, Vt), 3 Am. B. R. 245, 97 Fed 922 Lumber Co. (C. C. A., 2d Cir.), 7 Am. B. E. ' ' 866 Peefeeeed Ceeditoes. [§ 60-a. it differs from that of our law of 1867, not only in substituting the result for the intent save in so far as the latter is an element of "reasonable cause to believe," but also in requiring the attacking trustee to show only that the creditor had reasonable cause to believe that a preference was intended instead of the more difficult elements of proof, indicated above. The present law, too, distinguishes between a mere preference in fact and one that is voidable.^" d. Eflfect of definition prior to amendments of 1903. — The controversy touch- ing the effect of this new definition on transactions in due course of trade has now passed into history. In brief, the view that subsection a defined a prefer- ence led to the doctrine that payments on account after insolvency were preferences without either knowledge of insolvency on the part of the debtor, or reasonable cause to believe that a preference was intended on the part of the creditor ; a doctrine that reversed the rule that good faith was the test and rendered cash transactions in business not only the safest course, but, in effect, essential.-'^ As a consequence, the meaning of both subsection b and sub- section c was greatly enlarged by judicial construction. Indeed, the very existence of the bankruptcy system was for a time put in jeopardy. The reports are full of cases bearing on these much-mooted questions. The amendatory act of 1903 has brought the statute back to what its framers intended it to say, and thus made most of these cases valueless. The principal evil to be cor- rected by the amendment of 1903 was that of secret preferences given by with- holding from record instruments which by the whole policy of recording statutes should be recorded.^^ Section 60 as amended and § 3-a are to be con- strued in harmony. ■'^ Some of the numerous cases arising prior to the amend- ment of 1903 are cited in the foot-note." 10. For an unusual case, see In re Chap- erence might be set aside if the bankruptcy lin (D. C., Mass.), 8 Am. B. E. 121, 115 Fed. petition was filed within four months after 162. the day of recording. The court of appeals 11. " This was never intended by the fram- in this circuit has said that the purpose of ers of the law, and it works obvious injustice this amendment was to bring the two sections and is the source of 99 per cent, of the objec- into harmony, and that the provision con- tioTi3 to the law." (House Judiciary Commit- cerning recording should receive the same tee's Report accompanying amendatory bill, construction in each section." Citing In re April 21, 1902.) Loeser v. Savings Bank, 17 Am. B. E. 628, 12. In re Dundore (D. C, Pa.), 26 Am. B. 148 Fed. 975, 78 C. C. A. 597, 18 L. E. A. (N. R. 100; Loeser v. Savings Deposit Bank (C. S.) 1233. C. A., 6th Cir.), 17 Am. B. R. 628, 148 Fed. 13. In re Donnelly (D. C, Ohio), 27 Am. 978. B. R. 504, 193 Fed. 755. As to eflfect of fail- Purpose of amendment. — In the case of ure to conform requirements of § 60, as to In re Sayed (D: C, Mich.), 26 Am-. B. E. recording or filing transfers with those pre- 444, 185 Fed. 962, the court said: "It is scribed in § 3-b, see Carey v. Donohue, 240 familiar history, in connection with the orig- U. S. 430, 36 Am. B. E. 704, 709. inal Bankruptcy Act, that the giving of a 14. That partial payments in due course preference might come within the definition of trade are "preferences": In re Knost of an act of bankruptcy, and so might by rea- (Eef., Ohio) , 2 Am. B. E. 471 ; aifd. as Stro- son of the time provision for recording found bel v. Knost (D. C, Ohio), 3 Am. B. R. 631, in connection with this definition be the basis 99 Fed. 409; In re Conhaim (D. C, Wash.)' of an adjudication ; and yet that same prefer- 3 Am. B. R. 249, 97 Fed. 923 ; In re Fort ence could not be set aside by the trustee Wayne Electric Co. (D. C. Ind.) 13 Am. under section 60, because mo than four B. E. 186, 96 Fed. 803; affd. as Columbus months' time had elapsed after the giving of Electric Co. v. Worden (C. C. A., 7th Cir.), the preference, and before the filing of the 3 Am. B. E. 634, 99 Fed. 400; In re Pixen petition in bankruptcy. To meet this diflS- (C. C. A., 9th Cir.), 4 Am. B. R. 10, 102 Fed. culty, the amendment of 1903 to section 60-b 296; Carson, etc., Co. v. Chicago Title & provided that, if the instrument of preferen- Trust Co., 182 U. S. 438. 5 Am'. B. E. 814, tial transfer was one which by law was re- 45 L. ed. 1171, 21 Sup. Ct. 906; that they are quired or permitted to be recorded, the pref- not: In re Piper, 2 N. B. N. Eep. 7; in re § 60-a.J Elements of Peefeeence, 867 e. Distinction between preference and fraudulent transfer. — Conveyances may be fraudulent because the debtor intends to put his property beyond the readi of his creditors; or because he intends to hinder and delay them as a class; or by preferring one who is favored above the others. There is no necessary connection between the intent to prefer and that to defraud ; but inasmuch as one of the common incidents of a. fraudulent conveyance is the purpose on the part of the grantor to apply the proceeds in such a manner as to prefer favored persons, the existence of such intent to prefer is an important matter to be considered in determining whether there was an intent to defraud. But the two purposes are not of the same quality, either in conscience or in law, and one may exist without the other. The statute 'recognizes the difference between the intent to defraud and the intent to prefer, and also the difference between a fraudulent and a preferential conveyance. One is inherently and always vicious; the other innocent and valid, except when made in violation of express provisions of law.^^ One is malum per se and the other malum prohibitum, and then only to the extent that it is prohibited. A fraudulent conveyance is void, regardless of its date; a preference is valid unless made within the prohibited date.-^* II. ELEMENTS OF A PREFERENCE. a. In general. — Since the amendatory act, a preference consists in a person, (1) while insolvent and (2) within four months of the bankruptcy, (3) pro- curing or suffering a judgment to be entered against himself or making a transfer of his property, (4) the effect of which will be to enable one creditor to obtain a greater percentage of his debt than any other creditor of the same class. Such a preference is voidable at the instance of the trustee, if (5) the person recovering it or to be benefited thereby has (6) reasonable cause to believe that the enforcement of the judgment or transfer will result in a Smoke (D. C, N. Y.), 4 Am. B. R. 434, 104 payment of a debt, the tranaaction is valid Fed 289- In re Hall (Ref., N". Y.), 4 Am. at common law. Lyon v. Wallace, 35 Am. B. R. 67i; In re Ratliflf (D. C, K Car.), 5 B. R. 688, 108 N. «. 1075; and see Kentucky Am. B. R. 713, 107 Fed. 780. See, for a vig- Bank & Trust Co. v. Pritchett (Okla. Sup. orous protest against the doctrine of Carson, Ct.), 33 Am. B. R. 190, 143 Pac. 338. etc., Co. V. Chicago Title & Trust Co., In re Until the commencement of bankruptcy pro- Dickson (C. C. A., Ist Cir.), 7 Am. B. R. 186, ceedings a debtor has the right to dispose 111 Fed. 726. There are also numerous cases of his property, the right to receive and pay pro and con, (1) whether a payment which his debts with it and the right to receive exactly cancels one of several obligations and pay one of his creditors in preference to must be surrendered; for instance, see In re others, provided the payment or security is Conhaim (D. C., Wash.), 3 Am. B. E. 249, 97 not violative of any act of Congress or law Fed. 923; also In re Beswick (Ref., Ohio), 7 of the State. Johnson, Baillie Shoe Co. v. Am. B. E. 395, and Kimball v. Eosenham Co. Bardsley (C. C. A., 8th Cir.), 38 Am. B. R. (C. C. A., 8th Cir.), 7 Am'. B. R. 718, 114 492, 237 Fed. 763. Fed. 185; In re Seay (D. C, Ga.), 7 Am. Before a bankrupt has been adjudicated as B. R. 700, 113 Fed. 969, and In re Beswick such he has the right to deal with his prop- (Eef., Ohio), 7 Am. B. E. 403; and (2) erty as he may see fit, so long as he does not .whether a, subsequent credit could be set off Sive a preference to any creditor or impair the against a preference, some of which are cited ^J,",^, "f^ masf *Sud C?'f "^rAm'^B ^R^'pif later under this section. None of these eases -[141? E 2M ' are thought now applicable. 16. Van Iderstine v. National Discount Co 15. Right to' prefer.— It is not a fraud 227 U. S 575 29 Am. B. E. 478 57 L ed 652, J. 1 c J i-i • i • T-i J 33 Sup. Ct. 343; Kentucky Bank & Trust Co. at common law for a debtor m straightened y. Pritchett (Sup. Ct., Okla.), 33 Am B e! circumstances to prefer one or more creditors, 190, 143 Pac. 3.38; Watson v. Adams (C. C. A.", though payments so made render it impos- Bth dr.), 39 Am. B. E. 473, 242 Fed. 441; Smith sible to pay other creditors. If the sole ob- les^"'"'^ ^°- ^- ^^■'>' *^ '*■"'• ^- "• ^^^- 2*^ Fed. ject of the transfer is to pay or secure the 868 Peefeeeed Ceeditoes. [§ 60-a. preference." If any of these elements is wanting, a preference cannot be set aside if otherwise valid under the State law.^* If the transfer was made or the judgment procured or suffered while the -debtor was insolvent and the effect of such transfer or judgment was to enable one creditor to obtain a greater percentage of his debt than any other creditor of the same class, such transfer or judgment is a preference.^* The burden of proving the existence 17. Craig T. Sharp (Mo. Ct. of App.), 45 Am. B. E. 137. 219 S. W. 95, citing Collier on Bank- ruptcy (11th Ed.) 867. No matter how devious the scheme (see In re Belding [D. C, Mass.], .8 Am. B. E. 718, 116 Fed. 1016), if it comes •fairly within the purpose of the statute as eyl- •aJenced by its words. It .will be a voidable preference. See Stern, Falk & Co. v. Louis- ville Trust Co. (C. C. A., 6th Cir.), 7 Am. B. E. 305, 112 Fed. 501; In re Beerman (D. •C, Ga.), 7 Am. B. E. 431, 112 Fed. 662; Stern v. Mayer, 16 Am. B. E. 763. 113 N. Y.. App. Div. 181, 98 N. Y. Supp. 1028. For a case where nearly all the elements were lack- ing, see Brown v. Guichard, 7 Am. B. E. 515, 37 J^. Y. Misc. 78, 74 N. Y. Supp. 735. See Am. Bankr. Dig. § 482. The amendment of 1910 makes " reason- able cause to believe that the enforcement of such judgment or transfer would effect a preference " an essential element of a prefer- ence, instead of "reasonable cause to believe that a preference was intended." Essential elements of preference. — In the case of Sebring v. Wellington, 6 Am. B. K. 671, 63 N. Y. App. Div. 498, 171 N". Y. Supp. 788, the court said: "It seems to be con- ceded that in order to render a preference voidable within the provisions of this section it is necessary to establish four facts, viz: (1) the insolvency of the transferor; (2) the obtaining by one creditor of a greater per- centage of his debt than any other creditor of the same class ; ( 3 ) the giving of a prefer- ence within four months before the filing of the petition in bankruptcy; and (4) reason- able cause on the part of the creditor to believe that a preference was intended." The same is held in Matthews v. Hardt, 9 Am. B. R. 373, 79 N. Y. App. Div. 570, 80 N. Y. Supp. 462. These cases were decided prior to the amendment of 1903. To this element must now be added those referred to in the text based upon the amendment of 1903. The text is cited with approval in the case of lirown V. City National Bank (M". Y. Supp. Ct.), 26 Am. B. E. 638, 72 N. Y. Misc. 201, 131 N. Y. Supp. 92. And see Newman v. Tootle-Campbell Dry Goods Co. (Mo. Kans. City Ct. of App.), 31 Am. B. R. 399, 160 S. W. 825, specifjdng the elements of a voidable preference; Mayes v. Palmer (C. C. A., 8th Cir. ) , 31 Am. B. R. 225, 208 Fed. 97 ; Sparks V. Marsh (D. C, Ark.) , 24 Am. B. E. 280, 177 Fed. 739; In re Starkweather & Albert (D. C, Mo.), 30 Am. B. E. 743, 206 Fed. 797; Heyman v. Third Nat. Bank (D. C, N. J.), 32 Am. B. R. 716, 216 Fed. 685; Sheetz v. Walter Bovd Saddlery Co. (Kan. Sup. Ct.), 33 Am. B.' R. 32, 147 N. W. 897 ; Eussell's Trustees v. Mayfleld Lumber Co. (Ky. Ct. of App.), 32 Am. B. E. 357, 164 S. W. 7&3 ; Ken- tucky Bank & Trust Co. v. Pritchett (Sup. Ct., Okla.), 33 Am. B. E. 190, 143 Pac. 338; Abele V. Beacon Trust Co. (Mass. Sup. Jud. Ct), 40 Am. B. E. 743, 117 N. E. 833; Smith v. Coury (D. C, Me.), 41 Am. B. E. 219, 247 Fed. 168. The banljruptcy law recognizes two kinds of preferences — those which a creditor in good faith may accept, and retain, and those which are forbidden and therefore voidable. The constitutive elements of a preference ol the latter class are: First, the insolvency of the debtor at the time of the preference; second, the giving of the preference within four months of the filing of the petition in bankruptcy; third, the effect of securing to the favored creditor a greater percentage of his debt than other creditors of the same class may obtain from the estate of the debtor; and, fourth, that the preferred cred- itor when he received the preference, knew, or had reasonable cause to believe, that it was the purpose of his debtor to give him a preference over other creditors of the same class. Wolff Mfg. Co. v. Batheal Shoe Co. (Mo. Kan. City Ct. of App.), 35 Am. B. R. 895, 180 S. W. 396. Attempted compromise of claims. — In or- der to render void as preferences payments made to defendants in an attempted com- promise of their claims, by the application to their claims of certain insurance moneys, it must be established (1) that bankrupt was insolvent at the time of the transfer; (2) that the defendants obtained a greater per- centage of their indebtedness than other cred- itors of the same class; (3) that the prefer- ence-was given within four months before the filing of the petition in bankruptcy; and (4) that defendants had reasonable cause to be- lieve that a preference was intended. Shultz V. Boyt Saddlery Co. (Sup. Ct., Iowa), 33 Am. B. E. 32, 147 N. W. 897. Recovery of transfer preferentially made where the elements specified in the text are shown to exist. Grandison v. National Bank of Eochester (C. C. A., 2d Cir.), 36 Am. B. E. 438, 231 Fed. 800; Healy v. Wehrung (C. C. A., 9th Cir.), 36 Am. B.R. 673, 229 Fed. 686. 18. Russell V. Mayfleld Lumber Co. ( Ct. of App., Ky.), 32 Am. B. E. 357, 164 S. W. 783. 19. In re Saved (D. C, Mich.), 26 Am. B. E. 444, 185 Fed. 962 In the case of Bos- well National Bank v. Simmons (C. C. A., 8th Cir.), 26 Am. B. E. 865, 190 Fed. 735, it was held that where a bankrupt, being insolv-. ent, made payments within the four months' period to a creditor, in satisfaction of a then existing debt, under such circumstances as to 60-a.J Elements of Pbefeeence;-Insolve:n-cy. 869 of the essential elements of a transfer is upon the trustee seeking to avoid it.^° b. While insolvent. — (1) In geneeal. — The word "insolvent" has the same meaning here as elsewhere in the act.^^ (2) Time of insolvency. — If the debtor was not insolvent when the transfer was made it will not operate as a preference although made within four months before the filing of a petition in bankruptcy against him.^^ The question of solvency must be determined as of the date when the payments or transfers were made.^^ If the levy following the judgment causes the insolvency, it is not enough.^* enable the creditor to obtain a greater per- centage of bis debt than any other creditor of the same class, and the creditor had reason to believe it was being preferred, the payment constituted a voidable preference recoverable by the bankrupt's trustee; Marsh v. Walters (C. C. A., 6th Cir.), 34 Am. B. E. 85, 220 Fed. 805; Peterson v. Nash Bros. (C. C. A., 8th Cir.), T Am. B. E. 181, 112 Fed. 311; Swarts v. Fourth Nat. Bank (C. C. A., 8th Cir.), 8 Am. B. B. 673, 117 Fed. 1; McBlvain v. Hardesty (C. C. A., 8th Cir.), 22 Am. B. E. 320, 169 Fed. 32. Grounds of attack upon transfer. — By the ex- press authority of the bankruptcy act, the trustee may attack any transfer alleged to be voidable as a preference if made within the period fixed by law. It is only when the trus- tee attacks a transfer or mortgage on other grounds that State laws and decisions apply as to the validity of a transfer. A trustee may. attack a transfer as a voidable preference con- cededly valid on all other grounds. Williams v. German American Trust Co. (C. C. A., 8th Cir.), 33 Am. B. E. 600, 219 Fed. 507. 20. Burden of proving elements of volclalile preference. — Under sections 60-a and 60-b of the Bankruptcy Act as amended in 1903, and prior to the amendment of 1010, the burden of proof is on a trustee in bankruptcy who seeks to avoid as a preference to show that the bank- rupt (1) while Insolvent, (2) within four months of the bankruptcy, (3) made the trans- fer in question ; (4) that the creditor receiving the transfer will be thereby enabled to obtain a greater percentage of his debt than other creditors of the same class; and (5) that the creditor receiving the transfer had (reasonable cause to believe that it was thereby intended to give a preference. Kimmerle v. Farr (C. C. A., 6th Cir.), 26 Am. B. E. 818, 189 Fed. 295. See also Tumlin v. Bryan (C. C. A., 5th Cir.), 21 Am. B. E. 319, 165 Fed. 166, 01 C. C. A. 200; In re Neill-Pinckney-Maxwell Co. (D. C, Pa.), , 22 Am. B. E. 401, 170 Fed. 481 ; Cauthorn v. Hurley State Bank (Idaho Sup. Ct.), 33 Am. B. E. 794, 144 Pac. 1608 (quoting entire paragraph of te:;t) ; Kentucky Bank & Trust Co. v. Pritchctt (Okla. Sup. Ct), 33 Am. B. E. 190, 143 Pac. 338. As to evidence and burden of proof in actions to recover preferences, see Am. Bankr. Dig. § 677; evidence of reasonable cause to believe preference was intended, Am. Bankr. Dig. § 514, and post under heading "Evidence of reasonable cause to believe." 81. See Bankr. Act, § 1 (15), and discussion thereunder. Compare In re Alexander (D. C, Ga), 4 Am. B. E. 376, 102 Fed. 464; Simpson v. Western H. & M. Co. (Wash. Sup. Ct), 40 Am. B. E. 213, 167 Pac. 113. For rule under former law, see Toof v. Martin, 13 Wall. 40; Wager v. Hall, 16 Wall. 584. Marvin v. Anderson (Sup. Ct, Wis.), 6 Am. B. E. 520, 87 N. W. 226, is, therefore more in line with the old definition than the new. See also Ben.iamin v. Chandler (D. C, Pa.), 15 Am. B. E. 439, 142 Fed. 217. Sufficient mcaas to satisfy debts. — Evidence that a bau^rupt was not possessed of sulncient ready means to satisfy all his debts at the time of the execution of a chattel mortgage, alleged to constitute a preference, is insufficient; proof must be presented respecting the amount of the mortgagor's property at a fair valuation, at the time of givinrj the mortgage as required by subdivision 15 of section 1 of the Bankruptcy Act. Matter of Walker Starter Co. (C. C. A., 7th Cir.), 37 Am. B. E. 122, 235 Fed. 285. 23. In re Leech (C. C. A., 6th Cir.), 22 Am. B. E. 599, 171 Fed. 622; McAleer v. People's Bank (Ala. Sup. Ct), 42 Am. B. E. 581, 80 So. 94; Farmers' National Bank v. Slaton (Ky. Ct. of App.), 41 Am. B. E. 650, 203 S. W. 565; Mat- ter of Looschen Piano Case Co. (D. C, N J ), 43 Am. B. E. 733, 259 Fed. 931 ; Hicks Company, Ltd. V. iri.cro (C. C. A.,' Sth Cir.), 44 Am. B. E. 3J4, 201 Fed. 773, citing Collier on Bank- ruptcy (11th ed.) 869. its. De Laval Separator Co. v. Jones (Me. Sup. Ct), 41 Am. B. E. 440, 102 Atl. 968; Matter of Keller (D. C, Mich.), 42 Am. B. E. 601, 252 Fed 042; In re Wittenberg, etc., Co. (D. C, Wis.) 8 Am. B. E. 271, 108 Fed. 503 ; Butler Paper Co v Goembel (C. C. A., 7th dr.), 16 Am. B. E 26, 143 Fed. 295; Sabin v. Camp (D. C, Ores) 3 Am. B. E. 578, 98 Fed. 974 ; Sheppard-Strasshe'im Co. V. Black (C. C. A., 7th Cir.), 33 Am. B E. 574, 211 Fed. 643; McNeil v. Folk (Sup. Ct of App., W. Va.), 33 Am. B. E. 234, 83 S. E 192; Eosenman v. Copard (C. C. A., 5th Cir.) 35 Am. B. E. 786, 228 Fed. 114; Tumlin v. Bryan (C. C. A., 5th Cir.), 21 Am. B. E. 319, 165 Fed. 160; Matter cl Bunch Commission Co. (D C Kan.), 35 Am. B. E. 526, 225 Fed. 243; In re Earners' Supply Co. (D. C, Ohio), 22 Am B E, 460, 170 Fed. 502. See Am. Bankr. Dig. § 484l 84. Chicago Title & Trust Co. v. Eoebling's; Sons (C. C, 111.), 5 Am. B. E. 368, 107 Fed. 71; Matter of Chicago Car Equipment Co. (C. C. A, 7th Cir.), 31 Am. B. E. 017, 211 Fed. 638. See also Clarion Bank v. Jones, 21 Wall. 325. Com- pare Matter of Sola (C. C. A., 1st Cir.), 44 Am. B. E. 372, 261 Fed. 822. 25. Kaufman v. Treadv.-ay, 105 U. S. 271, 12 Am. B. E. 682, 49 L. Ed. 190, 25 Sup. Ct. 33; Kentucky Bank & Trust Co. v. Pritchett (Sup. Ct, Okla.), 33 Am. B. E. 190, 143 Pac. 338; Stephens v. Union Sav. Bank & Trust Co. (C. C. A., 6th Cir.), 42 An. E. E. m, 250 Fed. 192. 2G. In re Chappell (D. C, Va.), 7 Am. B. E. 608, 113 Fed. 545. Burden of proof. — In an action by a trustee to recover a payment in discharge of a valid, obligation from the bankrupt to a bank, the burden of proof is upon the plaintiff to show that the bank had reasonable cause to believe- that a preference was intended. Calhoua County Bank v. Cain (C. C. A., 4th Cir.), IS- Am. B. E. 509, 152 Fed. 983. It i.-.T^rt be alleged, and proven that the bankrut wa.s insolvent at the time of the transfer. TLo burden cf prov- 870 Peefeeeed Ceeditoes. [§ 60-a. (3) Peoof of insolvency. — ^ Whether or not a debtor is insoivwit is a question of fact/" and the burden of showing insolvency is on him who alleges it.^^ The fact that a debtor is adjudged a voluntary bankrupt does not raise a presumption of insolvency prior to the iiling of the peticion,^ but it is res judi- cata upon the question of the insolvency of the bankrupt at the time the petition was filed.^''°' But it has been held that an adjudication in an involuntary pro- ceeding, that a judgment dehtor was insolvent at the time of the recovery of certain judgments against him, is conclusive upon the question of insolvency.^^ Eut insolvency must be alleged and found as a fact ; mere belief is not enough,^' nor is danger of insolvency as a coming result.^* The method of determining the question of insolvency has already been considered. The rules which are applicable generally in determining this question are also applicable in de^ termining whether a transfer is preferential because made at a time when the banknipt was insolvent.^^ The schedule of liabilities filed by the bankrupt is admissible on the issue of inaolvency,^^ although this has been doubted.^^ The bankrupt's books of accounts,^* the method of determining appraisement taken in the proceedings,^*^ and the amo;int realized from the sale of assets by the receiver or trustee,^^ are admissible upon the question of insolvency. (4) Valuation of peopeety. — Where property is transferred in fraud of creditors the definition of insolvency contained in § 1 (15) contemplates that the bankrupt shall not have the benefit of its valuation, in determining whether he is insolvent ; but where property is transferred in payment of a just debt the mere fact that it involves a preference does not exclude the property from con- sideration in determining the debtor's solvency. ^^ In determining insolvency Ing such facts Is on the trustee. In re Leech 439, 142 Fed. 217; Eidge At. Bank v. Sundheim (C. C. A., 6th Cir.), 22 Am. B. E. 599, 171 Fed. (C, C. A., 3d Cir.), 16 Am. B. E. 863, 145 Fed. 622 J Simpson v. Western H. & M. Co. (Wash. 798. Sup. Ct.), 40 Am. B. E. 213, 167 Pac. 113. Schedules filed by the bankrupt In the bank- 27. In re Chappell (D. C, Va.), 7 Am. B. E. ruptcy proceedings are proper evidence in an 608, 113 Fed. 545; McNeil v. Folk (Sup. Ct. of action against a creditor of the bankrupt to App., W. Va.), 33 Am. B. E. 234, 83 !5. B. 192; recover back an alleged preference obtained by Simpson v. Western H. & M. Co. (Wash. Sup. such creditor when such schedules are properly Ct.), 40 Am. B. E. 213, 167 Pac. 113; Matter of identified, and the production and admission of Looschen Piano Case Co. (D. C, N. J.), 43 secondary evidence of such schedules is gov- Am. B, E. 733, 259 Fed. 931. erned by the same rules which govern the pro- 27a. Matter of Star Spring Bed Co. (D. C, duction and admission of such evidence in other N. J.), 43 Am. B. E. 328, 257 Fed. 176. cases, and' the same is true with respect to the 28. De Graff v. Lang, 92 N. Y. App. Div. 564, admission of duplicate originals. Utah Ass'n 87 N. Y. Supp. 178; Simpson v. Western II. & of Credit Men v. Boyle Furniture Co. (Sup. Ct., M. Co. (Wash. Sup. Ct.), 40 Am. B. E. 213, 167 Utah), 26 Am. B. E. 867, 117 Pac. 800. ^ m'. ■ i- « ■ ! ^ .1 1. J 33. Hackney v. Eavmoud Bros., Clarke Co. Bllmination of claims not proved or allowed.— /o, p^ Nph ^ 10 Am R T! 9iq ■>1f fiq Neh In determining the insolvency of a bankrupt at i.?}'P- ^^- ^^°-'- ^" ■*"• ^- ^^- ^^-i- -^^- ^'^ ^^'^■ the time of an alleged preference all claims against the bankrupt are to be considered, and 34. In re Docker-Foster Co. (D. C, Pa.), 10 not merely those which are proved and allowed Am. B. E. 584, 123 Fed. 190. in the bankruptcy proceedings. Lyttle v. Fifth. 34a. Hackney v. Hargreaves, 13 Am. B. E. National Bank (D. C, N. Y.), 39 Am. B. E. 690. 164, 3 Neb. (Unoff.) 676. ln*"r-»Tfn^toVVRef"'p»WAm*B^ETY'''''" 36. Matter of Star Spring Bed Co. (D. C, In re Linton (Set, Fa.), 7 Am. a. K. b7b. ^ j, 4q Am Ti M I9 Ga. 918. In computing the four months before filing the petition in bankruptcy within which time a preference is voidable, the dny on which the petition was filed must be ex- cluded. Dutcher v. Wright, 94 U. S. 553, 24 L. ed. isa. 43. Jackson v. Sedgwick (C. C, N. Y.), 26 Am. B. R. 836, 189 Fed. 508; Brown v. Citv National Bank (N. Y. Sup. Ct., Trial), 26 Am. B. R. 63'8, 72 Misc. 201, 131 N. Y. Supp. 92. 44. In re Terrill (D. C, Vt.), 4 Am. B. R. 145, 100 Fed. 778. As to the efi'ect of this doctrine on a case which would be a voidable preference under the law as amended, but which was not before, quaere, and see " Sup- plemental Section to Amendatory Act," post. 45. See Sawyer v. Turpin, 91 U. S. 114, 23 L. ed. 235; In re Foster, Fed. Cas. 4,964; Matter of Wilson (D. C, Hawaii), 23 Am. B. R. 814. An order on a creditor for the payment r* money due the bankrupt is a transfer of the fund from the day of its presentation. 872 Peefeeeed Ceeditoes. [§ 60-a. required the transfer takes effect from the date thereof and not from the time it is actually recorded.*® It seems that the amendment to § 60-a is for the purpose of bringing it into substantial accord with § 3-a. These provisions should be read together, and when so read there can be no permissible question but that the date of the preference referred to in § 60 is the same as that referred to in § 3-b.*'' However, there is authority to the effect that Congress did not intend § 3-b and § 60-a to mean the same thing, but in fact, after due consideration, deliberately refused to make § 60-a as broad as § 3-b.*® And this suggestion has now received the sanctioning approval of the Supreme Court.** (3) Peepoemance of ageeement made peige to foue moitths' peeiod. — Any attempt to evade the act by agreement entered into prior to the prescribed period, consummated by the perfection of a lien within the period, is nugatory. Such a lien is ineffectual and is a voidable preference. Such a transaction will be subject to the same rules as though no such agreement had been made. Its validity will be determined in each instance as of the date when the preferential lien was sought to be perfected. A mortgage or transfer of his property by an insolvent debtor within four months of the filing of a petition in bankruptcy against him, which othei-wise constitutes a voidable preference, is not deprived of that character or made valid by the fact that it was executed in performance of a contract to do so made more than four months before the filing of the petition.^" The same rule applies where a transfer in payment of Johnston v. Huff (C. C. A., 4th Cir.), 13 Am. B. R. 287, 133 Fed. 704; In re Hines (D. C, Pa.), 16 Am. B. R. 495, 144 Fed. 142, 147, .543. When "four months period" commences to run. — -Where the mortgagee does not file a sworn statement required by the Colorado statute until seven months after the expira- tion of one year from the time the mortgage was recorded, the four months' period within which the trustee in bankruptcy of the mort- gasfor may r,ttack the transfer must be fig- ured from the date of taking possession of the property by the mortgagee and not from the date of record. Williams v. German American Trust Co. (C. C. A., 8th Cir.), 33 Am. B. R. 600, 219 Fed. 507. 46. Matter of Boyd (C. C. A., 2d Cir.), 32 Am. B. R. 548, 213 Fed. 774; Hoshaw v. Cosgriflf (C. C. A., 8th Cir.), 40 Am. B. R. 694, 247 Fed. 22. 47. Long V. Farmers' State Bank (C. C. A., 8th Cir.), 17 Am. B. R. 103, 147 Fed. 360; English V. Ross (D. C, Pa.), 15 Am. B. R. 370, 140 Fed. 630. 48. Matter of Boyd (C. C. A., 23 Cir.), 32 Am. B. E. 54S, 213 Fed. 774; Matter of Haryey (D. C, Ala.), 32 Am. B. E. 337, 212 Fed. 340, See also Marsh v. Leseman (C. C. A., 2d Cir.), 40 Am. B. B, 97, 242 Fed. 484. 49. Carey v. Donohue, 240 U. S. 430, 36 Am. B. E. 704, 60 L. ed. 726, 36 Sup. Ct. 3S6 (revg. 31 Am. B. E. 210, 209 Fed. 328), in which the court comments upon the evident purpose of Congress in eliminating certain latiguage as to requiring recording or registering transfers, from § 60 which was included in § 3-b. 60. In re Great Western Mfg. Co. (C. C. A., 8th Cir.), 18 Am. B. R. 259, 264, 152 Fed. 123. Effect of prior agreements. — A transfer of property within the four months' period to be applied on an antecedent debt, under an agreement made antetior to such period, is a preference. Vitzthum v. Large (D. C, la..) , 20 Am. B. R. 666, 162 Fed. 685. In Wilson V. Nelson, 183 U. S. 191, 198, 7 Am. B. R. 142, 4f) L. Ed. 147, 22 Sup. Ct. 74, the debtor had given an irrevocable power of attorney to the creditor to cciifess judgment many years before judTmcnt was cnnfesse'l under it within the four months, and the Supreme Court held it to be a voidable preference. See also Page v. Rogers, 211 U. S. 575, 21 Am. B. E. 496, 53 L. Ed. 332, 29 Sup. Ct. 159. Mortgages executed within the four months' period in performance of agreements to give them made more than four months before tlie filing of the petitions in bankruptcy have been held to be voidable preferences. In re Shciidcin (D. C, Pr..). 3 Am. B. R. 554, 98 Fed. 406; In re Ronk (D. C, Ind.), 7 Am. B. R. 31, 111 Fed. 154; In re Dismal Swamp Co. (D. C, Va.), 14 Am. B. R. 175, 135 Fed. 415; Matter of White (Ref., R. I.), 22 Am. B. R. 200; In re Smith (D. C, N. Y.), 23 Am. B. R. 864, 176 Fed. 426. And this vii^w seems to be sustained by the terms of the bankruptcy act, by the more cogent reasons, and by the weight of authority. In re Great Western Mfg. Co. (C. C. A., 8th Cir.), 18 Am. B. R. 259, 265, 152 Fed. 123; Lathrop Bank V. Holland (C. C. A., 8th Cir.), 30 Am. B. R. 62, 205 Fed. 143. § 60-a.J Elements; Within Four Months. 813 an antecedent debt is made under such circumstances.'^ Where an insolvent corporation, within the four months' period, makes a partial payment on account of goods sold received under a contract entered into prior to its bankruptcy, such payment is preferential, though thereafter no more goods were furnished under the contraet.^^ Where a claim secured by a chattel mortgage or an assignment, executed more than four months prior to bank- ruptcy, is waived by the acceptance of an offer of settlement, payment on such claim within the four months' period will constitute a voidable preference.'^ (4) Date of conteact governs. — Where a contract for the sale of the bankrupt's property which provided that the proceeds of the sale were to be applied in payment of certain claims against the bankrupt, the date of the contract rather than the date of payment under the contract governs in deter- mining whether a preference was given within the four months' period.^ If the contract gives rise to an equitaljle lien in favor of the creditor such lien will be presumed to exist as of the date of the contract, and the delivery of the property under such contract to the creditor within the four months' period will not make it a preference. '^ Whether or not such a lien takes effect as of the date of the contract or as of the date of the taking possession of the prop^ erty will be governed by the State law."* 51. Vitzthiim v. Large (D. C, la.), 20 Am. B. R. 666, 162 Fed. 685. 52. In re Mayo Contracting Co. (D. C, Mass.), 19 Am. B. R. 551, 157 Fed. 469. 53. Schuetz v. International Harvester Co. (Iowa Sup. Ct.), 34 Am. B. R. 708, 149 N. W. 855, in which case it appeared that a rlpbtor, after property purchased by him had been destroyed by fire, gave an order on the insurance companies in favor of the vendor, and in order to avoid bankruptcy the vendor with other creditors agreed to accept the in- surance money pro rata on their respective claims, it was held that the vendor thei'e'oy waived his claim under the order and also under notes secured by a chattel mortgage given more than four months prior to bank- ruptcy, and the trustee in bankruptcy may re- cover the payments from the insurance moneys as preferences. 54. Fitch V. Bank of Grand Rapids (Sup. Ct., Wis.), 26 Am. B. E. 879, 131 N. W. 1095. 55. Sexton V. Kessler & Co. (C. C. A., 2d Cir.), 21 Am. B. E. 807, 172 Fed. 535, atfd. 225 U. S. 90, 28 Am. B. E. 85, 56 L. ed. 995, 32 Sup. Ct. est; Godwin v. Murchison National Bank, 22 Am. B. K. 703, 145 N. C. 320; Hanson v. Blake (D. C, Me.), 19 Am. B. E. 325, 155 Fed. 342; Wilder v. Watts (D. C, S. C), 15 Am. B. E. 57, 138 Fed. 426; Britton v. Union Investment Co. (C. C. A., 8th Cir.), 44 Am. B. E. 531, 262 Fed. Ill, Wiener v. Union Trust Co. (D. C, Mich.), 44 Am. B. E. 610, 261 Fed: 709; Van Slyke v. Huntington (C. C. A., 8th Cir.), 45 Am. B. E. 173, 265 Fed. 86. lnsnrr.::ce payable to vendor. — Sullivan v. Meyer (Tenn. Sup. Ct), 39 Am. B. E. 314, 193 S. W. 124. Delivery to pledgee within four months' period not a preference. — Bankrupt had for many years drawn upon defendant, ' an Eng- lish company, and in 1903, upon request that it set aside securities for Its drawing credit, placed in its safe deposit vault, in a separate package, certain securities named designated them as held in escrow as security to defend- ant for drafts, and notitied- defendant of its action and of the particular securities so held. Bankrupt also entered the securities and all substitutions on its loan boolc, and as substitutions were made from time to time, the English company was notified. The se- curities were always either negotiable by delivery or indorsed in blank. They were always marked and kept separate and never removed from' the vault, except when taken to the office to be examined and checlced off by a representative of the English company. Thereafter, within four months of defend- ant's bankruptcy, and at a time when it was insolvent, the escrow securities were deliv- ered over to the defendant. It appeared that the transaction was entered into in good faith and that the transfer was not void as against bankrupt's creditors, irre- spective of attachment. Held, that when de- fendant took tlie securities, it only exercised a right which had been created long before bankruptcy, and that the transaction could not be avoided by bankrupt's trustee as a preference under the bankruptcy act. Sex- ton V. Kessler & Company, Ltd., 225 U. S. 90, 28 Am. B. E. 85, 56 L. Ed. 995, 32 Sup. a. 657. 56. Thompson v. Fairbanks, 19-6' U. S. 516, 13 Am. B. R. 437, 49 L. Ed. 577, 25 Sup. Ct. 306; In re Chantler Qoak & Suit Co. (D. C, R. L), 18 Am. B. R. 498, 151 Fed. 952; In re Automobile Livery Service Co., 23 Am. B. R. 799, 176 Fed. 792, in which it was held that under the Alabama law where there has been no delivery of pledged property, but in pursuance of a prior agreement such prop- erty upon the pledgor's default was delivered within the four months' period, the possession thus acquired relates back to the time of said agreement and consti'^utes a preference^ only as to claimants who had in the mesn- time perfected liens upon the property. 874 Peefeeeed Ceeditoes. [§ 60-a. (5) Possession within foue months' peeiod. — Where possession is taken by the creditors of an insolvent debtor's property within four months before the filing of the petition, under an agreement, whereby a lien was created in favor of the creditors upon such property in case of a failure of the debtor to comply with the terms of such agreement, such assumption of possession will constitute an unlawful preference notwithstanding the fact that the agreement was made prior to the four months' period. ^'^ But where property is pledged or mortgaged for the benefit of creditors by a valid pledge or mortgage executed prior to the four months' period, such creditors may enter into possession of such property within the four months' period. In all such cases the rights of creditors in respect to the particular property will depend upon the validity of the pledge or mortgage under the laws of the state where made.'^ A pledge 57. Matthews v. Hardt, 9 Am. B. E. 373, 79 N. Y. App. Div. 570, 80 N. Y. Supp. 462; Matter of Mr.ndel (D. C, N. Y.), 10 Am. B. E. 774, 127 Fed. 863. Compare In re Chadwick (D. C, Ohio), 15 Am. B. E. 528, 140 Fed.- 674; Christ v. Zehner, 212 Pa. St. 188, 16 Am. B. E. 788, 61 Atl. 822. See Am. Bankr. Dig. § 488. Trust receipts; assignment of accounts to release. — In an action by trustees in bank- ruptcy to set aside assignments of accounts and warehouse receipts to the defendant as an illegal preference and to recover the amount realized thereon it appeared that the defendant in lending money to the bankrupt took warehouse receipts and trust receipts more than four months prior to bankruptcy covering raw material taken from the ware- house by the bankrupt with the defendant's consent. These trust receipts stipulated that fhe material was to be held for the defend- ant with liberty to sell it and apply the proceeds to any indebtedness to the bank. The banlcrupt, with the knowledge of the de- fendant, mingled the raw material so taken under the trust receipts with other material in its factory, and sold the manufactured product; The defendant claimed that the ac- counts assigned to it within four months of bankruptcy represented the raw material covered by the trust receipts. It was held that the assignment of accounts was a void- able preference, as constituting a transaction entirely apart from the trust receipts cover- ing the raw material which entered, in part, into the manufacture of the articles for which the accounts accrued. Merchants National Bank v. Corr (C. C. A., 4th Clr.), 34 Am. B. E. 527,' 221 Fed. 419. 58. Sabln v. Camp (D. C, Or.), 3 Am. B. E. 578, 98 Fed. 974; In re Wolf (D. C, Iowa), 3 Am. B. E. 555, 98 Fed. 74; Thompson v. Fair- banks, 196 U. S. 516, 13 Am. B. E. 437, 49 L. Ed. 577, 25 Sup. Ct. 306; Sexton v. Kessler & Co. (C. C. A., 2d Clr.), 21 Am. B. E. 807, 172 Fed. 535. But compare In re Sheridan (D. C, Pa.), 3 Am. B. E. 554, 98 Fed. 406; Kettenboch v. Walker (Idaho Sup. Ct.), 44 Am. B. E. 619, 186 Pac. 912, citing Collier on Bankruptcy (11th ed.) 873; Atherton v. Beaman (C. C. A., 1st Clr.), 45 Am. B. R. 212, 264 Fed. 878. In .Massacbusetts the taking of possession of mortgaged chattels by the mortgagor within the four months' period under an un- recorded mortgage covering after-acquired property made more than two years before the bankruptcy of the mortgagor does not constitute a preference. Humphrey v. Tat- man, 198 U. S. 91, 14 Am. B. E.. 74, 49 L. Ed. 956, 25 Sup. Ct. 567. A mortgagee taking possession before the commencement of bankruptcy proceedings against his mort- gagor of after-acquired property covered by the mortgage, is entitled under the law of Massachusetts to hold the property as against the trustee. In re Hurley (D. C, Mass.), 26 Am. B. E. 434, 185 Fed. 851. Missouri statute. — In the case of In re Ozark Cooperage & Lumber Co. (C. C. A., 8th Cir.), 24 Am. B. E. 835, 180 Fed. 105, the court speaking of the Missouri statute relating to change of possession said : " Some kinds of personal property may be readily delivered from hand to hand and interested persons may rightfully expect that method to he observed. In other cases, the character of the property and the circumstances of its situation preclude such a transfer; and other indicia of a change of ownership such as signs, brands and marks are generally ac- cepted as sufiBcient. Each case, however, as it arises should' be determined by its own peculiar facts and circumstances." Taking possession of property within the four months' period. — In the case of In re Bird (D. C, Minn.), 25 Am. B. E. 24, 180 Fed. 229, it appeared that about two years before the petition in bankruptcy was filed, a bank had in its possession personal property belonging to the bankrupt which had been pledged to the bank to secure the payment of a debt owing to the bank by him; at the same time the bankrupt assigned to another creditor all his interest in the equity of such personal property, such equity to be determined after the bank should have been fully paid; at the time of the adjudication the property was still in the possession of the bank ; it was held that the assignment of the equity in such property was a valid con- tract under the common law and under the law of Minnesota and that it was not vo: as a preference for failure to record or reois- ter the transfer as required by section CO-a. as such tansfer was not required to be § 60-a.J Elements; Within Four Months. 875 of stock by a bankrupt to a bank, prior to the four months' period, wbich pledge was perfected at the time by the delivery of the certificates of stock without transfer on the books of the corporation, does not constitute a pref- erence alliiough such stock was sold pursuant to the pledge, within the four months' period.^* (6) Assignment of peopeety within foue months. — Where an assign- ment of personal property and book accounts was made by a bankrupt within the four months' period to secure to a bank the payment of notes, purchased by it from the bankrupt, under an agreement made more than four months prior to the filing of the petition, whereby the bankrupt agreed to maintain at all times a deposit equal to at least twenty-five per cent, of the notes so purchased, and against which the notes payable at maturity could be charged. Such assignment constitutes a voidable preference.*" Collections made within the four months' period on accounts, which were assigned before that period commenced, do not constitute a preference which the trustee may recover.®* (7) Peioe to the amendments of 1903. — The clause as to the period within which a preference shall not be given was in subdivision h in the originail law. It led to the anomalous doctrine that mere preferences, as, for instance, bona fide payments, must be surrendered if since insolvency, no matter how many months or years back, but fraudulent preferences were good unless within the four months' period.*^ This dilemma was the direct result of Carson v. Chicago Title & Trust Co.,*** and gave force to the demand for recorded or registered under the Minnesota law, nor was it a preference for failure to take possession of the property within the four months' period. Where the rights of a mortgagee under a chattel mortgage had been fixed more than four months prior to the bankruptcy of the mortgagor, by a contract good between the parties, his taking possession of the mort- gaged property within the four months' period did not constitute the transaction a preference. In re East End Mantel & Tile Co. (D. C, Pa.), 29 Am. B. R. 793, 202 Fed. 275. Assignments of fire insurance policy under prior agreement. — A transaction in which the owner of a mercantile business gives to a creditor an assignment of a fire insurance policy, in order that such creditor may col- lect the amount thereof and apply the same to the payment of a prior loan, and which is given in furtherance of a prior agreement by which the insurance policy was pledged to the said creditor as security for money loaned and for future adva.nces, and under the understanding that in case of fire such au- thority to collect or assignment should be given, is not an unlawful preference even though made within four months of the act of bankruptcy; the money being loaned and the policy having been pledged prior to that time. Hecker v. Commercial State Bank, 37 Am. B. R. 809, 159 N. W. 97. Valid lien; possession within four months. — Where a bankrupt has given an equitable lien on his property which according to the law of the state is enforceable against the bankrupt and purchasers with notice, the preference which results from the lienor tak- ing possession of the property dates back to the date of the original lien, and therefore, although possession is taken within four months, it is not a voidable preference. Davis V. Billings (Pa. Sup. Ct.), 38 Am. B. R. 957, 99 Atl. 163. 59. First Nat. Bank of Lake Charles v. Lang (C. C. A., 5th Cir.), 29 Am. B. R. 247, 253, 202 Fed. 117, 121. 60. Tilt V. Citizens' Trust Co. (D. C, N". J.), 27 Am. B. R. 320, 191 Fed. 441, affd. 29 Am. B. R. 906, 200 Fed. 410. 61. Lowell V. International Trust Co. (C. C. A., Ist Cir.), 19 Am. B. R. 853, 158 Fed. 781. Collection of accounts within four months. — When an assignment of accounts is made more than four months prior to the bank- ruptcy, the fact that the accounts are not collected by the creditor until within four months does not make the transaction a preference. In re Bird (D. C, Minn.), 25 Am. B. R. 24, 180 Fed. 229. 62. For instance, see the now inapplicable cases of In re Jones (D. C., Mass.), 4 Am. B. R. 563, 110 Fed. 763; In re Abraham Steers Lumber Co. (D. C, N. Y.), 6 Am. B. R. 315, 110 Fed. 738; affd. s. c, 7 Am. B.R. 332, 112 Fed. 406; In re Rosenberg (Ref., N. Y.), 7 Am. B. R. 316; also the numerous cases contra, of which the following are characteristic: In re Wise, 2 N. B. N. Rep. 151; In re Beswick (Ref., Ohio), 7 Am. B. R. 395; In re Siegel-Hillman, etc., Co., 2 N. B. N. Rep. 937; In re Dickinson (Ref., NY.), 7 Am. B. R. 679. 63. 182 U. S. 438, 5 Am. B. R. 814, 45 L. Ed. 1171, 21 Sup. Ct. 906. 876 Peefeeeed Ceeditoes. [§ 60-a. amendmeut. The clause has now been restored to subsection a, where it was in the Torrey bill.®* The effect of this transfer is to make the four months' limitation an element of the preference referred to in both subdivisions a. and b.^'° (8) Running of time wheee eecoeding is eequieed. — (I) In general. — The concluding sentence of subdivision a was inserted by the amendatory act of 1903. Its purpose is apparent — to meet the decisions that held the date of the delivery of a preferential instrument, rather than the date of the record, the beginning of the four months' period.^® But the amendment did not change the date as to which such transfers are to be judged in determining their voidable character.®^ If the transfer was filed or recorded within the four months' period, where filing or recording is required, and at that time the bankrupt was insolvent, and the transferee had reasonable cause to believe it, and the effect was to give him a greater percentage of his debt than the other creditors, the transfer is a preference.®^ This clause as e4. See In re Hall (Eef., N. Y.), 4 Am. B. K. 671. Compare Report No. 1,698, 57th Congress, First Session, pp. 3, 8. 65. Manning v. Evans (D. C, N. J.), 19 Am. B. R. 217, 156 Fed. 106. 66. In re Wright (D. C, Ga.), 2 Am. B. R. 364, 96 Fed. 187; In re Mersman (Ref., N. Y.), 7 Am. B. R. 46; In re Kindt (D. C, Iowa), 4 Am. B. R. 148, 101 Fed. 107. Ap- parently contra: In re Klingaman (D. C., Iowa), 4 Am. B. R. 254, 101 Fed. 691; Bab- bitt V. Kelly, 9 Am. B. R. 335, 95 Mo. App. 529. 70 S. W. 384; Davis v. Hanover Savings Puua Soe. (C. C. A., «li Cir.), 31 Am. B. E. 368, 210 Fed. 768; Deupree v. Watson (C. C. A., €lh Cir.), 32 Am. B. E. 407, 216 Fed. 483; Gray & Dudley Hardware Co. t. Guthrie (Ala. Sup. Ct.), 39 Am. B. E. 654, 75 So. 318. As to splitting days into hours, see In re Tonawanda Street Planing Mill (Eef., N. Y.), 6 Am. B. E. 38, and cases cited. 61. Deupree v. Watson (C. C. A., 6th Cir.), 32 Am. B. E. 407, 216 Fed. 483. 68. McBlvaln v. Hardesty (C. C. A., 8th Cir.), 22 Am. B. R. 320. 169 Fed. 32; Covington v. Bergman (D. C, N. C). 32 Am. B. E. 35, 210 Fed. 499; Gray & Dudley Hardware Co. y. ■Guthrie (Ala. Sup. Ct.), 39 Am. B. E. 654, 75 So. 318. Mortgage given before but recorded within four months' period. — On November 26, 1909, when indebted to a. large extent 'bankrupt gave to the claimant, his brother, a mort- gage on real estate for the sum of $1,300 to secure an alleged advance of a like amount. Claimant admitted that he knew bankrupt was pressed by creditors when the alleged loan was made. He did not at any time take possession of the mortgaged pre:r.ises and did not record the mortgage until March 10, 1910, two weeks before the bankrupt filed a peti- tion in voluntary bankruptcy, at which time bankrupt's liabilities three times exceeded his assets. Under the law of Pennsylvania, where the real estate is situate, a mortgage is a lien only from the date of recording. Held, that the giving of the mortgage was a transfer of property within the four months before the filing of the petition and consti- tuted a voidable preference under subdivi- sions " a " and " b " of section 60 of the Bankruptcy Act. In re Dundore (D. C, Pa.), 26 Am. B. R. 100. Conveyance based on present consideration. — In the case of In re Jackson Brick & Tile Co. (D. C, Mo.), 26 Am. B. R. 915, 927, 189 Fed. 636, which arose prior to the amend- ment of 1910, the court said: "The provi- sions of the statute that ' where the prefer- ence consists in a transfer, such period of four months shall not expire until four months after the recording or registering of the transfer, if, by law, such recording or registering is required,' was intended to post- pone the time within which a transfer is open to attack as a preference until four months after the date of the recording of the transfer, where such recording is required by the local law; but while the statute post- pones the time within which the transfer can be attacked the statute cannot properly be so applied as to materially alter the essentia! character of the transaction. If the transfer is one which is required to be recorded, the four-month period during which it may bo ."ttacked does not begin to run until the con- veyance is recorded, but if the transfer when made was based unon a present consideration, a delay in recording the instrument does not warrant us in treating the conveyance as if it were made as security for an antecedent debt, because to do so would be to create by con- struction a transaction different from the actual one. It is true thrit in certain cases where the conveyance has no force and valid- ity whatever as to crec'.'lors until recorded, the courts have held that the transfer may be regarded as first co-iing into existence when it is recorded (^Icriv.iin v. Ilardestv (C. C. A., 8th Cir.), 22 Am. B. R. 320, 160 Fed. 31 ; In re Newton ( C. C. A., 8th Cir. ) , 18 Am. B. R. 567, 153 Fed. 841, 83 C. C. A., 23; First Nat. Bank v. Connett (C. C. A . 8th Cir.), 15 Am. B. R. 662, 142 Fed. 33, 73 C. C. A. 219, 5 L. R. A. [N. S.] 148) ; but in my opinion these cases are inapplicable to the facts here presented, and, as the § 60-a.J Kecoeding ok EEGiSTEEi'jrG Tkansfees. sn amended only refers to transfer originally intended as preferences, ■ or whichy at their inception, constituted such as a matter of law.®* (II) Registering or recording required by State law. — The amendment of 1910 makes voidable a preferential transfer required by State law to be regis- tered or recorded, if such transfer was so registered or recorded within the four months' period. The omission of words equivalent to "unless the peti- tioning creditors have received actual notice of such transfer or assignment,"' found in § 3-b should be notedJ* The State law relative to registration or- recording will determine as to whether or not a transfer is required to be registered or recorded.''^ The word "required" has reference to the char- acter of the instrument of transfer required to be recorded by the State lavr rather than to the particular individuals who, by reason of adventitious cir- cumstances, may or may not be affected by an unrecorded instruments^ It will sometimes be found difficult to determine whether the la-w actually requires the recording or registering of a transfer within the meaning of this subsection. For instance, under a statute" requiring the recording of a chattel mortgage, it was held that a failure to .register rendered the mortgage void only as against lien creditors, subsequent purchasers or incumbrancers in good faith, and that such recording was therefore not required to make the instrument valid as against the mortgagor's general creditors; it is this character of a requirement which is needed to bring the transaction within this subdivi- sion.''^ It is now determined authortitatively that a provision in a State law transfer here in question wag for a present con- sideration, it cannot properly be treated as a voidable preference. Filinsr within four months' period. — The validity of a chattel mortgage given by a bank- rupt to a bank as security, must be determined as of the date of its execution ; and where it was given in good faith and valid when exe- cuted, and neither preferential nor fraudulent under State law, because withheld from record, the fact that it was not filed until within four months of the bankruptcy proceedings, does not make it invalid under section 60a of the Bank- ruptcy Act, as amended in 1903. Dougherty v. First National Bank of Canton (C. C. A., 6th Cir.), 28 Am. B. E. 263, 197 Fed. 241. 69. Bradley Clark Co. y. Benson, 13 Am. B. E. 170, 93 Minn. 91, 109 N. W. 670. 70. On this general subject, the practitioner should consult the discussion of this subsection, found in Section Three. Note distinction made between language here used and that used in § 3-b, as discussed in Little v. Holly Brooks Hardware Co. (C. C. A., 5th dr.), 13 Am. B. E. 422, 133 Fed. 874 and Carey v. Donahue, 240 tr. S. 430, 36 Am. B. E. 704, revg. 31 Am. B. E. 210, 209 Fed. 328. Effect of actual notice. — Notwithstanding a deed is not recorded until within four months of bankruptcy It will be effectual against all creditors having actual notice of the transfer more than four months prior to bankruptcy. Staples V. Warren, 39 Am. B. E. 289, 45 Wash. L. E. 262. 71. Hawkins v. Dannenberg Co. (D. C, Ga.), 37 Am. B. E. 262, 234 Fed. 752. See Am. Bankr. Dig. § 490. Maine Statute. — Under the revised statutes of Maine, chapter 93, section 1, providing that "No mortgage of personal property is valid bgainst any other person than the parties thereto, unless possession of such property is delivered to and retained by the mortgagee, or the mortgage is recorded," a chattel mortgage is -required to be recorded, within the meaning of section 60a of the Bankruptcy Act, as amended in 1910. Matter of Alden (D. C, Me.), 37 Am. B. E. 611, 233 Fed, 160. 72. First Nat. Bank v. Connett (C. C. A., Sth Cir.), 15 Am. B. E. 662, 665, 142 Fed. 33. Necessity for recording lease. — Where under the express terms of a lease, the property was to revert to the lessor upon default by the lessee, and the record title was in the name of the lessor, it is not necessary that the lease should be recorded so far as the creditors of the bankrupt lessee were concerned. ' Hills v. Stim- •son Co. (Wash. Sup. Ct), 41 Am. B. E. 818, 172 Pac. 1181. Under the law of Georgia, the failure to re- cord a chattel mortgage does not render it void as between the parties and ordinary creditors, but only against lien creditors of the mort- gagor, or subsequent purchasers and mortgagees or lienholders in good faith, and recording is not "required" within the meaning of this sec- tion. In re Jacobson & Perrill (D. C, Ga.), 2» Am. B. E. 603, 200 Fed. 812; Martin v. Com- mercial Nat. Bank (C. C. A., Sth Cir.), 36 Am. B. E. 25, 228 Fed. 651; Johnson v. Barrett (D C, Ga.), 38 Am. B. E. 464; but see Hawkins v. Dannenburgh Co. (D. C, Ga.), 37 Am. B. E. 262. 234 Fed. 752. 73. Meyer Bros. Drug Co. v. Pitkin Drug Ca (C. C. A., 5th Cir.), 14 Am. B. E. 477, 136 Fed. 396; In re Chadwick (D. C, Ohio), 15 Am B E. 528, 140 Fed. 674; Martin v. Commercial Nat Bank (C. C. A., Sth Cir.), 36 Am. B. E. 25, 228 Fed. 651; Staples v. Warren (D. C, Ct. of Ann.) 39 Am. B. E. 289, 45 Wash. L. E. 262; Jones v. Bank of Excelsior Springs (Mo. Ct. of App.). 44 Am. B. E. 99, 213 S. W. 892. Recording required as against judgment creditors. — In the case of Matter of Hunt (D C N. Y.), 14 Am. B. E. 416, 139 Fed. .iSd, It was held that, because under the laws of New York an unrecorded conveyance was good as against everybody except sub- sequent purchasers without notice, it. was not required to be recorded in order to be 878 Peeiteeeed Ceeditoes. [§ 60-a. requiring the recording or registration of a transfer to make it valid as against subsequent bona fide purchasers does not constitute a requirement of recording or registering within the meaning of this section, so as to entitle the trustee to recover the preference for the benefit of creditors.''* It was formerly held effectual against a bankrupt trustee. But Judge Archbald, In re English v. Rosa (D. C, Pa.), 15 Am. B. R. 370, 140 Fed. 631, and the circuit court of appeals for the eighth ci'-cuit, in First Kat. Banli v. Connett (C. C. A., 8th Cir.), 15 Am. B. R. 662, 142 Fed. 33, reached an opposite conclusion and held that a recording statute, which required a convey- ance or transfer to be recorded to be effectual against a certain class or classes of persons, was a law which required the recording of the transfer in question within the meaning of section 60-a as amended. The same con- clusion was reached in Loeser v. Bank & Trust Go. (C. C. A., 6th Cir.), 17 Am. B. R. 628, 148 Fed. 975, revg. 15 Am. B. R. 528, 140 Fed. 674. The circuit court of appeals in the seventh circuit have adopted the ruling de- clared in the fifth circuit, following the case of Meyer Bros. Drug Co. v. Pitkin Drug Co., supra, and the case of In re Sturtevant (C. C A., 8th Cir.), 26 Am. B. E. 574, 188 Fed. 196, in which the court held that where bankrupts more than two years before bank- ruptcy, being solvent, in good faith gave to claimant's testator a chattel mortgage to secure their note made for a present and valid consideration, but the mortgage was not recorded until fifteen days prior to the filing of a petition in bankruptcy, and under the law of Illinois such a mortgage, although unrecorded, is good as against the mortgagor and his general creditors, the recording of the mortgage within the four-month period did not create a preference within the mean- ing of section 60a of the Bankruptcy Act. The Supreme Court in Carey v. Donahue 240 U. S. 430, 36 Am. B. R. 704, 60 L. ed. 726, 36 Sup. Ct. 386, has overruled the Loeser case and other cases like it and has followed the Sturtevant case. Revised Laws 1906 (Minn.), sec. 3502, pro- viding that " every assignment of a debt, un- less the same be in writing and be filed with the clerk of the town or municipality in which the assignor resides, shall be presumed to be fraudulent and void as against his creditors, unless those claiming thereunder make it appear that it was made in good faith and for a valuable consideration," does not " require " a " recording or registering " within the meaning of sections 60-a and h of the Bankruptcy Act. Hence, where a writ- ten assignment of a claim was actually made more than four months prior to the filing of a petition in bankruptcy by the assignor, it cannot be avoided by the trustee in bank- ruptcy as a ipreference although it was never filed. Telford v. Hendrickson (Minn. Sup. Ct.), 31 Am. B. R. 866, 139 N. W. 941. Subsequent purchasers or lien creditors. — — A chattel mortgage given to recover a debt and required to be recorded under the law of Arkansas to be valid against subsequent purchasers or Hen creditors, must be treated as executed when first filed lor record, and is invalid as against the mortgagor's trustee in bankruptcy when not filed until within four months of the filing of the petition in bank- ruptcy, when the mortgagor was insolvent. Matter of Bunch Commission Co. (D. C, Kan.), 35 Am. B. E. 526, 225 Fed. 243. 74. Marsh v. Leseman (C. C. A.; 2d Cir.), 40 Am. B. E. 97, 242 Fed. 484; Matter of Ander- son (D. C, E. I.), 41 Am. B. E. 731, 252 Fed. 272. Purpose of provision as to requirements of recording. — In the case of Carey v. Dono- hue, 240 U. S. 430, 36 Am. B. E. 704, the Supreme Court h.Td under consideration the Ohio statute (Ohio Code, § 8543) relative to the recording of instruments conveying real property, which provided that until so re- corded " they shall be deemed fraudulent so far as relates to a subsequent bona fide pur- chaser." It appeared that a deed conveying real property to a creditor was executed by the bankrupt more than four months prior to his bankruptcy, but it was recorded within the four months' period. The court through Mr. Justice Hughes said: — "As Congress did not undertake in § 60 to hit all preferential transfers (otherwise valid) merely because they were not disclosed either by record or possession, more than four months before the bankruptcy proceeding, the inquiry is simply as to the nature of the requirement of recording to which Congress referred. The character of the transfer itself, both with respect to what should constitute a transfer and its preferential effect, had been carefully defined. It is plain that the words are not limited to cases where recording is required for the purpose of giving validity to the transaction as between the parties. For that purpose, no amendment of the original act was needed, as in such a case there could be no giving of a preference without record- ing. But in dealing with a transfer, as de- fined, which, though valid as between the par- ties, was one which was ' required ' to be recorded, the reference was necessarily to a requirement in the interest of others who were in the contemplation of Congress in enacting the provision. The-natural, and, we think, the intended, meaning, was to em- brace those cases in which recording was necessary in order to make the transfer valid as against those concerned in the dis- tribution of the insolvent estate; that is, as against creditors, including those whose position the trustee was entitled to take. This gives effect to the amendment and in- terprets it in consonance with the spirit and purpose of the bankruptcy act. See Senate Report, No. 691, Sixty-first Cong. 2d Sess., p. 8. In the present case, there was no requirement of recording in favor of creditors, either general creditors or lien creditors. The requirement of the § 60-a.j Eecoeding oe Eegistehihg ; "When Eequieed. 879 that where a State statute provides that every chattel laortgage not accom- panied by immediate delivery and followed by continued change of posses- sion " shall be absolutely void as against the creditors of the mortgagor and as against subsequent purchasers and mortgagees in good faith" unless it, or a true copy thereof, be filed with the county clerk, registration is required within the meaning of this section of the bankruptcy act, and it is none the less so though the penalty for noncompliance is not invalid as to everybody and for all purposes^" This provision would appear, from the principle underlying the ruling of the Supreme Court, to be one requiring the recording or filing of the instrument to protect it as against the creditors of the bankrupt, who are represented by the trustee, so as to justify a recovery of the preference.''® The cases in which it has been declared that if recording or registration is required for any purpose, even if not for all purposes, it is " required " within the meaning of the amendment,'" are now nullified by the conclusion reached by the Supreme Court in the Carey case. The purpose of the amendment will be effectuated by construing it as referring to transfers which require recording or registration to make them valid as against general creditorsJ^ Where the applicable law was solely in favor of sub- sequent iona fide purchasers without notice. These subsequent purchasers are entirely out- side of the purview of the bankruptcy act. The proceeding in bankruptcy is not, in any sense, in their interest, and the trustee does not represent them. We can find no ground for the conclusion that the clause 'if by law recording or registering thereof is re- quired' had any reference to requirements in the interest of persons of this descrip- tion. The limitation of the provision to those transfers which are ' required ' to be recorded under the applicable law ia not to be taken to be an artificial one by which the rights of creditors are made to depend upon the presence or absence of lo- cal restrictions adopted, alio intmtu, in the interest of others! Eather, as we have said, we deem the reference to be to requirements of registry or record which have been es- tablished for the protection of creditors, — the persons interested in the bankrupt es- tate, and in whose behalf, or in whose place, the trustee is entitled to act. And where, as in this case, there is no such require- ment, and the transfer was made more than four months before the filing of the pe- tition in bankruptcy, there can be no re- covery under § 60." 75. Mattley v. Giesler (C. C. A., 8th Cir.), 26 Am. B. R. 116, 187 Fed. 790, revg. 23 Am. B. R. 673, 175 Fed. 619, which arose under the Nebraska statute; see a. c. 29 Am. B. R. 132, 202 Fed. 738. Compare Fisher v. Zollinger (C. C. A., 6th Cir.), 17 Am. B. R. 618, 149 Fed. 34, affg. 15 Am. B. R. 524, holding that under the laws of Ohio the taking possession of after-acquired prop- erty within the four-month period, under a chattel mortgage given and recorded prior to that time, does not constitute a voidable preference. 76. Bunch v. Malonev (C. C. A., 8th Cir.), ,37 Am. B. R. 369, 233 Fed. 967 (affg. 35 Am. B. E. 526, 225 Fed. 243) holding that where the applicable registry statute provides generally that an unfiled or unrecorded trans- er shall be void as to "creditors" or employs words of similar import as in Arkansas, the trustee in bankruptcy as the representative of general creditors may Invoke the remedy of section 60b of the Bankruptcy Act, regardless of the local construction of the statute making a procedural distinction between creditors with a lien and those without. See also National Bank of Bakersfleld v. Moore (C. C. A., 9th Cir,), 41 Am. B. E. 409, 247 Fed. 913. 77. Eagsn v. Donovan (D. C, Ohio), 26 Am. Bi R. 311, 189 Fed. 138, holding that where a State statute provides that deeds not recorded, although good as between the parlies, are void as to bona fide purchasers for value without knowledge, the recording of a deed isi "required" within the mean- ing of § 60-a; In re Beckhaus (C. C. A, 7th Cir.), 24 Am. B. E-. 380', 177 Feds 141; Loeser v. Bank & Trust Co. (C. C. A., 6th Cir.), 17 Am. B. R. 628, 148 Fed. 975; In re Donnelly (D. C., Ohio), 27 Am. B. R. 504, 193 Fed. 755. 78. In re Sturtevant (C. C. A., 7th Cir.), 26 Am. B. E. 574, 577, 189 Fed. 138, in which the court said': " If the word ' required ' in section 60-a is to be construed as re- ferring to a transaction which would be invalid for all purposes, then it does not apply to the case in hand, for the record- ing of the mortgage is not required- in that sense imder the Illinois statute. The re- cording laws are only for the purpose of notice. Dfean v. Plane, 195 111. 495-500, 63 N". E. 274. This construction of section 60-a does not strike at the object sought to be attained by the amendments of 1903. It would formerly have been an easy matter to make a preferential transfer prior to the beginning of the four-month period, and withhold the transfer instrument from record .until after the period had begun to run, thus defeating the benefit contemplated 880 Peefeered Ceeditoes. [§ 60-a. State law requires that failure to file or record will invalidate the transfer as against creditors, the word "creditors" will not be limited in its applica- tion, but will include creditors of all kinds, and under such law filing or recording is required.™ The provision does not apply where the recording of an instrument is permissive only, and the grantee takes possessioir under a deed.*'' An. assignment of a land contract which might have been recorded if executed with due formality, under the laws of a State, but in respect to which recording is not required to give it validity, is not "required" to be recorded.*^ If a chattel mortgage first comes into existence as against general creditors, under a State statute, when it is recorded, it is " required " to be recorded under this subdivision even though it is not absolutely void in all circumstances because not so recorded.^^ (Ill) Transfers prior to fow months' period recorded within such period. — Where a transfer in the nature of a preference was made more than four months before the petition in bankruptcy was filed, but was recorded within that period, the statute does not have the effect of making it voidable at the instance of a trustee, unless it was one required by law to be recorded or registered within the principles heretofore declared, and the invalidating circumstances existed when it was recorded or registered.®' If an instrument has been made by a bankrupt, and recorded within the statutory period, it is a question of fact whether it was done with intent to give. a preference.^ The failure to record a deed until after the grantor's adjudication as a bankrupt is not sufficient to make it an unlawful preference, in the absence of a fraudu- lent agreement, where, under the State law, the unrecorded instrument is valid between the parties and against general creditors of the grantor.*® Such fact will be corroborative of the general scheme to defraud, where it appears that by the creation of that period. Manifestly 143 Fed. 428; In re Noel (D. C, Md.), 14 Am. Congress must have construed the law as B. K 715, 137 Fed. 694. it then stood as making the transfer to 83. Martin v. Commercial Nat. Bank (C. C. date from the time it was actually made, A. ^th Cir.), 36 Am. BE. 25 228 Fed. 651, ... , J J. ii, J i f £1- c atEd. 40 Am. B. E. 16o, 38 Sup. Ct 176; Getmau without regard to the date of fllmg for y^ Lippert (N. Y. App. Div.), 36 Am. B. E. £06, record. Therefore a transfer, though fraud- 171 N. Y. App. Div. 536, 157 N. Y. Supp. 867; ulent could not have been attacked, even Matter of Roberts (D. C, Ga.), 36 Anj. B. E. thmiirh tTio in«triimpnt PvirlpTipiTicr thp 'trans- l^'^' ^27 Fed. 177; Jolanson V. Barrett (D. C, though the mstrument evmencing tne trans ^^ j gg j^^_ ^ ^ ^g^ 237 Fed. 112; Dougli- fer was recorded withm the four months. erty v. First Nat. Bank (C. C. A., 6th Cir.), 28 In order to cure this, the amendment was Am. B. E. 263, 197 Fed. 241; Marsh v. Leseman added that no fraudulent transfer constitut- (£. C. A., 2d Ci^), 40 Am. B. E. 97, 242 Fed. ing a preference could escape the four-month g^' c^r.)," « 'im.' a E^'eo? '2'48' F^d ^692?' dV provision unless the recording was effected Laval Separator Co. v. Jones (Me. Sup. Ct.), 41 prior to that period." See Doughterty v. Am. B. E. 440, 102 Atl. 968. First National Bank (C. C. A., 6th Cir.), ^'P'te^se by bankrupts to indorsers as se- 00 A -D-D 000 inr» -Ct J cAi i ff , curity. — The facts that a bank, when it took ,i8 Am. a. K. «Jbd, Itff aea. dil, as to enect a^ assignment of a mortgage executed to in- of amendment of 1906;- Martin v. Commercial dorsers by the maker of a note which it had National Bank (U. S. Sup. Ct.) , 40 Am. B. R. discounted, had learned that the maker was iRn qa cin.Ti. ri+ 17R then insolvent, and was insolvent when the (00, so i=up. uc. I'o. mortgage was given, and that recording had 79. In re Mission Fixture & Mantel Co. been postponed pursuant to an agreement be- (D. C, Wash.) 24 Am. B. E. 873, 180 Fed. tween the maker and the Indorsers do not avoid ogq ' or defeat the mortgage as a valid security In the possession of the bank, the holder of the 80. Getman v. Lippert (N. Y. App. Div.), note secured thereby. Matter of Mosher (D. C, 36 Am. B. R. 806, 171 N. Y. App. Div. 533, N. Y.) 35 Am B E. 284, 224 Fed 739 1K7 \r V «3„r,Ti Sfi7 **• Matter of McKane (D. C, N. Y.), 19 Am. 157 iN. X. bupp. HO?. B jj ;^03, 158 Fed. 647. See Anderson v. Chen- 81. In re Sayed (D. C, Mich.), 26 Am. B. au't (C. C. A., 5th Cir.), 31 Am. B. E. 349, 208 R. 444, 185 Fed. 962. g^ j^ -^^ Mcintosh (C. C. A., 9th dr.), IS 82. First Nat. Bank v. Connett (C. C. A., Am. B. E. 169, 150 Fed, 546; In re Sayed (D. 8th Cir.), 15 Am. B. R. 662, 142 Fed. 33; ^it'^'see'if ^th^t^ f' m*ort'g%f ^o"''' $1 00ft In re Montague (D. C, Va.), 16 Am. B. R. 18, given by a bankrupt to secure a loan 'for § 60-a.j Made a Teansfee of Peopeety. 881 the deed was without consideration and in fraud of creditors.** Where a deed absolute on its face, but in effect a mortgage was given long prior to bank- ruptcy as security for a promissory note, but was withheld from recorded by agreement until the day before the petition in bankruptcy, the transfer con- stituted a preference, since it being in effect a mortgage it was "required" to be recorded to be valid as against creditors.*^ d. Procured or suffered a judgment. — The words "procured or suffered a judgment to be entered against himself in favor of any person" seems an inheritance from the law of 1867.^® They are not th^ same as those used in § 3-a (3). "Procuring" a judgment implies active agency on the part of the debtor. It is very different from " permitting " the same thing. But the disjunctive " or " is used, as is the word " suffered," and cases in point under § 3-a (3) are probably equally in point as to preferences which are voidable. Thus, Wilson v. The City Bank®^ is no longer controling even here. The crucial element of intent is now unnecessary. The few decisions under the present law directly in poiut are to like effect.'" Cases under the former law on the meaning of "suffer or procure" should be cited with caution.*^ e. Made a transfer of his property.— (1) Iw geneeal. — The word "trans- fer," both by the express terms of the bankruptcy law and by authoritative decisions, includes "the sale and every other and different mode of disposing of, or parting with property, or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift or security."®* (2) Method of teanspee. — (I) In general. — The method of transfer is immaterial, and this was so under, 'the former law.®' Any method of transfer whereby the transferee, a creditor, receives property belonging to the bankrupt, only $700, and withheld , from record until within four months of bankruptcy is pref- erential under section 60-a of the Bank- ruptcy Act. and might also be attacked for usury. Butcher v. Werksman (D. C, N. Y.), 30 Am. B. R. 332, 204 Fed. 330. 86. Butcher v. Werksman (D. C, N. T.), 30 Am. B. E. 332, 204 Fed. 330. 87. Dulany v. Morse (Ct. of App., D. C), 29 Am. B. E. 275, 41 Wash. L. Eep. 52. 88. Act of 1867, § 39. 8». 17 Wall. 473. 90. In re Collins (Eef., la.), 2 Am. B. E. 1; In re Eiehards (D. C, Wis.), 2 Am. B. E. 518, 95 Fed. 258 ; Grant T. National Bank of Auburn (D. C, N. Y.), 28 Am. B. E. 712, 197 Fed. SSf; Moore v. Smith & Sons (D. C, N. Y.), 30 Am. 3. R. 413, 205 Fed. 431. See Am. Bankr. Dig. S 521. Besentlal elements, where judgrment is suf- fered. — An analysis of the statute will reveal that, to establish a preference, the trustee must show : (1) That the debtor was insolvent at the time of the entry of the Judgment; (2) that the debtor suffered the judgment to be entered within four months before the filing of the pe- tition; (3) that the enforcement of the judg- ment obtains for the creditor a greater per- centage of its debt than any other creditor of the same class ; and (4) that the bank or its agent had reasonable cause to believe that the effect of such judgment was to give a preference within the meaning of the acts of Congress re- lating to bankruptcy. Anderson v. Hayton State Bank (Ore. Sup. Ct.), 38 Am. B. E. 4, 159 Pac. 1003. Confession of judgment.— Where a corpora- tion with knowledge of its insolvency and within two months of bankruptcy, not only suffers, but procures a judgment to be en- tered afrahist itself, the enforcement of which will give to the judgment creditor substantially everything it owns, and a gre.iter percentage of its claim than any other creditor of the same class, said corporation will be deemed to have given a voidable preference. Grant v. National Bank of Auburn (D. C, N. Y.'', 37 Am. B E. 329, 232 Fed. 201. A creditor who recovers a judgment, by con- sent or in invitum, and by execution sale col- lects his money within four months preceding bankruptcy, and with reasonable cause to be- llve, etc., receives a voidable preference which he must repay to the trustee. Golden Hill Dis- tilling Co. V. Logue (C. C. A., 6th dr.), 39 Am. B. E. 731, 243 Fed. 342. The rights of a mortgagee under a valid chattel mortgage may be enforced by confes- sion of judgment by the mortgagor as well as by an action to foreclose the mortgage ; and where the mortgage itself did not constitute a preference, the confession of Judgment thereon and a sale of the property does 'not constitute a preference. Utah Ass'n of Credit Men v. Jones (Utah Sup. Ct), 39 Am. B. E. 723, 164 Pac. 1029. 91. The following are typical: Little v. Alex- ander, 21 Wall 500 ; Tenth Nat. Bank v. Warren, 96 U. S. 539, 24 L. Ed. 640; Sage v. Wynkoop, 104 U. S. 319, 24 L. Ed. 740; In re Dunkle, Fed. Cas. 4.160; In re Baker, Fed. Cas. 763. 92. Bankr. Act, § 1 (25). Coder v. Arts (C. C. A., 8th dr.), 18 Am. B. H. 513, 145 Fed. 202, 152 Fed. 943, modifying 16 Am. B. E. 583. 145 Fed. 202, affd. 216 U. S. 223, 22 Am. B. E. 1, 53 L. Ed. 772, 29 Sup. Ct. 436. 93. Stern, Falk & Co. v. Louisville Trust Co. (C. C. A., 6th Cir.), 7 Am. B. E. 305, 112 Fed. 501; National Bank of Newport v. Herkimer Bank, 225 U. S. 178, 28 Am. B. B. 218, 56 L. Ed. 1042, 32 Sup. 633. 882 Peefeeeed Ceeditoes. [§ 60-a. and thereby obtains a preference over other creditors, will result in a preference.®* It is the effect of the transfer, and not its form or method which con- trols.®* So that a payment of money,®® a conveyance of land or mortgage thereof as security for a payment of a debt,®^ the voluntary confession of judg- ment to a creditor ®* the retaking of goods which have been sold and delivered,®® or any other device by means of which the bankrupt' has disposed of any por- tion of his estate will constitute a transfer. Where a creditor secures a judg- ment against an insolvent debtor and procures an execution to bs levied on his personal property, theexecution sale of such property and payment of the pro- ceeds to the creditor constitutes a transfer within the meaning of the bank- ruptcy act.-^"** A trustee in bankruptcy who mingles the funds of the estate with his own, and afterward becomes bankrupt himself, cannot pay out of the funds deposited in his name, the amount due the estate of which he is trustee. -^"^ The mere renewal by a mortgages of a chattel mortgage within the four month period is not a transfer of property within the meaning of this section.^"^^ (II) Transfer by indirection. — ■ The other elements of a preference being present the fact that a payment was made to a creditor by the indirect method of passing the money through one or more intermediaries does not validate the payment.-^'^^'' Where a debtor conveyed property to his wife without any consideration and she mortgaged it in favor of his creditors. 94. Bailey v. Baker Ice Machine Co., 239 U. S. 268, 35 Am. B. E. 814, 819, 60 L. Ed. 275, 36 Sup. Ct. 50, aifg. 31 Am. B. R. 593, 209 Fed. 603. 95. Rogers v. Fidelity Sav. Bank & Loan Co. (D. C, Ark.), 23 Am. B. R. 1, 172 Fed. 735. In the case of National Bank of New- port V. Herkimer County Bank, 225 U. S. 178, 28 Am. B. R. 218, 222, 56 L. Ed. 1042, 32 Sup. Ct. 633, it is said: "It is not the mere form or method of the transaction that the act condemns, but the appropriation by the insolvent debtor of a portion of his prop- erty to the payment of a creditor's claim, so that thereby the estate is depleted and a creditor obtains an advantage over other cred- itors." 96. Carson, etc., Co. v. Chicago, etc., Trust Co., 182 U. S. 438, 5 Am. B. R. 814, 45 L. Ed. 1171, 21 Sup. Ct. 906; Jaquith v. Alden, 189 U, S. 78, 82, 9 Am. B. R. 773, 47 L. Ed. 717, 23 Sup. Ct. 649; New York Co. Nat. Bank v. Massey, 192 U. S. 138, 11 Am. B. R. 42, 48 L. Ed. 380, 24 Sup. Ct. 199; In re Fixen & Co. (C. C. A., 9th Cir.), 4 Am. B. R. 10, 102 Fed. 296; In re Arndt (D. C, Wis.), 4 Am. B. R. 773, 104 Fed. S34; In re Sloan (D. C, la.), 4 Am. B. R. S56, 102 Fed. 116; West v. Bank of Lahoma (Sup. Ct., Okla.), 16 Am. B. E. 733, 16 Okla. 508, 86 Pac. 59; In re Warner, Fed. Cas. 17,177; In re Clark, Fed. Cas. 2,812. Payment of Money. — In a suit by a trustee in bankruptcy to set aside an alleged prefer- ential payment it appeared that the bankrupt while insolvent executed a mortgage to a realty company which delivered to him its check on defendant's bank ; that one K, in exchange for the realty company's check gave the bank- rupt's broker his own check ou another bank ;■ that the broker deposited K's check in his own bank and drew his check to the order of de- fendant for which he received notes of the bankrupt held by defendant; that defendant had reasonable cause to believe that the bank- rupt was insolvent, but did not have any in- terest in the realty company. It was held that a decree dismissing the complaint on the theory that there had been no real transfer of cash by the bankrupt to defendant, should be reversed. Obermeier v. Kass (C. C. A., 2d Cir.), 34 Am. B. E. 37, 219 Fed. 529. 97. Sieg V. Greene (C. C. A., 8th Cir.), 35 Am. B. E. 150, 225 Fed. 955. 98. Grant v. National Bank of Auburn (D. C, N. Y.), 28 Am. B. E. 712, 197 Fed. 581. 99. Wolff Mfg. Co. V. Battreal Shoe Co. (Mo. Kan City Ct. of App.), 35 Am. B. E. 895, 180 S. W. 396, holding that where a creditor, un- der an agreement with his debtor, takes goods from the debtor's store just prior to bank- ruptcy and with full knowledge of the debtor's insolvency, such transfer is a voidable prefer- ence under the bankruptcy act. 100. Galbraith v. Whitaker (Sup. Ct., Minn.), 32 Am. B. E. 113, 138 N. W. 772. 101. Block V. Eice (D. C, Pa.), 21 Am. B. E. 691, 167 Fed. 693. Payments on account of loans, made during insolvency and within the four months' period, constitute preferences. In re Colton Export and Import Co. (C. C. A., 2d dr.), 10 Am. B. E. 14, 121 Fed. 663. So held where payment was mads from the general funds of the bankrupt, al- though the loan was made for a particular pur- pose but not used therefor. In re Kearney (D. C, Pa.), 21 Am. B. E. 721, 167 Fed. 995. The repayment of stolen money does not con- stitute a preference, the person to whom it is restored being in entire Ignorance both of the theft and restoration. McNaboe v. Columbian Manufacturing Co. (C. C. A., 2d Cir.), 18 Am. B. E. 684, 153 Fed. 967. In the above case the president of a bankrupt corporation converted into cash a portion of its assets and re- paid himself, as agent of another corporation, money which he had stolen from its funds and applied to the uses and purposes of the bank- rupt and it was held that such repayment did not constitute a preference under the bank- ruptcy act. 101a. Matter of Dagwell (D. C, Mich.), 45 Am. B. E. 358, 263 Fed. 406. 101b. First National Bank v. Blackburn (C. C. A., Sd Cir.), 43 Am. B. E. 680, 256 Fed. 527. 60-a.J Peefeeential Teansfee. 883 it was held to be a preference by the debtor. ^"^ If a transaction was entered into for the purpose of indirectly evading the provisions of the act and pro- curing an undue preference to the creditor, it is voidable, ^"^ Any transfer whether direct to the creditor or for his benefit, whereby the estate was depleted and the creditor received an unfair advantage is sufficient.-"'* (Ill) Partnership and individual assets. — Any scheme or device resorted to by persons in contemplation of bankruptcy, for the purpose of charging the partnership assets with individual obligations is a violation of the act.^"^ So, on the other hand, any scheme or device resorted to by a creditor for the pur- pose of charging the individual assets of a partner, with the co-partnership liabilities, would be unlawful.^'* So a transfer of the firm assets to one partner, for the purpose of enabling the individual creditors of the purchasing 108. Gibson v. Dobie, Fed. Cas. 5,394, 14 N. B. E. 156, 5 Biss. 198. 103. Eoberts v. Johnson (C. C. A., 4tli Cir.), 18 Am. B. E. 132, 151 Fed. 567; Mason v. Nat. Herkimer Co. Bank (D. C, N. Y.), ?1 Am. B. E. 98, 163 Fed. 920, rovd. on other grounds, 22 Am. B. R. 733, 172 Fed. 529; In re Beerman (D. C, Ga.), 7 Am. B. E. 431, 112 Fed. 663; Frank T. MuDliner, 9 Am. B. E. 229, 76 N. Y. App. Div. 616, 78 N. Y. Supp. 369; Block v.. Academy Ball room, (D. C, N. Y.), 34 Am. B. E. 675, 221 Fed. 1604; McKnight v. Shadbolt (Wash. Sun. Ct.), 40 Am. B. E. 615, 168 Pac. 473; Farmers' State Bank v. Freeman (C. C. A., Sth Cir.), 41 Am. B. E. 2S6, 249 Fed. 579 ^ MacHenry v. Dwelling Bldg. & Loan A'ssn. (D. C, Pa.), 44 Am. B. E. 234, 259 Fed. 880. Payment cr transfer by indirection; — Upon the foreclocure of a mortgage uyon firm property, there remained after satisfaction of tl:e mortgage a considerable surplus belonging to the bankrupt firm. One of the partners directed the mortgagee to pay from the surplus in his hands a debt due a creditor, thereby creating a preference. In legal effect this transaction was the same as a direct payment by the firm to prefer a firm creditdr. Johnson v. Hanley, Hoye & Co. (D. C, R. I.), 26 Am. B. E. 748, 188 Fed. 7-52. Where a bank received security for bank- rupt's indebtedness by means of an assign- ment of a mortgage executed by the bank- rupt to a third party, in determining whether the transaction constituted a pref- erence, it. must be determined by its effect and not by its form, as the court must look at results and not at the devious ways by which they are accomplished. In re McDonald & Sons (D. C, S. Car.), 24 Am. B. R. 446, 178 Fed. 487, affd. 25 Am. B. E. 948. And see Walters v. Zimmerman (D. C, Ohio), 30 Am. B. R. 776, 780, 208 Fed. 62, where mortgage to secure loan from president of bank for the payment of a debt due the bank was held a preference; modi- fied by Marsh v. Walters (C. C. A., lat Cir.), 34 Am. B. R. 85, 2aO Fed. 805. The payment of a bankrupt's note, which was secured by a chattel mortgage on his stock of goods, by the purchaser of said goods, who had assumed the mortgage as part of the purchase price, has the same legal effect, so far as the giving of a pref- erence to 'the holder of the note -is con- cerned, as if the payment had been made by the bankrupt himself. . Wickwire v. Webster City Sav. Bank (Sup. Ct., la.), 37 Am. B. R. 157, 133 N. W. 100. Acceptance of mortgage security. — Where in an action by a trustee in bankruptcy against twp directors of a bankrupt corpora- tion to recover alleged preferential payments, it appeared that each of the defendants had advanced certain amounts to the corporation, that thereafter the wife of one of the di- rectors advanced a certain amount to the corporation receiving a mortgage as security, with the understanding that $3,500 of the amount advanced by each defendant should be included in the mortgage; that the mortgage advanced the amount less the sums paid to the defendants by checks of the corporation which they indorsed to her; it was held that the transaction did not constitute a preferential transfer to the defendants, and, therefore, no recovery should be allowed against them. Withoft v. Andrews (D, C, Calif.), 33 Am. B. E. 536, 217 Fed. 421. Sale of notes under judgment of State court. — A sale of notes, belonsing to a bxnk- rupt, which had been attached in actions against him by creditors in another State, while he was insolvent, does not constitute a preference, where, the bankrupt made no transfer of the notes and did not suffer or procure the judgment made in the actions against him. De Friece v. Brvant (D. C, Ky.), 37 Am. B. K. 275, 232 Fed. 233. 104. Grandison v. Nat. Bank of Rocliester (C. C. A., 2d Cir.), 36 Am. Pr. E. 43«, 231 Fed. 800 ; and see National Bank of Newport v. National Herkimer County Bank, 225 U. S. 178, 184, 28 Am^ B. R. 218, 56 L. Ed. 104' 32 Sup. Ct. C33 ; Smith v. Coury (D. C. Me ) 41 Am. B. E. 219, 247 Fed. 168; De Forest v. Crane & Ordway Co. (Mont. Sup. Ct), 43 Am. B. E. 349. 179 Pac. 291, 105. In re Jones & Cook (D. C, Mo.), 4 Am B. E. 141, 100 Fed. 781. See Am. Bankr. Dig, 106. Matter of Frazer (D. C, N, Y ) 34 Am. B. R. 467, 221 Fed. 83, holding that where a creditor of a partnership knowing that the Insolvency of the firm was Imminent and having reasonable cause to beileve that the effect of the indorsement of the firm notes by an individual partner, who was solvent, . would be to constitute a preference, the pay- ment of such note from the individual assets of the Indorser will operate as a preference. 884 Prefeeeed Ceeditoes. [§ 60-a. partner to obtain an advantage over firm creditors, constitutes a preference. ^"'^ If an individual member of a firm, vphile the firm is insolvent, transfers his property in payment of a firm debt, it constitutes an unlawful preference, not by the firm, but by the individual member/**^ (IV) Contract of conditional sale. — The lien which a vendor of personal property retains under a contract for the sale of such property on condition that the vendor retains title notwithstanding change of possession, is not a transfer of such property. The traoisfer to be within the statute must be of property belonging to the bankrupt.-^"* A conditional sale, made for value, and filed as required by the statute is not a preference, though made within four months of the buyer's adjudication as a bankrupt. *^° (3) Intent oe good faith. — A resultant inequality being now the essence of a preference, it makes no difference whether the transferee was coerced by his creditor.^" The section prior to the amendment of 1910' provided that the person receiving the preference "shall have had reasonable cause to believe that it was intended thereby to give a preference;" and under this clause the intent of the bankrupt to prefer was required to be shown. ^'^ Under the section as it then existed the fact that the transfer was made in good faith was immaterial, if made within the prescribed period to secure an antecedent debt, and intended and accepted as a preference, and so resulted."' As the section now stands all that is required is " reasonable cause to believe that the enforcement of such judgment or transfer would effect . a prefer- ence," without regard to the intent of the bankrupt. The transfer itself shows the intent; the other elements of a preference being present, it will be presumed that when he made the transfer he intended a preference."* But 107 In ro Waite, Fed. Cag. 17,044, 1 Low. Co. v. Wriprht (C. C. A., Sth Cir.), 31 Am. B. „.„ E. 125. 207 Fed. 535; In re Parmer's Cooperative 30"- Co. (D. C, N. Dak.), 30 Am. B. E. 187, 202 Mortgage on individual property. — Based Fed. 1005; 5I:itter of .\iison JlprpniitUe Co, m. on the principle that each individual partner C., Tex_V 3,S Am. B. R. n52, 203 Fed. S71; Mat- is liaWe for the entire partnership indebted- ^j^.^JfI fiZ " ■•^' ' "" "' ness, a preference is created in favor of a partnership creditor where one or more of the 110. Matter of Cohen (D. C, N". Y.), 20 individual partners gives a mortgage on his Am. B. R. 7!)fi, 163 Fed. 444. individual property in favor of a partnership 111. See Clarion Bank v. Jones, 21 Wall, creditor or suffers a judgment to be taken 325; Giddings v. Dodd, Fed. Cas. 5,405; In against him individually. The rule Stated re Batchelder, Fed. Cas. 1.098. applies as well where the several partners 112. KimTiei'le v. Farr (C. C. A,, 6*-h Cir,), have not been individually adjudicated bank- 26 Am. B. E, 818, ISO Fed, 295; Hardy v. rupts as where they have been so adjudicated. Gray (C, C. A,, Ist Cir.), 16 Am. B. R. Where individual partners have given a 387, 144 F'ed. 922, 75 C. C. A. 562; In re preference to a firm creditor the bankruptcy First Nat. Bank of Louisville (C. C, A., 6th court has jurisdiction, although the partners dr.), 18 Am, B. R. 766, 155 Fed. 100. 84 individually have not been adjudicated bank- C. 'C. A. 16; Rutland County Nat. Bank v. rupts, to set aside such preference by virtue Graves (D. C, Vt.), 19 Am. B. R. 446, 156 of its power under section 5-g of the Bank- Fed. 168; Soule v. First Nat'l Bank (Sup, ruptcy Act to "marshal the assets of the Ct., Idaho), 32 Am. B. R, 536, 140 Pac. 1098, partnership estate and the individual estates 113. Morgan v. First Nat, Bank (C. C. so as to prevent preferences and secure the A., 4th Cir.), 16 Am. B. E. 639, 145 Fed, equitable distribution of the property of the 466, so held in respect to a trust deed ex- several estates," Fort Pitt Coal & Coke Co. ecuted in good faith by an insolvent to se- V, Diser (0. C. A., 6th Cir,), 38 Am. B. R. cure an antecedent debt, Brewster v, Goff 566, Lumber Co, (D, C, Pa,), 21 Am. B, R, 106, 108. Mayes v. Palmer (C. C. A., 9th Cir,), 164 Fed. 127. 31 Am. B. R. 225, 208 Fed. 97; Mills v. 114. Efackney v. Raymond Bros, Clarke Co, Fisher (C. C. A,, 6th Cir,) , 20 Am. B, R. 237, (Sup. Ct, Nebr.) , 10 Am, B. R. 213, 214, 68 159 Fed. 897, 87 C. C. A. 77. Neb, 624, citing Johnson v, Wald (C, C. A,, 109, Bailey v. Baker Ice Machine Co,, 239 Sth Cir.), 2 Am. B. R. 84, 93 Fed, 640; Frost U. S. 268, 35 Am, B. R. 814, affg. 31 Am. B. v, Latham & Co, (D, C„ Ala,), 25 Am, B, R. K. 593, 209 Fed, 603; Big Four Implement 313, 181 Fed. 866; Patterson v. Baker Gro- 60-a.j Peefekential Teansfee; Depletion of Estate. 885 where a debtor pays and a creditor receives the amount of a just debt, the good faith of the transaction will be presumed, but upon proof that a voidable preference resulted the initial presumption is destroyed."* Good faith alone would not be sufficient to preserve the transfer, if it in fact constituted a preference. ^^® It is conclusively presumed that a preference was intended when the effect of the transaction is to give one creditor a greater percentage of his debt than other creditors of the same class. ^" (4) Estate must be diminished. — (I) In general. — There can be no preferential transfer without a depletion of the bankrupt's estate."* A fictitous transaction not affecting the estate of the debtor or the rights of creditors cannot be deemed a transfer, although assuming the form of one.^^^ If the property alleged to have been transferred is of no value to the trustee, representing the creditors, as where it consists of a revocable privilege, of personal value to the bankrupt, such transfer is not in any sense a preference.^" Where the holder of an alleged preference actually returns the property to the bankrupt in good faith before bankruptcy proceedings, and nothing was paid therefor by the bankrupt, and his estate was not depleted by the transfer, the alleged holder of the preference is relieved from liability. ^^' The transfer must consist of property belonging to the bankrupt; thus if an indorser on the bankrupt's note pay the debt and credit the amount thereof on an indebtedness due by the indorser to the bankrupt, the payment is not a preference. ^^^ eery Co. (Sup. Ct, Ore.), 33 Am. B. E. 740, 144 Pac. 673; Soule v. First Nat'l Bank (Sup. Ct, Idaho), 32 Am. B. E. 536, 140 Pac. 1098. 115. Wolff Mfg. Co. V. Battreal Shoe Co. (Mo. Kan. City Ct. of App.), 35 Am. B. E. 895, 180 S. W. 396, holding that proof that a preference was voidable destroys the initial presumption of good faith on the part of a creditor in ac- cepting payment of his Just claim, and places him in the position of attempting to evade and defeat the application of the bankruptcy law to the estate of his insolvent debtor. 116. Morgan v. First Nat. Bank (C. C. A., 4th Cir.), 16 Am. B. E. 639, 145 Fed. 466; Matter of Gesas (C. C. A., 9th Cir.), 16 Am. B. E. 872, 146 Fed. 734. 117. In re McDonald & Sons (D. C, S. Car.), 24 Am. B. E. 446, 178 Fed. 487, a£td. 25 Am. B. E. 948, 184 Fed. 986. 118. McKay v. Sperry Flour Co. (Wash. Sup. Ct), 39 Am. B. E. 295, 163 Pac. 377; Potter v. American Ptg. & Litho Co. (la. Sup. Ct), 40 Am. B. E. 854, 165 N. W. 1044; Matter of Schwab (D. C, N. Y.), 44 Am. B. E. 185, 258 Fed. 772 citing Collier on Bankruptcy (11th ed.) 88o. See also Eadford Grocery Co. v. Hayni (C. C. A, 5th Cir.), 44 Am. B. E. 300, 261 Fed. 349; Stearns Salt & Lumber Co. v. Hammond (C. C. A., 6th Cir.), 33 Am. B. E. 484, 217 Fed. 559, holding that where a mortgage obligated the mortgagor to insure the property for the bene- fit of the mortgage trustee, " as a further se- curity" for the mortgage Indebtedness, and the mortgagor within twenty days of its bank- ruptcy authorized the trustee to pay a portion of the proceeds of the policies to the mortgagee to be applied upon an open unsecured account, such payments constituted preferences, within the meaning of section 60 of the Bankruptcy Act, as they operated to deplete the assets available to the general and unsecured credi- tors, and the trustee of the bankrupt mortgagor is entitled to a recovery thereof. Return of goods secured by fraud. — A return to the seller of goods or payment to the extent of their value upon discovery that the sale has been induced by fraud, does not constitute a preference, even though the seller does not ex- pressly assert a right of rescission. Illinois Parlor Frame Co. v. Goldman (C. C. A., 7th Cir.), 43 Am. B. E. 287, 257 Fed. 30O. 119. In re Steam Vehicle Co. (D. C, Pa.), 10 Am. B. E. 385, 121 Fed. 939; Continental & Com. Trust & Savings Bank v. Chicago Title & Trust Co. (IT. S. Sup. Ct), 229 U. S. 435, 30 Am. B. E. 624, 57 L. Ed. 1268, 33 Sup. Ct. 829. The mere preferential transfer of a worthless claim does not come within the meaning of the act. Matter of Hamilton Automobile Co. (C. C. A., 7th. Cir.), 31 Am. B. E. 205, 209 Fed. 596; Boot Manufacturing Co. v. Johnson (C. C. A., 7th dr.), 34 Am. B. E. 247, 219 Fed. 397. 120. In re Martin (C. C. A., 3d Cir.), 29 Am. B. E. 623, 200 Fed. 940. 121. Lucey v. Matteson (D. C, N. T.), 32 Am. B. E. 782, 215 Fed. 224. 122. Payment by indorser of bankrupt's note. — ^Bankrupt executed a note for certain machinery and supplies, and the payee in- dorsed it, discounted it at a bank and re- ceived the proceeds for its own use. There- after, the note was renewed from time to time, with like indorsement. The payee., in the meantime, had pledged to the bank all of its assets, intending to liquidate its busi- ness, and at the time of the last renewal secured the note by specific assignments of accounts, as collateral. Within four months of the maker's bankruptcy and before the maturity of the note, the payee, acting in its own behalf, took up the , note and received back its collateral. The amount so paid was charged by the payee to bankrupt to which it was indebted in a large sum, and on bank- rupt's books a corresponding credit was given to the payee, the charge against banE- rupt, however, not being known to the bank. Beld, that since the payment to the bank was not made by bankrupt, either directly or in- directly, so that its assets were thereby 886 Peefebbed Ceeditobs. [§ GO-a. (II) Fair consideration for present loan. — Where the transfer consists of the giving of a fair security for a present loan, and does not diminish the general fund/^ or a pledge or payment for a consideration given in the present or to be given in the future, whether in money, goods, or services, no preference results. ^^* Where a deed of trust is given to a bank to secure the payment of a present loan it is valid/^^ (III) Payments on account; net result rule. — Where the net result of the transactions complained of was to increase rather than deplete the estate, there can be no preference. For instance where payments are made on a runninfc account between the parties, in the regular course of business for goods sold and delivered within the four months' period, without knowledge on the part of the creditor of the debtor's insolvency, and the effect was to keep the account alive, with the result that new credits were extended and new depleted, such payment did not constitute a preference, tlie amount of wliicli could be re- covered by the bankrupt's trustee. National Bank of Newport v. National Herkimer County Bank, 225 U. S. 90, 28 Am. B. E. 213, 56 L. ed. 995, 32 Sup. Ct. 657, affg. 22 Am. B. E. 733, 172 Fed. 529. Where a partner negotiated loans from a bank on his own notes, indorsing them in the name of the firm, assumption of the payment of such notes to the bank by the firm within four months of the partner's bankruptcy and the subsequent payment thereof to the bank by the firm, did not constitute a preference to the bank, as the creditor did not receive any of the bankrupt's property. Catchings v. Chatham Nat. Bank (C. C. A., 2d Cir.), 24 Am. B. E. 843, 180 Fed. 103. See also Aiello v. Crampton (C. C. A., 8th Cir.), 29 Am. B. E. 1, 201 Fed. 891. 123. In re Wolf (D. C, la.), 3 Am. B. E. 555, 98 Fed. 74; First Nat. Bank v. Penn. Trust Co. (C. C. A., 3d Cir.), 10 Am. B. E. 782, 124 Fed. 968; Tiffany v. Boatman's Sav. Bank, 18 Wall. 375; In re Noel (D. C, Md.), 14 Am. B. E. 715, 137 Fed. 694; McDonald v. Clearwater By. Co. (C. C, Idaho), 21 Am. B. E. 182, 164 Fed. 1007; O'Connell v. City of Worcester (Mass. Sup. Ct), 38 Am. B. E. 913, 114 N. E. 201. See also Payne v. Sehon (W. Va. Sup. Ct. of App.), 40 Am. B. E. 462, 94 S. E. 34. The surrender of a valid lien is of itself a present consideration to the extent of the se- curity released. Lake View State Bank v. Jones (C. C. A., 7th Cir.), 40 Am. B. E. 148, 242 Fed. 821. Notes representing an antecedent debt do not constitute a present fair consideration for a transfer by a bankrupt. Mac Henry v. Dwell- ing Dldg. & Loan Assn. (D. C, Pa.), 44 Am. B. H. 234, 259 Fed. 880. Transfer for present consideration. — It is not every transfer by an insolvent within the four months' period that Is voidable by his trustee in bankruptcy, but the transfer to be voidable must be on account of a pre-existing debt; and when one gives an insolvent present value for a transfer of property, or when he makes an exchange of property, there is no preference. Ernst v. Mechanics' & Metals Nat. Bank (C. C. A., 2d Cir.), 29 Am. B. B. 289, 201 Fed. 664, a£Ed. 231 U. S. 50, 31 Am. B. E. 291, 58 L. Ed. 115, 34 Sup..Ct. 20. liOan by officer to insolvent corporation. — A chattel mortgage, authorized by a corporation In financial difficulty, prior to, but actually exe- cuted after, the receipt of a loan of money by an officer and director, which was actually delivered to the corporation, is not a preference under the BnnUruptcy Act or section 66 of the New York StocI; Corporation Law. Matter of Metropolitan Dairy Co. (C. C. A., 23 Cir.), 35 Am. B. E. 466, 224 Fed. 444. Transfer tp secure present indebtedness. — The maker of a note on the same day executed a mortgage on his real estate to indorsers as se- curity and thereupon a bank discounted the note. The indorsers unknown to the bank agreed not to record the mortgage, and it was not recorded until twenty days before the banjs- ruptcy of the maker. Thereafter the indorsers assigned the mortgage to the bank. It was held, that the mortgage was not a preference, as it was accepted by the indorsers in good faith as security. Matter of Mosher (D. C, N. Y.), 35 Am. B. E. 284, 224 Fed. 739. 134. Potter V. American Ptg. & Litho Co. (la. Sup. Ct), 40 Am. B. E. 854, 165 N. W. 1044; Irwin V. Maple (C. C. A., 6th Cir.), 41 Am. B. E. 532, 252 Fed. 10; Furth v. Stahl, 10 Am. B. E. 442, 205 Pa. St. 439. See also Dressel v. North State Lumber Co. (D. C, N. Car.), 9 Am. B. E. 541, 119 Fed. 531, holding that the return of money to a bai:krupt advanced to the bankrupt upon a check under an agreement that it was to be used to obtain a loan, which was not made, is not a preferential payment to the bankrupt. Security for present and future loans. — Where an assignment of security for present and future loans was made by a bankrupt while sovlent, the loan and each advancement there- after made were, in substantial effect, in- ex- change for present security and, under the rule that a security given for present loan is not a preference, even though the debtor be in- solvent, such assignment did not constitute a preference. In re Sayed (D. C, Mich.), 26 Am. B. E. 444, 185 Fed. 962. Present and past consideration. — Where a transfer is made for both a present and a past consideration to the extent that it was made tor a present consideration it is not voidable, but the fact that a part of the consideration was present does not prevent the transfer from being voidable as to the consideration which was past. Smith V. Coury (D. C, Me.), 41 Am. B. E. 219, 247 Fed. 168. 125. In re Jackson Brick & Tile Co. (D C , Mo.), 26 Am. B. E. 915, 189 Fed. 636, (revd. on other grounds, 27 Am. B. E: 673, 195 Fed 188), citing In re Union Feather & Wool Mfg Co i£- Sx ^•' '^^^ '^^^■'>- '^ ^">- B. E. 472, 112 Fed. 774, 50 C. C. A. 524; City Bank v. Bruce (C. C. A., 4th Cir.), 6 Am. B. K. 311, 109 Fed. 69, 48 C. C. A. 236; Stedman v. Bank (C. C. A., 8th" Cir.), 9 Am. B. E. 4, 117 Fed. .237, 54 C. C. A.. .!69 ; Farmers' Bank v. Carr (C. C. A 4th Cir ) 11 Am. B. E. 733, 127 Fed. 600, 62 C. 'c. A 446 ^ Angle V. Bankers' Surety Co. (C. C. A.. 2d Cir ) 41 Am. B. E. 00, 244 Fed. 401. 60-a.J Peefeeential Teansfee; Antecedent Debts. 887 goods placed in stock increasing the bankrupt estate, such payments are not voidable as preferences/^® A transfer of property by a bankrupt which does not exceed in value the amount due the creditor on its mortgage and the amount of money actually paid by him to unsecured creditors by agreement with the bankrupt, does not constitute a preference. •'^^ Where a bankrupt within four months prior to bankruptcy pays a creditor with money that i", exempt under the State law such payment does not constitute a preference.^^* (IV) Substitution of securities. — The substitution of securities pledged for an old loan, as, for instance, the exchanging of accounts receivable between an insolvent debtor and one of his creditors, does not create a preference, because there is no diminution of the debtor's estate whereby the creditors may be injured,-'^ unless the siecurities substituted are of greater value than the original ones.-^^^ An absolute transfer of an account against an insolvent debtor made in good faith to a person who afterward purchases goods from the debtor and gives in payment therefor the account thus transferred to him, is not a transaction especially prohibited by the bankruptcy act.-^^" (5) Payment of antecedent debts. — Any transfer within the statutory 126. Chisholm v. First Nat. Bank (111. Sup. Ct.), 35 Am. B. K. 598, 109 N. E. 657; Jaquith v. AljJen, 189 U. S. 78, 47 L. ed. 717, 23 Sup. Ct. 649. Payments on a running account. — Where a creditor has a claim on a running account for goods sold and delivered during the four months' period, the account being made up of debits and credits, leaving a net amount due from the bankrupt estate, payments made within such period without knowledge of the debtor's insolvency are not preferences. Wild & Co. V. Provident Life & Trust Co., 214 U. S. 292, 22- Am. B. R. 100, 53 L. ed. 1003, 29 Sup. Ct. 619, revg. 18 Am. B. E. 506, 153 Fed. 562. Where the account between the banlcrupt's estate and the person charged with having received a preference is an account current, the balance of the account, when the trans- actions cease, is to be taken in the determina- tion of whether there has been an advance- ment by the bankrupt's estate which would constitute a voidable preference. If the bank- rupt's estate has not been diminished there has been no voidable preference. Dunlap v. Seattle National Bank (Wash. Sup. Ct.), 38 Am. B. R. 937, 161 Pac. 364. 127. Russell's Trustee v. Mayfield Lumber Co. (Ct. of App., Ky.), 32 Am. B. R. 357, 164 S. W. 783. 128. First Nat. Bank of Cleveland v. Orten (Sup. Ct, Okla.), 33 Xm. B. R. 108, 142 Pac. 1096. 129. Border Nat, Bank v. Coupland (C. C. A., Btli Cir.), 39 Am. B. R. 165, 240 Fed. 355; Marsli v. Leseman (C. C. A., 2d dr.), 40 Am. B. E. 97, 242 Fed. 484; In re Eeese-Hammond Fire Brick Co. (C. C. A., 3d Cir.), 25 Am. B. E. 323, 181 Fed. 641, citing Collier on Bank- ruptcy (8th ed.), p. 657; Lloyd v. Sickles (Wash. Sup. Ct), 38 Am. B. R. 785, 162 Pac. 979; Clark T. Iselin, 21 Wall. 369; Stewart v. Piatt, 101 U. S. 731, 25 L. Ed. 816; Birnhisel v. Firman, 22 Wall 170; In re Weaver, Fed. Cas. 17,307; Butt V. Carter, Fed. Cas. 1,844. See Am. Bankr. Dig. § 506. Exchange of eecurltles, — In Cook v. Tullis, 18 Wall. 332, the Supreme Court uses the following language: "A fair exchange of values- may be made at any time, even if one of the parties to the transaction be in- solvent. There is notliing in the bankruptcy act, either in its language or object, ■which prevents an insolvent from dealing with his property, selling or exchanging it for other property at any time before proceedings in bankruptcy are taken by or against him, provided such dealings be conducted without any purpose to defraud or delay his creditors or give preference to any one, and does not impair the value of his estate. An insolvent is not bound, in the misfortune of his in- solvency, to abandon all dealings with his property; his creditors can only complain if he waste his estate or give preference in its disposition to one over another. His dealinrs will stand if it leave his estate in as good plight and condition as previously." The language was quoted by the Supreme Court in the case of Stewart v. Piatt, 101 U. S. 818. The same principle may be found an- nounced in Jaquith v. Alden, 189 U. S. 78, 9 Am. B. R. 773, 47 L. ed. 717, 23 Sup. Ct. .649. In the case of Sawyer v. Turpin, 91 U. S. 114, 120, 23 L. Ed. 235, the Supreme Court said : " It is too well settled to require dis- cussion that an exchange of securities vpithin the four months is not a fraudulent prefer- ence within the meaning of the Bankruptcy Law, even when the creditor and the debtor know that the latter is insolvent, if the se- curity given up is a valid one' when the exchange is made, and if it be undoubtedly of equal value with the security substituted for it." '' 129a. Matter of Star Spring Bed. Co. (D C N. J.), 43 Am. B. E. 328, 257 Fed. 176. ' " 130. Hackney v. Eaymond Bros. Clarke Co (Sup. Ct, Nebr.), 10 Am. B. R. 213, 214, 68 Nebr! 624; Lyon v, Clark, 124 Mich. 100, 1(K, 88 N W. 1046; North v. Taylor, 6 Am. B. E 233 61 N. Y. App. Div. 253, 70 N. Y. Supp. 338 ' 888 PsEFEEEED CeEDITOES. [§ 60-a. time by way of payment on or security of an antecedent debt is a preference. ^^^ As a corollary to the proposition that only transfers which diminish the estate of the bankrupt are preferences, it may be stated that preferences arise only in the case of antecedent debts. The distinction between a security and a preference is determined in accordance with that corollary. Property trans- ferred by a borrower at the time of receiving the loan, and for the purpose of making the lender safe, is a security. Its validity, if unaccompanied by positive fraud, is recognized and enforced in bankruptcy. But a transfer intended to enable one to secure payment of an antecedent debt is a pref- erence, if its effect is to give that creditor an advantage over others. If that is not its effect, it is a valid payment.^^^ Whether a debt secured by a 131. In re Belding (D. C, Mass.), 8 Am. B. R. 718, 116 Fed. 1016; In re Cobb (D. C, N. Car.), 3 Am. B. R 129, 96 Fed. 821; In re Wolf (D. C, la.), 3 Am. B. E. 555, 98 Fed. 74; In re Jones (D. C, S. Car.), 9 Am. B. R. 262, 118 Fed. 673; In re Montgomery, Fed. Cas. 9,732; Coggeshall v. Potter, Fed. Cas. 2,955. But compare Brooks v. Davis, Fed. Cas. 1,950; Adams v. Merchants' Bank, 2 Fed. 174. It is suggested tiiat In re Sanderlin (D. C, N. Car.), C Am. B. R. 3£4, 1C9 Fed. S57, is more reliable autliority liere than is MeNair v. Melntyre (C. C. A., 4tli Cir.), 7 Am. B. E. 638, 113. Fed. 113, that reversed it ; Feilbacli Co. T. Eussell (C. C. A., 6th Cir.), 37 Am. B. E. 285, 233 Fed. 412; Conners v. Broekport Nat. Bank (D. C, Maine), 32 Am. B. E. 882, 214 Fed. 847; Schener v. Kattzoffi (D. C, .N Y.), 37 Am. B. E. 476, 233 Fed. 473; Matter of Mosher (D. C, N. Y,), 35 Am. B. E. 234, 224 Fed. 730; Irwin v. Maple (C. C. A., 6th Cir.) , 41 Am. B. E. 532, 252 Fed. 10; Payne v. Sehon (W. Vn. Sup. Ct. of App.), 40 Am. B. E. 462, 94 S. E. 34. Security for antecedent deMs and subsequent ad\ai;cca. — The fact that a transfer of prop- erty by a baulirui~,t, made when insolvent and with knowledge by the creditor of the in- solvency, was made to secure subsequent ad- vances as well as antecedent debts does not de- prive it of its preferential character, especially where such subsequent advances have been paid by the bankrupt. Matter of Gottlieb & Co;. (D. C, N. J.), 40 Am. B. E. 247, 245 Fed. 139. In Louisiana, a conveyance of real estate by an insovlent husband, within the four months' period, to his wife, does not constitute a preference, under section 60-b, where the sub- ject-matter of the conveyance does not exceed in value the total property of the wife. Go- mila V. Wilcombe (C. C. A., 5th Cir.), 18 Am. B. E. 143, 151 Fed. 470. Payment of rent within four months of bank- ruptcy. — A payment by a bankrupt within four months of bankruptcy to be applied to rent not within the current year constitutes a voidable preference, where the landlord knew or had reasonable cause to know that the tenant was Insolvent. Matter of Bergdoll Motor Co. (D. C, Pa.), 35 Am. B. E. 32, 225 Fed. 87. 133. City National Bank v. Bruce (C. C. A., 4th Cir.), 6 Am. B. E. 311, 109 Fed. 69, 48 C. C. A., 236, citing text. The difference between preferences in pay- ment of antecedent debts, and securities given at ite time of incurring liabilities was clearly stated by Justice Davis of the United States Su- preme Court in Tiffany v. Boatman's Savings Inst. (18 Wall. 376), who said: "Neither the terms or policy of the bankrupt act are violated If these collaterals be taken at the time the debt is incurred. His (the bankrupt's) estate is not Impaired or diminished in- consequence, as he gets a present equivalent for the securities he pledges for the repayment of the money bor- rowed. Nor in doing this does he prefer one creditor over another, which is one ot the great objects of the bankrupt law to prevent. The preferences at which this law is directed can only arise in case of antecedent debts. To secure such a debt would be a fraud on the act, as it would work an unequal distribu- tion of the bankrupt's property; and, there- fore, the debtor and creditor are alike pro- hibited from giving or receiving any security whatever for a debt already incurred, if the creditor had good reason to believe the debtor to be insolvent. But the giving of securities when the debt is created is not within the law, and if the transaction be free from fraud in fact, the party who loans the money can retain them until the debt is paid. In the administration of the bankrupt law in Eng- land this subject has frequently come before the courts, who have uniformly held that ad- vances may be made in good faith to a debtor to carry on his business, no matter what his condition may be, and that the party making these advances can lawfully take securities at the time for their repayment. And the decisions in this country are to tlie same effect. (Hiliiard on Bankruptcy, 333, ch. 10, sec. 10; Hutten v. Grutwell, 1 El. & Bl. 15; Harris v. Rickett, 4 Hurl & N. 1; Bruteston V. Cooke, 6 E, & B. 296 ; Lee v. Hart, 34 Eng. Law and Eq. 569; Belle v. Simpson, 2 H. & N. 410; Hunt V. Mortimer, 10 B. & C. 44; Ex. p. Shouse, Crabb R. 482; Wadsworth v. Tyler, Fed. Cas. 17,032, 2 N. B. R. 101; quarto. ) " Security for clearance loan. — Where bank- rupts, who were stockholders, obtained from defendant banks at the beginning of banking hours, day or clearance loans, and later in the same day, when bankrupts were insolvent and the banks had reasonable cause to believe them to be so, delivered to the banks, upon demand, a large quantity of collaterals as security, the transactions constituted prefer- ences and the securities were recoverable by bankrupts' trustees. Ernst v. Mechanics' & Metals Nat. Bank (C. C. A., 2d Cir.), 29 Am. B. R. 289, 201 Fed. 664, affd. 231 U. S. 50, 31 Am. B. R. 291, 58 L. Ed. 115, 34 Sup. Ct. 20. Mortgage to secure funds to pay antece- dent debt. — A mortgage given by an insol- vent within four months of being adjudicated to secure money borrowed at the time for the § 60-a.J Peefeeential Teansfee. 889 transfer or lien is antecedent must be determined as of the date of the transfer or lien.^^^ A transfer of goods within the four months' period in part pay- ment of unsecured debts, constitutes a preference, and the trustee is entitled to the goods or their value, if possible/^* The delivery of a horse either in payment of a debt or as security therefor, is a preference, and must be deliv- ered to the trustee for the benefit of the estate.-'^® The assignment of a policy of fire insurance, within the statutory period, as security for an antecedent debt, constitutes a preference. ^^® A transfer of firm . property in payment of an individual partner's antecedent debt is a preference, ■^^'^ but the firm must be adjudged bankrupt before a suit can be brought to avoid it.^^® But if the debt is secured by an inchoate statutory lien the payment thereof is not a preference. ^^® Payments may be made in discharge of a valid lien, either legal or equitable. ^*° (6) MoETGAGE OF PEOPEETT. — ^A transfer may include a mortgage of the bankrupt's property as well as an absolute conveyance."^ Thus, a chattel mortgage, given on the verge of bankruptcy, may constitute an unlawful preference."^ A mortgage is a security and a transfer, and subject to the provisions of subsections a and i. Such a mortgage or transfer as consti- tutes a preference under subsection a is not voidable under subsection b unless the creditor who receives it, or is benefited by it, or his agent, has purpose of preferring a certain creditor, where the lender knew or had reasonable cause to believe that such was his purpose, is void. Matter of Stone (Ref., Mass.), 37 Am. B. R. 138. 133. Matter of Mossier Co. (C. C. A., 7th Cir.), 38 Am. B. R. 604. 134. In re Ansley Bros. (D. C, N: Car.), 18 Am. B. R. 457, 153 Fed. 983. 133. In .re Nechamkus (D. C, N. Y.), 19 Am. B. R. 189, 155 Fed. 867, holding that any claim of the creditor for stable hire, medical attendance, etc., for the horse in excess of the value of its use must be pre- sented, and in a proper way may be con- sidered as an expense of the receiver in bank- ruptcy. 136. Hanson v. Blake & Co. (D. C, Mr), 19 Am. B. R. 325, 350, 155 Fed. 342, holding that the assignee 'has no equitable lien upon the insurance money; State Bank of Clear- water V. Ingram ( C. C. A., 5th Cir. ) , 38 Am. B. R. 447. 137. In re Gillette et al. (D. C, N. Y.), 5 Am. B. R. 119, 104 Fed. 769. See also In re Beerman (D. C, Ga.), 7 Am. B. R. 431, 112 Fed. 662. 138. Withrow v. Fowler, Fed. Cas. 17,919. Compare Amsinck v. Bean, 22 Wall. 395; In re Sines (D. C, Pa.), 16 Am. B. R. 495, 144 Fed. 142. 139. In re Lynn Camp Coal Co. (Cir. Ct., Ky.), 2 Am. B. R. 60, 168 Fed. 998. 140. A subcontractor under agreement to furnish materials to a contractor, which had agreed to construct certain buildings for a railway company, after the railway company had agreed to see that it was jaid for ma- terials delivered, filed a lien, and thereafter the railway company, the contractor, its sure- ties, and the subcontractor with other claim- ants all entered into an agreement for the settlement of the differences which had arisen and for the payment of all legitimate lien- able claims, and the railway company and the sureties deposited a certain sum, more than six months prior to the commencement of bankruptcy proceedings against the contrac- tor, for the payment of such claims, which had to he severally approved by the parties to the agreement. It was held that the fact that the bankrupt joined with his cotrustees in approving the settlement of the subcon- tractor's claim, within four months of his adjudication, does not constitute the payment a voidable preference; and that said agree- ment gave the subcontractor an equitable lien good as against the trustee in bankruptcy. Root Manufacturing Co. v. Johnson (C. C. A., 7th Cir.), 34 Am. B. R. 247, 219 Fed. 397. 141. In re Coffey (Ref., N". ¥.), 19 Am. B. R. 148, 164, holding that the effect of a mort- gage, being to enable the mortgagee to obtain a greater percentage of his debt than other creditors, renders it a voidable preference. Mortgage prior to four months' period. — A real estate mortgage, given more than four months prior to the filing of a petition in bankruptcy against the mortgagor, can only be avoided for actual fraud, although not recorded until within four months of the fil- ing of the petition in bankruptcy. Matter of Mosher (D. C, N. Y.), 35 Am. B. R. 284, 224 Fed. 739. 142. Coder v. McPherson (C. C. A., 8th Cir.), 18 Am. B. R. 523, 152 Fed. 951; Rut- land County Nat. Bank v. Graves (D. C , Vt.), 19 Am. B. R. 446, 156 Fed. 168; In re Hiekerson (D. C, Idaho), 20 Am. B. R. 682, 162 Fed. 345; Brooks v. Bank of Beaver City (Sup. Ct, Kans.), 25 Am. B. E. 890, 109 Pac. 409. See Am. B. E. Dig. § 538. 890 Peefeeeed Ceeditors. [§ 60-a. reaEonable cause to believe that it was intended to give a preference.^** The receipt by the mortgagee, shortly before the bankruptcy, of certain specific property from the bankrupt, by virtue of a contract of purchase in con- nection vyith another and separate transaction does not constitute a pref- erence, barring proof of the claim under the mortgage.-^** The taking of a chattel mortgage by a creditor to secure the payment of an overdue debt, shortly before the institution of proceedings in bankruptcy by or against him, is usually suggestive- of insolvency, and should be carefully scrutinized."^ A partnership mortgage given within the four months' period and while the partnership was insolvent, to secure the individual debt of a member of the firm, constitutes a voidable preference, upon the adjudication in bank- ruptcy of the partnership.^*^ And the assignment of a mortgage given within the four months' period by an insolvent corporation has been held to consti- tute a preference."''' If a mortgage be given partly for an antecedent debt and partly for a present consideration it is voidable as a preference' to the 143. Coder v. Arts (C. C. A., Sth Cir.) , 18 Am. B. E. 513, 152 Fed. 943, modifying 16 Am, B. B. 583, aflfd. 213 U. S. 223, 22 Am. B. E. 1. 53 L. ed. 772, 29 Sup. Ct. 436; Stockgrower'a State Bank of Mountain Home T. Corker (C. C. A., 9th Cir.), 34 Am. B. E. 392, 220 Fed. 614; Angle T. Banker's Surety Co. (C. C. A., 2d Cir.), 41 Am. B. E. 90, 244 Fed. 401, affg. 32 Am. B. E. 71, 210 Fed. 289. Bights of bona fide transferee. — Though a mortgage given by a bankrupt constitutes a preference as against the mortgagee, it is en- forcible in the bands of a bona fide purchaser. Matter of Ballard (D. C, Tex.), 44 Am. B. E. 651. Chattel mortgage on entire stock in trade. — The glTlng and receiving of a chattel mortgage on the entire stock in trade of an alleged bank- rupt, is almost conclusive evidence of the In- tent of the mortgagor to give and of the mort- gagee to receive a preference over other credi- tors, and therefore of an intent on the part of tile mortgagor to hindler and delay the cred- itors other than the mortgagee. Pierre Bank- ing & Trust Co. V. Winkler (S. Dak. Sup. Ct), 40 Am. B. B. 622, 165 S. W. 2. A mortgage given by an insolvent debtor within the four months' period is void under § 60-b where the creditor had reasonable cause to believe a preference intended. In re Tindel (D. C S. Car.), 18 Am. B. E. 773, 155 Fed. 456. Or where the creditor received the mort- gage with knowledge of the bankrupt's In- solvency. Pittsburg Plate Glass Co. v. Ed- wards (C. C. A., sth Cir.), 17 Am. B. E. 447, 148 Fed. 377. Where it does not appear whether the mortgagor was insolvent when the mort- gage was given or not, but he was insolvent, and the mortgagee knew It when he took pos- session, the mortgage constitutes a preference. In re Eeynolds (D. C, Ark.), 18 Am. B. E. 666, 153 Fed. 295. In re Herman (D. C, Iowa), 31 Am. B. E. 243, 207 Fed. 594, In which case a chattel mortgage was given Immediately prior to the bankruptcy to secure a present loan, and also an antecedent loan, and it was held that the mortgage was a void preference, although It was made pursuant to an agreement made when the first loan was made, prior to the four months' period. T-king: of chattel mortgage by bank; reason- able cause to believe. — Where a banker finds that a customer, already in debt to the bank, Is running behind; that his transactions indi- cate a loss in business ; that his balances are becoming depleted; that his demands for ad- ditional loans are pressing and frequent; that his overdrafts are the subject of special at- tention, and that his credit is so overstrained that the banker will not pay checks, even for very small amounts, it is fair to conclude that the taking of a chattel mortgage or any other lien by a bank upon all that the debtor has, must have been with reasonable cause to believe that foreclosure of the mortgage would create a preference. Eosenthal v. Bronx National Bank (D. C, N. Y.), 35 Am. B. R. 273, 222 Fed. 83. Present and past consideration.— Where a debtor being indebted to a father and son and also to others, gives a mortgage to the father covering both debts and secures thereon money to pay the son, and the father fails to make reasonable inquiries as to the solvency of the debtor, such mortgage constitutes a preference. Matter of Stone (Eet, Mass.), 37 Am. B. E. 138. 144. Mills V. Virginia-Carolina Lumber Co. (C. C. A., 4th Cir.), 20 Am. B. E. 750, 164 Fed. 168, modg. 18 Am. B. E. 218, 151 Fed. 642. 145. Hussey v. Richardson-Roberts Dry Goods Co. (C. C. A., 8tli Cir.), 17 Am. B. R. 511, 148 Fed. 598. Mortgage as security for note. — A bank- rupt corporation, witliin four months of bankruptcy, purchased certain shares of stock from another corporation and gave its check in payment. Tlie bank on which the check was drawn rejected payment three times for lack of funds, and the bankrupt finally gave its note secured by a deed of trust or mortgage, whiela the vendor accepted, without attempting to prevent the bankrupt from disposing of the stock. Evidence exam- ined and held that the mortgage constituted a voidable preference which may be set aside by the trustee. Security Trust and Savings Bank v. Staats Co. (C. C. A., 9th Cir.), 37 Am. B. R. 647, 233 Fed. 514. 146. In re W. J. Floyd & Co. (D. C, N. Car.), 19 Am. B. R. 438, 156 Fed. 206. 147. In re Mills Co. (D. C, N. Car.), 20 Am. B. R. 501, 162 Fed. 42. See Am. B. R. Dig., § 520. An assignee of a chattel mortgage, con- stituting a voidable preference, who forecloses and appropriates the proceeds, is liable to tlie trustee in bankruptcy of the mortgagor. Neilbach Co. v. Russell (C. C. A., 6th dr.), 37 Am. B. R. 285, 233 Fed. 412. § 60-a.J Peefeeential Tbansfees; Notes and Checks. 891 extent of the antecedent debt."* A chattel mortgage given to secure a present loan, but which was really for the purpose of obtaining payment of an ante- cedent debt is a preference.^*® Where a mortgagee under a chattel mortgage, containing a provision covering after acquired property which is void under a State statute, takes possession of such property within the period of four months with full knowledge of the mortgagor's insolvency, the transaction con- stitutes a voidable preference. ■^^'' The taking of possession of property covered by an unrecorded chattel mortgage within the four months' period consti- tutes a voidable preference. -^"^ A mortgage on exempt and non-exempt prop- erty may be avoided as preferential so far as it pertains to the non-exempt property.-^*^ The confession of a judgment on a valid chattel mortgage and a sale of the property does not constitute a preference. •^^^'^ (,7) Notes and chegk;s. — It is not the giving of a note by the bankrupt to a creditor that constitutes a prefeTence, but the payment thereof within the four months' period.-^^* But the delivery of the note of a third person constitutes a preferenee.^^* Payments on a note or cheek even where there is an indorsement by a solvent party constitutes a preference.^^ A post-dated check constitutes a transfer at the time of its payment, and the question of preference under the statute is to be determined by the conditions existing 148. Matter of SutJierland Co. Inc. (D. C, Mass.), 40 Am. B. K. 305, 245 Fed. 663; City Na- tional Bank t. Bruce (C. C. A., 4tli Clr.), 6 Am. B. R. 311, 109 Fed. 69, 48 C. C. A. 236. A mort- gage made within tbe four months' period In good faith to secure a present loan is valid hut cannot be sustained as a security for ante- cedent debts, although mortgagee believed mort- gagor to be solvent. Farmers' Bank v. Carr (C. C. A., 4th Clr.), 11 Am. D. R. 733, 127 Fed. 690, 62 C. C. A., 446; In re Hull (D. C, Vt.), 8 Am. B. R. 302, 115 Fed. 858, holding that a chattel mortgage given within the four months' period to secure the purchase price of a present sale of goods Is valid aa to the goods sold, but is invalid as to other goods not Included in the sale. Present consideration.^ Where the treas- urer and stockholder of a corporation In order to enable It to complete contracts which it had undertaken within four months prior to his bankruptcy, mortgaged his real property to secure a loan from a surety company to which he was liable as indemni- tor for bonds it had given for the perform- ance of the contracts, such mortgage will be deemed to have been given for a present consideration, and. hence, is not a fraudulent transfer or a preference. Angle v. Bankers' Surety Co. (D. C, N. Y.), 33 Am. B. R. 71, 210 Fed. 389, aff'd 41 Am. B. R. 90, 244 Fed. 401. 149. The directors of a bank to which the bankrupt was indebted, after their bank had refused him a loan, induced another bank in which they were also directors, within four months before bankruptcy, to make a loan -to the bankrupt secuT-ad by a note and chat- •tel mortgage. The latter was foreclosed and the proceeds used in paying the first bank. At the time of the execution of the mortgage the bankrupt had other debts and the cashier of the first bank knew that his account was unsatisfactory. The enforcement of the chat- tel mortgage was held to be a voidable prefer- •^nce. Stockgrower's State Bank of Mountain Home v. Corker (C. C. A., 9th Cir.), 34 Am. B. R. 393, 320 Fed. 614. 150. Grimes v. Clark (C. C. A. 4th Cir.), 37 Am. B. R. 142. 151. Brooks v. Bank of Beaver City (Sup. Ct., Kans.), 26 Am. B. R. 890, 895, 109 Pac. 409. 152. In re Bailey (D. C, Utah), 24 Am. B. R. 301, 176 Fed. 990. MoTtease of real estate exempt as homestead. — A mortgage given by a bankrupt on real estate which is partly exempt as a homestead under State law, cannot operate as a preference to the extent of bankrupt's homestead exemp- tions, since the general creditors would not be entitled to the exempt property in any event First National Bank of Lake Charles v. Lanz (C. C. A., 5th Cir.), 29 Am. B. R. 247, 253, 202 Fed. 117, 121. IBSw. Utah Ass'n of Credit Men v. Jones (Utah Sup. Ct.), 39 Am. B. E. 723, 164 Pac. 1029 153. In re Wolf & Levy (D. C, Tenn.), 10 Am. B. R. 153, 122 Fed. 127. Payment on note. — Where a debtor, within four months of bankruptcy, sells property and receives therefor two checks payable to a bank, with which a note held by the bank was paid, and the balance deposited to the credit of the debtor in Its general account, the payment on the note is a voidable pre- ference. Chisbolm v. First National Bank of Le Roy (III. Sup. Ct), 35 Am. B. R. 598 109 N. E. 657. 154. Dickinson v. Bank of Richmond (C. C. A., 4th Cir.), 6 Am. B. R. 551, 110 Fed. 353. 165. Swarts v. Fourth Nat. Bank (0. C. A., 8th Cir.), 8 Am. B. R. 673, 117 Fed. 1; In re Lyon (C. C. A., 2d Cir.), 10 Am. B. R. 25, 121 Fed. 723, affg. 7 Am. B. R. 412, 114 Fed. 326; Landry v. Andrews, 6 Am. B. R. 281, 21 R. L 597; In re Hill Co. IC. C. A., 7th Cir.), 12 Am. B. R. 221, 130 Fed. 315; In re Deutschle & Co. (D. C, Pa ), 25 Am. B. R. 348, 182 Fed. 435 892 Pebfeeked Ceeditoes. [§ 60-a. at such time.^^" Payment on notes within the four months' period, although such notes were given for the support of the bankrupt's business, is a pref- erence.-'^^ A payment on an indorsed note which relieves the indorser, who is good, of his liability, is a preference, although the creditor may not have received any benefit from such payment.^'* But if the indorser had no knowledge of the payment and did nothing to induce it, the payment may not be regarded as a preference; because having no knowledge of it ho had no reasonable cause to believe that a preference would result. ^^* If the indorser had knowledge of the bankrupt's condition, and procured the pay- ments to be made so that he might be relieved from his obligation, the pay- ment is a preference.^*** (8) Teansaction of banking- business. — The inhibition of preferential transfers by this section does not prevent the transaction of the business of banking in the ordinary way. As will be observed under section 68, relative to setoffs, a bank may set off against a claim against a depositor the amount of his deposit, and prove for the balance due.^*^ A bank may take renewal notes in extension of credit and receive partial payment of the debt, and has the right during the continuance of their relations to pre- sume that the debtor is solvent and carrying on business in the usual way; and if it turns out that the debtor was insolvent the creditor may receive payment without incurring the liability of having to restore such payment when bankruptcy intervenes. A restoration of preferential payments is required of the bank only when it has reasonable cause to believe that a preference will result from such payments made within four months of the bankruptcy.-'*^ 156. In re Lyon (C. C. A., 2d Cir.), 10 Am. B. E. 25, 121 Fed. 723, aflfg. 7 Am. B. R. 412, 114 Fed. 326. If the bank received the bankrupt's check for an amount to be ap- plied on account of a matured note held by the bank, it constitutes a voidable preference. Eidge Ave. Bank v. Sundheim (C. C. A., 3d Cir.), 16 Am. B. E. 863, 145 Fed. 798; In re Starkweather & Albert (D. C, Mc), 30 Am. B. E. 743, 206 Fed. 797. 157. Ohio Valley Bank v. Mack (C. C. A., 6th Cir.), 20 Am. B. E. 40, 163 Fed. 155. Where a bank r-eceived payment on a note from an indorser, a corporation, the maker, another corporation, being a bankrupt, the officers of both corporations being the same, it was not a preference. Mason v. Nat. Herkimer County Bank (C. C. A., 2d Cir.), 22 Am. B. E. 733, 172 Fed. 529, revg. 21 Am. B. E. 98, 163 Fed. 920, aflfd. siib nom. National Bank of Newport v. Herkimer County Bank, 235 U. S. 90, 28 Am. B. E. 218, 56 L. Ed. 995, 32 Sup. Ct. 657. 158. Swarts v. Bank (C. C. A., 8th Cir.), 8 Am. B. E. 673, 117 Fed. 1. Security transferred to an accommoda- tion maker of a promissory note for the bene- fit of an insolvent debtor constitutes a pref- erence. In re Bailey &, Son (D. C, Pa.), 21 Am. B. E. 911, 166 Fed. 982; Landry v. Andrews, •e Am. B. E. 281, 21 E. 1. 597. 159. Eeber v. Schulman & Bro. (C. C. A., 3d Cir.), 25 Am. B. E. 475, 183 Fed. 564, affg. 24 Am. B. R. 782, 179 Fed. 574. Payment to relieve indorser. — In the cases of Kobusch v. Hand (C. C. A., 8th Cir.), 19 Am. B. E. 379, 156 Fed. 660, 84 C. C. A. 372; In re Sanderson (D. C, Vt), 17 Am. B. E. 871, 149 Fed. 273, and Brown V. Streicher (D. C, E. I.), 24 Am. B. E. 267, 177 Fed. 473, the party benefited by the payment made by the bankrupt either had control of the bankrupt or requested him to make the payment, so that in every instance the party benefited by the payment not only had knowledge thereof but actively participated therein. IGO. Brown v. Streicher (D. C, E. I.), 24 Am'. B. E. 267, 177 Fed. 473; Kobusch v. Hand (C. C A., 8th Cir.), 19 Am. B. E. 379, 156 Fed. 660, 84 C. 0. A. 372. See post under this section, subtitle " Creditors only to be preferred." 161.' See § 68. Set-offs and countei-claims, E(2), and cases cited. 162. Gi'.indison v. Eobertson (D. C, N. Y.), 34 Am. B. E. 609, 220 Fed. 9S5, citing Stud- ley V. Boylston Nat. Bank, 229 V. S. 523, 30 Am. B. H. 161. .33 Sun, Ct. SOfl, 57 L. Ed. 1313; Grant T. Nat. Banli. 97 U. S. SO. 24 L. Ed. 971; Paper T. Stern (C. C. A.. Stb Cir.). 2S Am. B. E. 592, 198 Fed. 642, 117 C, C. A. 346; In re Eggert (C. C. A., 7th Cir.), 4 Am. B. E. 440, 102 Fed. 735, 43 C. C. A. 1 ; Banli of Commere v. Brown (C. C. A., 4th Cir.), 40 Am. B. E. 591. 249 Fed. 37; Fifth National Bank v. Lyttle (C. C. A., 2d Cir,), 41 Am, B. E. 370, 250 Fed. 361. § 60-a.] Peefeeential Teansfees; Bank Deposits. 893 (9) Deposit of money. — ^A deposit of money in a bank, upon an open account, subject to check, is not a transfer constituting a preference, although. the bank as a creditor has the right to set off its claim against the deposit.^®* A deposit here referred to is a deposit received in the usual course of banking business, and not one which is "built up" or deposited under imusual cir- cumstances for the purpose of giving a preference to the bank.^^* The action of a bank in applying the deposit or any portion thereof upon the depositor's indebtedness to the bank does not constitute a preferential transfer, ^^" if at the time the bank bad no reason to believe that the depositor was insolvent, and there was no collusion.^*® If the deposit is made as a part of a scheme to pay the depositor's indebtedness to the bank after he became insolvent, and such insolvency was known to the bank, it is a voidable preference/®^ Where the bankrupt deposits money with a bank under an arrangement with it and other creditors that the money was to be received for the purpose of a pro rata distribution among such creditors, the trustee in bankruptcy has no enforceable interest in the arrangement.-^®* But where a payment is made to a bank, the effect and purpose of which is to protect the bank on a loan made by it sometime before such payment, it will be regarded as a pref- 163. Am. Bank of Alaska v. Johnson (C. C.' A., 9th Cir.), 40 Am. B. R. 502, 245 Fed. 312; In re Hill Co. (C. C. A., 7th Cir.), 12 Am B. E. 221, 130 Fed. 315; West T. Bank of Lahoma (Snp. Ct!., Okl.), 16 Am. B E. 733, 16 Okla. 508, 86 Pae. 59. As to whether a payment of a clearing house check uy a clearing house association is a prefer- 'ence, see Rector v. City Deposit Bank Co., 200 U. S. 405, 15 Am. B. E. 336, 50 L. Ed. ££7, 26 Sup. Ct. 289. As to effect of fraud or collusion between officers of bank and bankrupt, see In re Wright-Dana Hardware Co. (D. C, N. Y.), 31 Am. B. R. 192, 207 Fed. 636. A deposit of money to one's credit in a bank does not operate to diminish the estate of the depositor, for when he parts with the money he creates at the same time on the part of the bank an obligation to pay the amount of the deposit as soon as the de- positor may see fit to draw a check against it. It is not a transfer of property as a payment, pledge, mortgage, gift or security. New York Co. Nat. Bank v. Massey, 192 U. S. 138, 11 Am. B. R. 42, 48 L. Ed. 380, 24 Sup. Ct. 199 ; Parkfer v. First Nat. Bank (Sup. Ct., Vt.), 34 Am; B. R. 669, 94 Atl. 1, holding that a bank with knowledge that a debtor is about to file a petition in bank- ruptcy may apply on the debt money of the debtor in a "commercial or cheek account." where it appears that the deposit was gen- eral, subject to check in the usual course of business. 164. Mechanics & Metals National Bank V. Ernst, 231 U. S. 60, 31 Am. B. R. 303, 58 L. -Ed. 121, 34 Sup. Ct. 23; National City Bank v. Hotchkiss, 331 U. S. 50, 31 Am. B. R. 291, 58 L. Ed. 115, 34 Sup. Ct. 20; Fourth National Bank of Wichita v. Smith (C. C, A., 8th Cir.), 38 Am. B.. R. 771; German- American State Bank v. Larimer (C. C. A., 8th. Cir.), 37 Am. B. R. 556, 235 Fed. 501; In re National Lumber Co. (C. C. A. 3d Cir.), 32 Am. B. R, 389, 212 Fed. 928. 168. In re Elsasser (Eef., Pa.), 7 Am. B. E. 215; In re Little (D. C, la.), 6 Am. B. E, 682, 110 Fed. 621; In re Smith Thorndyke & Brown Co. (C. C, A., 7th Cir.), 22 Am. B. E. 350, 170 Fed. 900; Am. Bank of Alaska v. Johnson (C. C. A., 9th Cir.), 40 Am. B. E. 502, 245 Fed. 312. 166. Right of bank to apply deposits to indebtedness. — 'Where bankrupt, being in- debted to a bank upon past due notes, de- posited to its credit in said bank a sum loaned to it upon a mortgage given by it to the wife of its secretary and treasurer, and paid the bank the amount of its indebt- edness with interest from the money so de- posited, but the evidence was not sufficient to show that at the time of the payment bankrupt was insolvent or that it acted in collusion with the bank, the transaction did not constitute a, voidable preference, since, in the absence of collusion, fraud or insolv- ency of the bankrupt, the bank did not need a check to enable it to get the money, but had the right to apply so much of bank- rupt's deposit as was necessary to the pay- ment of its debt. Walsh v. First Nat. Bank of Maysville (C. C. A., 6th Cir.), 29 Am. B. R. 118, 201 Fed. 622. 167. Johnson v. Gratoit County State Bank (Mich. Sup. Ct.), 38 Am. B. R. 518, 160 N. W. 544; First National Bank v. Harper (C. C. A., 9th Cir.), 43 Am. B. R. 82, 254 Fed. 641. Acceptance by bank of check from de- positor. — Acceptance by a banli of a check of a depositor in payment of an overdue note, within four months of the bankruptcy of the depositor, and with reasonable cause to be- lieve that the transaction would result in a preference, constitutes a payment, not a set- off, and effects an unlawful preference. Knoll V. Commercial Trust Co. (Pa. Sup. Ct.), 35 Am. B. R. 379, 94 Atl. 750. 168. Lowell V. International Trust Co. (C. C. A., 1st Cir.), 19 Am. B. R. 853, 158 Fed. 781. 894 Peefeeeed Ceeditoes. [§ 60-a. ■erence/*® and so also where a deposit ia made with a bank after it had cause to believe that the depositor was insolvent."** (10) Payment of wages. — The payment of wages by a bankrupt is not a preference."^ The payment of checks given by a corporation to its presi- dent for present advances with which to pay its workmen their weekly wages is not a preference. ^"^ (11) Teansfees that aee voidable. — The practitioner should always have in mind that, under the present law, many transfers are preferences in name but not in fact. To be the latter, the remedy prescribed in sub- section b must at least be available. The transfers must, in short, be void- able. Of the multitude of cases under the present law, only those including the element of reasonable cause to believe,*^* are, therefore, still in point. The others, since the changes made in § 57-g, are of value only by way of possible suggestion, f. Effect a greater percentage. — (1) Peg visions of statute. — Clause a. must be construed as making a judgment or transfer a preference when the effect of the enforcement thereof would be to enable one creditor of a class to obtain a greater percentage of his debt than any other creditor of the same class. Clause b as amended in 1910 authorizes a recovery of a preference if the creditor benefited has "reasonable cause to believe that the enforce- ment of such judgment or transfer would effect a preference." So that if a creditor receiving a transfer within the four months' period had reasonable cause to believe that such transfer would give him a greater percentage of his debt than other creditors of the same class would receive, it constitutes a preference which may be recovered by the trustee."* (2) Class of ceeditoes. — While the statute does not define the word "class" nor state in terms what creditors are in the same § 60-a.J Peefeeential Tea-nsfeks; Geeatee Peecentage. 895 whom taxes are owing, employees holding claims for wages, and those who by the laws of the states or the United States are entitled to priority ;"° and so also certain claims secured by liens on the property of the bankrupt are enti- tled to special consideration."® Creditors holding such claims, and the general creditors of the estate, constitute the classes of creditors of which the act treats."'^ It is the relation of their claims to the estate of the bankrupt, the percentage their claims are entitled to draw out of the estate of the bankrupt, and these alone, that dictate the relations of the creditors of the estate, and fix their classification and their preferences."* (3) Who aee ceeditoes of the same class. — The "greater percentage" refers only to creditors of the same class. This is the reason why the pay- ment of wages is not a preference."® If the effect of the transfer is to enable the creditor to receive out of the debtor's estate a larger percentage of his claim than other creditors of the same class, it constitutes a preference.-^** Thus a mortgage, which enables the mortgagee to get more than other cred- itors, is a preference. ^*^ But a part payment to one creditor is not a pref- erence where the debtor is able to pay his other creditors the same percentage.^*^ If the transaction results in the pro rata distribution of the debtor's estate among all. his creditors it does not create a preference, although the creditors had notice of the debtor's insolvency.*** Payments and sales in the general 175. Bankr. Act, § 64, post. 176. Bankr. Act, §§ 56b, 57e and 57h, ante. 1T7. Swarts v. Fourth Nat. Bank (C. C. A., Stli Clr.), 8 Am. B. E. 673, 660, 117 Fed. 1. A landlord who is not entitled to a preferenoe by any statute must be classed a» a general creditor in determining whether he has received a preference or not. Slayton v. Dunn (Vt. Sup. Ct.), 44 Am. B. E. 23, 107 Atl. 307. 178. Swarts v. Fpurth Nat. Bank (C. C. A., 8th Cir.), 8 Am. B. E. 673, 117 Fed. 1; Matter of Star Spring Bed Co. (D. C, N. J.), 43 Am. B. E. 328, 257 Fed. 176. Joint notes signed by a partnership and also by its members and joint and several notes founded on a partnership debt and signed by the Individual members of the firm only are both in the same class, and the enforcement of a judgment upon the joint and several notes will effect a preference. Anderson v. Stayton state Bank (Ore. Sup. Ct), 38 Am. B. E. 4, 159 Pac. 1003. Bankrupt purchasing: partnership assets. — Creditors who became such after the bank- rupt purchased the partnership business, though they were not aware of the purchase by the bankrupt, are in the same class with per- sonal creditors of the bankrupt whose claims accrued prior to said purchase. Wartell v. Moore (C. C. A., 6th Cir.), 44 Am. B. E. 624, 261 Fed. 762. 179. In re Keller (D. C, la.), 6 Am. B. E. 334, 109 Fed, 118. Compare Swarts v. Fourth Nat. Bank (C. C. A., 8th Clr.), 8 Am. B. E. 673, 117 Fed. 1 ; Mills v. Fisher & Co. (C. C. A., 6th Cir.), 20 Am. B. E. 237, 241 159 Fed. £97. 180. Brittain Dry Goods Co. v. Bertenshaw (Sup. Ct., Kan.), 11 Am. B. E. 629, 68 Kan. 734; Matter of Cotton Export, etc., Co. (C. C. A., 2d Cir.), 10 Am. B. E. 14, 121 Fed. 663; In re Douglass Coal & Coke Co. (D. C, Tenn.), 12 Am. B. E. 539, 131 Fed. 769; In re Mayo Con- tracting Co. (D. C, Mass.), 19 Am. B. E. 551, 157 Fed. 469; Mills v. J. H. Fisher & Co. (C. C. A., 6th Cir.), 20 Am. B. E. 237, 159 Fed. 897, holding that it is not a preference to make a payment upon a running account of pur- chases and payments where the effect was not to diminish tho fu:;d to which the creditors look for payment; Harder v. Clark (City Ct., N. Y.), 23 Am. B. E. 756, 66 Misc. 584, 123 N. Y. Supp. 1102. A distress (or rent by a landlord does not enable the landlord to obtain a greater per- centage of his debt than other creditors of the same class, where there is but one landlord. In re Belknap (D. C, Pa.), 12 Am. B. E. 326, 129 Fed. 646. 181. In re Coffey (Eef., N. Y.), 19 Am. B. E. 148, 165. 182. Brittain Dry Goods Co. v. Bertenshaw (Sup. Ct, Kan.), 11 Am. B. E. 629, 68 Kan. 734. • 183. Paymeuts to creditors, share and share alike. — In the case of In re Varley & Brauman Clothing Co. (D. C. Ala.), 26 Am. B. R. 840, 191 Fed. 459, the court said: "If the reviewing creditors did in fact believe, and would as prudent business men reason- ably have believed, from their correspondence with the bankrupt that the small payments were lAade to them, share and share alike with all the other creditors of the bankrupt, from the proceeds of the special sale, con- ducted by the bankrupt for that purpose, then the receipt of them by the creditors would not, in' my opinion, constitute a void- able preference, even though the bankrupt was insolvent, had knowledge of its condi- tion, and made them with intent to keep the creditors quiet, and not to distribute its assets equally among its creditors, and even though the creditors were charged with knowledge of its embarrassment or even of its insolvency. The usual inference to be drawn from a payment made by an insolv- ent of an intent to prefer the recipient would in that event be displaced by the assurance of the bankrupt that the pay- ment was not exclusive, but was shared in by all creditors alike." 896 Peefeeeed Ceeditoes. [§ 60-a. course of business do not constitute preferences where the net result is to increase the bankrupt's estate. ^^ (4) Test a geeatbe percentage. — The test of a preference, under the act, is the payment, out of the bankrupt's property, of a larger percentage of the creditor's claim than other creditors of the same class receive, and not the benefit or injury to the creditor preferred. ^^^ An intent to prefer, even prior to liie amendment of 1910, was not required to be specifically proven, but was conclusively presumed from the effect of the transaction in giving one creditor a greater percentage of his debt than any other creditor of a like class. ■'^^ The transfer must be such as to effectually dispose of the debtor's property; if it was originally and remained a nullity against the debtor's trustee in bankruptcy, it is not a preference. ^®'^ It is the effect of the transaction which will control; if the transfer results in certain cred- itors being paid and others excluded, the other elements existing, it is pref- erential. ^^^ This requirement as to equal percentages does not affect the requirement as to belief that a preference will result at the time the pay- ment was made; so that if a creditor accepts payment of a percentage of his claim believing that other creditors received the same percentage no prefer- ence will result.-^*® The transfer of a homestead exemption is not a preference, since it is not subject to the demands of creditors.^®" (5) Intent immateeial. — The logical result of the amendment of 1903 was to make intent, save as evidence of a reasonable cause to believe, imma- terial; it gave place to the new element, resultant inequity.^®^ The amend- 184. In re Sagor (C. C. A., 2a Cir.), 9 Am. B E. 361, 121 Fed. 65S ; Jacquitli v. Alden, 189 U. S. 78. 9 Am. B. E. 773, 47 L. Ed. 717, 23 Sup. Ct. 640. 185. Swarts v. Fourtli Nat. Bank (C. C. A., Sth Cir.), 8 Am. B. E. CT3, 677, 117 Fed. 1; Mat- ter of Star Spring Bed Co. (D. C, N. J.), 43 Am. B. E. 328, 2.'7 Fed. 170; Slayton v. Dunn (Vt. Sup. Ct.), 44 Am. B. R. 23, 107 Atl. 307, Failure to show greater percentage. — • In an action by a trustee in banliruptcy to re- cover goods whicla were returned to the Tender under unrecorded conditional sale contract, and which were of less value than the amount due defendant under such con- tract, where the evidence failed to show what assets came into the trustee's hands and what creditors were entitled to partici- pate therein so that it could not be deter- mined whether the return of defendant's goods resulted in giving it a greater per centage of its diebts than had or would be paid to other creditors, an essential element of a voidable preference was not proven. Hart V. Emerson-Bi-antingham Co. (D. C, Mo.), 30 Am. B. R. 218, 203 Fed. 60. 186. iHackney v. Hargreaves Bros., 13 Am. B. R. 164, 168, 68 Nebr. 624, revg. 10 Am. B. R. 213, 214, 68 Neb. 624; In re McDonald & Sons (D. C, So. Car.), 24 Am. B. R. 446, 178 Fed. 487, aflfd. 25 Am. B. R. 948, 184 Fed. 986; In re Martin (Ref., Tex), 27 Am. B. R. 151. holding that where the logical outcome of a debtor's acts in securing a creditor is to give such creditor a greater per cent, on its debt than other creditors, intent on the part of the debtor to give a preferen e may be presumed without further proof. 187. Rosenbluth v. De Forest & Hotch- kiss Co. (Sup. Ot., Conn.), 217 Am. B. R. 359, 81 Atl. 955. 188. In re Shantz & Son Co. (D. C, N. Y.), 30 Am. B. R. 552, 205 Fed. 425. 189. Reasonable cause to believe that greater percentage was received. — ^By the language of section 60b of the bankruptcy act, a payment must operate as a preference at the time it is made, or not at all, and the belief of the creditor as to whether it will constitute a preference or not, must be of the time the payment is made. This is true notwithstanding the clause of section 60a that "the eiTect of the enforcement of such judg- ^,„„4. ,,„ ^-.„„j.f„,, ^^.--ii i^g ^g enable any one of his creditors to obtain .a greater percentage," etc. Where it appears that the percentage of the total indebtedness of a- bankrupt paid during the four months period amounted to about thirty per cent., which was about twenty-seven per cent, in excess of the per- centage reoeivM by two creditors if each individual payment is considered alone, and about twelve per cent, in excess if the total payments made to the two creditors be con- sidered, and it also appears that the estate of the bankrupt -has been reduced to cash and will pay about thirty per cent, more of the total indebtedness, it iannot be held that the two creditors at the time they received the payments had reasonable cause to believe that a preference would result therefrom. Peck & Co. V. Whitner (C. C. A., 8th Cir.) , 36 Am. B. R. 722, 231 Fed. 893t 190. Mills V. Fisher & Co. (C. C. A., 6th Cir.), 20 Am. B. E. 237, 159 Fed. 897. 191. Compare Crooks v. The People's Bank, 3 Am. B. R. 238, 46 N. Y. App. Div. 335, 61 N. Y. Supp. 604; Lazarus v. Easan (D. C, Pa.), 30 Am. B. R. 287, 206 Fed 518 See Am. Bankr. Dig. § 517. § 60-a.J ' Ceeditoes Only Peefeeeed. 897 ment of 1910 obviated the requirement of proof of intent, by making it sufficient to prove reasonable cause to believe that tbe transfer vfould result in a preference. If the effect of the act was to create a preference, and such was its natural consequence, the debtor must be presumed to have intended to do that which was the necessary result of his act.^®^ g. Creditors only may be preferred.— (1) In geweeal. — Though the words "person" and "creditor" are used interchangeably in this subsection, it is clear that only a creditor can receive a preference. -^^^^ A long line of decisions, many of them alre'ady referred to, are to the effect that the relief sought under' this section extends only to an avoidance of a preference secured by the lender himself as a creditor, or as the practical agent of one who is a creditor.-'®* A payment for transfer to anyone other than a creditor, unless for the latter's benefit, falls within the remedies indicated in §§ 67-e and 70-e. This was also so under the former law though voidable preferences and fraudulent transfers were regulated by a single section. ^^^ Then, as now, the elements of these analogous transactions were somewhat different. The practitioner, therefore, should at the outset of a suit to recover decide whether the proposed defendant is a creditor or not. Pleading, proof, and possibly judgment will depend upon such decision. It appearing that when a mortgage was executed and filed the mortgagee was not a creditor, such mortgage may not be attacked.^®« (2) Teansfee to anothee foe benefit of ceeditoe. — As already indi- cated, a transfer by indirection for the benefit of a creditor is preferential.^*' To constitute a transfer a preference it is not necessary that it be made direct to the creditor.^®® The language of section 60-b shows plainly that this is the 192. In re Dorr (C. C. A., 9th Cir.), 28 198. Grandiaon v. Nat. Bank of Rochester Am. B. R. 505, 196 Fed. 292, citing Western (C. C. A., 2d Cir.), 36 Am. B. R. 438, 231 Fed. Tie & Timber Co. v. Brown, 196 U. S. 508, 800. 13 Am. B. R. 4i7, 25 Sup. Ct. 339, 49 L. Ed. Transfer for benefit of creditor.— In the i571. case of National Bank of Newport v. Herki- Intent to prefer. — .Since the amendment mer Bank, 225 U. S. 178, 28 Am'. B. R. 218, of 1910 to section 60b of the bankruptcy act, 56 L. Ed. 1042, 32 Sup. Ot. C33, Mr. Justice if a creditor knows, or has reasonable cause Hughes said: " To constitute a perference, to believe, that its debt will be satisfied in it is not necessary that the transfer be made whole oi in part by the confession of a judg- directly to the creditor. It may be made to ment within four months of the bankruptcy another for hia benefit. If the bankrupt has of the debtor, and a levy and sale of all the made a transfer of his property, the effect of personal property of the debtor, to the ex- which ds to enable one of his creditors to elusion of other creditors of the same class, it obtain a greater percentage of his debt than constitutes the receipt of a preference re- another creditor of the same class, circuity rf gardless of any intent on the part of the arrangement will not avail to save it. * * * creditor or the debtor. Grant v. National It is not the mere form or method of the Bank of Auburn (D. C, N. Y.), 37 Am. B. R. transaction that the act condemns, but the 329, 232 Fed. 201. appropriation by the insolvent debtor of a 193. In re Kayser (C. C. A., 3d Cir.), portion of his property to the payment of a 24 Am. B. R. 174, 177 Fed. 383 ; Heyman v. creditor's claim, ao that thereby the estate is Third Nat'l Bank (D. C, N. Y.), 32 Am. B. depleted and the creditor obtains an advan- E. 716, 216 Fed. 685. tage over other creditors." 194. Johnstone v.Babb (C.C. A., 4th Cir.), Persons to be benefited. — Where a bank- 38 Am. B. R. 715. rupt contractor has given an assignment of 195. Act of 1867, § 35. In the Revised money due under a building conta-act to a Statutea this section was broken up into two, subcontractor, who has not filed a mechanic's §§ 5128, 5129. lien, the owners are not persons to be bene- 196. In re Clifford (D. C, la.), 14 Am. flted, witfhin the meaning of sections 60a and B. R. 281, 136 eFd. 475. 60b of the bankruptcy act. Jump v. Bernier^ 197. See e. Made a trwnsfer of his prop- (Maisa., Sup. Ct.), 35 Am. B. R. 591, 108 «rty. — (2) Method of transfer, ante. M. E. 1027. 57 898 Peefereed Ceeditoes. [§ 60-a. purpose, where it declares that a preference is voidable if " the person receiv- ing it or to be benefited thereby, or his agent acting therein," shall have reasonable cause to believe that a preference was intended. ^^^ To constitute a preferential transfer, it is immaterial to whom the transfer is made, if it be made for the purpose of paying the claims of one creditor in preference to those of others.^"" So where an assignment of accounts was made to the president of a bankrupt corporation and he indorsed the notes of the bank- rupt which had been previously discounted at a bank, and collected the accounts and turned the proceeds over to the bank, the transfer was preferential and prohibited by the act.^^ If a transfer be made to a third person merely as an agent or. cover for the creditor, who is in effect benefited thereby, it is a 199. Western Tie & Timbier Co. v. Brown (C. C. A., 8th dr.), 12 Am. B. R. Ill, 129 Fed. 728 (revd. on other grounds, 196 U. S. 502, 131 Am. B. R. 447, 49 L. Ed. 571, 25 Sup. Ct. 339) ; Hackney v. Hargreaves Bros., 13 Am. B. R. 164, 94 N. W. 822, in whioh case it was held "tihat a transaction the legal effect of which is to appropriate out of the assets of the bankrupt an amount re- quired to settle with a creditor, amd which was subsequently turned over to such cred- itor, is a preference; Benjamin v. Chandler (D. C, Pa.), 15 Am. B. R. 439, 142 Fed. 217; Page v. Moore (D. C, Pa.), 24 Ami E. E. 745, 179 Fed. 988. Payment by indirection. — To effect a pref- erence, it is immaterial to whom a trans- fer is made, if it be for the purpose of paying the claims of one creditor in prefeireince tio those of another; and a transfer miade di- rectly, or through a third person, is sufiScieat. In re Harrison Bros. (D. C., Pa.), 28 Am. B. R. 684, 202 Fed. 243. 200. Hackney v. Hargreaves Bros., 13 Am. B. R. 164, 94 N. W. 822. revg. 10 Am, B. E. 213, 68 Neb. 624; Bank of Wayne t. Gold (N. T. App. DlT.), 26 Am. B. H. 722, 146 N. T. App. Div. 296, 130 N. Y. Supp. 942 citing- text; In re Lynden Mercantile Co. (D. C, Wash.), 19 Am. B. B. 44t, 156 Fed. 713 ; In re Beerman (D. C, Ga.), 7 Am. B. E. 431, 112 Fed. 662; First Nat. Bank t. Blackburn (C. C. A., 3d Clr.), 43 Am. B. B. 680, 56 Fed. 527. Transfer to one not a creditor. — Defend- ant, whidh was engpged in warehousing, sublet space in its plaiit to bankrupt, whose buaineas was the blending of various kindis of flour, the greater part of whioh was de- livered to d^endant by various railroads. Upon shipment of the flour which bajJirupt had purchased, bills of lading would be is- sued to the order of the shipper in care of defendant. The shipper would send a draft upon bankrupt witlh the bill of lading at- tached and upon payment of the draft thie bill of lading would be delivered to bank- rupt who would then surrender it to defend- ant, and receive a warehouse receipt of the goods. As the flour was received, it would be placed by defendant in various- open compartments which were marked, num- bered and tagged so ae to be readily identi- fied, and when bankrupt had paid a partic- ular draft it would issue orders for the amount of flour needled for blending, to be taken from the lot upon whitsh it had lifted the Mil of lading and to which it was en- titled'. It appeared bankrupt's employees betidesi taking flour to which the bankrupt had obtained title by paying the drafts, also removed flour for wliich no payment had been made and wMch was still in the custody of defendani as bailee of tihe ship- per. Upon discovering these thefts, defend- ant called upon bai^rupt to make good this shortage which it was unable to do. There- upon, defendant paid to 'banks which held drafts and bills of lading, eoime of which covered flour that had been imlawfuUy with- drawn 'and some of which covered other flour, uipwards of $8,000 and bankrupt gave its note to diefendlant for that amount. As seourity for the note it turned over to de- fendant warehouse leoelpts for flour con- signed to its care, thus effecting an actual transfer of so much of the flour covered by the hillsi of lading as had not been stolen, and 'also turned over certain other property. Eeld, tho/t since bankrupt when it unlaw- fully took the flour from defendant's cus- tody was the debtor solely of the shipper until the flour was paid for, the transfers as security made to defendant were not transfers to a creditor, and, therefor, could not be the sub.iect of voidable preferences. Keystone Warehouse Co. v. Bisaell (C. C. A.," 2d Cir.), SO' Am. B. R. 213, 203 Fed. 652. 201. Grandison v. National Bank of Com- merce (D. C, N. Y.), 34 Am. B. R. 497, 220 Fed. 981, (affd. 36 Am. B. R. 438, 231 Fed. 800), in which the. court said: "To consti- tute a preference it was not necessary that the assignment of the accounts receivable should be made directly to the bank. It was enough that the transaction which resulted in the indorsement of the renewal notes and the subsequemjt coU'eotion of the accounts re- ceivable were for the benefit of the bank. Alexander concededly received the assignm'ent of accounts from' the bankrupt to secure him as an indorser on the overdue promissory notes held by the defendant Such a transfer made by an insolvent falls within the pro- hibition of the Bankruptcy Act. Crooks v. People's Nat. Bank, 3 Am. B. R. 238 46 N. y. App. Div. 335, 61 N. Y. Supp. 604." § 60-a.] Cbeditors Only Peefebeed. 899 preference, ^^"^ as where, for instance, a transfer made to an accommodation indorser, to protect him from loss on the note, is a preference.^''* It seems to follow, from the last words in the amendment to this subsection, that the suit can be brought not only against the creditor or his agent, but also against a transferee not a creditor.^"* (3) Indorsee oe sueety. — An indorser or a surety may be a creditor within the meaning of the bankruptcy law.^"^ If an indorser permits or induces payment of a note, with knowledge or reasonable cause to believe that such payment will result in a preference, he receives the benefit of the payment and he is a creditor. ^"^ Thus, where the surety is the president of the bank- rupt, and with knowledge of its insolvency directs the payment to the holder of the obligation with intent to relieve himself from liability and to secure an advantage over other creditors, a preference arises which may be recovered from him by the trustee.^"^ Where the agent or officer of a bankrupt corporation 202. Alexander v. Kedmona (C. C. A., 2d Cir.), 21 Am. B. E. 620, 180 Fed. 92; Smith v. Coury (D. C, Me.), 41 Am. B. E. 219, 247 Fed. 168. A transfer to a third person Is invalid under this section as a preference only where that person was acting on behalf of the creditor. Dean v. Davis (U. S., Sup. Ct.), 38 Am. B. B. 664, 37 Sup. Ct. 30. In this case an insolvent debtor fearing arrest for forgery procured a loan and gave a mortgage within the four months' period to secure such loan, and the mortgagee took up the notes at a bank, and it was held that the mortgage was not voidable as a preference. 208. Lazarus v. Bagan (D. C, Pa.), 30 Am. B. E. 287, 206 Fed. 518. 204. Walters v. Zimmerman (D. C, Ohio), 30 Am. B. E. 776, 785, 208 Fed. 62, quoting text. 205. Swarts v. Siegel (C. C, Mo.), 8 Am. B. E. 220, 114 Fed. 1001; Wood v. United States (D. C, Mass.), 16 Am. B. E. 21, 143 Fed. 424; In re Hines (D. C, Pa.), 16 Am. B. E. 495, 144 Fed. 147; Ludvlgh v. Umstadter (D. C, N. Y.), 17 Am. B. E. 774, 148 Fed. 319; In re Bailey & Son. (D. C, Pa.), 21 Am. B. B. 911, 166 Fed. 982; Brown T. Streicher (D. C. B, I.), 24 Am. B. E. 267, 177 Fed. 473; Bank of Wayne v. Gold (N. Y. App. Dlv.), 26 Am. B. E. 722, 146 N. Y. App. DlT. 296, 130 N. Y. Supp. 943 ; Smith T. Tostevln (C. C. A., 2d Cir.), 41 Am. B. E. 212, 247 Fed. 102; Smith v. Coury (D. C, Me.), 41 Am. B. E. 219, 247 Fed. 168; Chapman v. Hunt (D. C, N. Y.), 41 Am. B. E. 482, 248 Fed. 160; Cohen r. Goldman (C. C. A., 1st Cir.), 42 Am. B. E. 85, 250 Fed. 599. See Am. Bankr. Dig. § 499. GnarantoTg of the payment of a note are "creditors" within the meaning of section 60 of the act, relating to preferences. Stern v. Paper (D. C, N. Dak.), 25 Am. B. E. 451, 183 Fed. 228. 206. Eeber v. Shulman & Bro. (C. C. A., 3d Cir.), 25 Am. B. E. 475, 183 Fed. 564, affg. 24 Am. B. R. 782, 179 Fed. 574; Ko- buscli V. Hand (C. C. A., 8th Cir.), 19 Am. B. E. 379, 156 Fed. 660; Brown v. Streicher |(D. C, R. I.), 24 Am. B. E. 267, 177 Fed. 473; Lazarus v. Eagan (D. C, Pa.), 30 Am. B. E. 287, 206 Fed. 518; Piatt v. Ives (Sup: Ct. of Errors, Conn.), 33 Am. B. E. 846, 86 'Atl. 579, Matter of Silvernail (D. C, Kan.), 33 Am. B. E. 59, 218 Fed. 979; Watchmaker V. Barnes (C. C. A., 1st Cir.), 43 Am. B. E. 632, 259 Atl. 783. Payment of note to release indorser.— Where the father of a bankrupt, who was 'the surety upon his notes given to secure loans, induced him to pay the notes within the four months' period from the proceeda of his business, at a time when he was in- solvent, the father is the person "to be benefited" by the preference within the meaning of section 60-b, and is liable to the trustee for the amount of the preferential payments. In re Sanderson (D. C., Vt.), 17 Am. B. E. 871, 149 Fed. 273. The payment by a bankrupt, within four months of the bankruptcy, while insolvent, of his promissory note at its maturity, to a bank which has discounted it for the. payee, who indorsed it to the bank, and who, at the time of such payment, was en- tirely solvent, so far inures to his benefit as that, there being evidence upon which it might be found' that he had reasonable ground for belief of the bankrupt's solvency, so that if the payment had been made to him he would have had reasonable cause to believe that it was intended thereby to give him a preference, and his connection with the bankrupt's affairs being of so close a character as to warrant an inference that he, in some way, procured, suggested, or aided such payment, the same should be held to have been preferential, and its repayment to the trustee ordered before such indorser can be allowed to. prove any claim against the estate. Matter of Matthews & Rosen- kranz (Eef., Mass.), 15 Am. B. R. 731. 207. Kobusch v. Hand (C. C. A., 8th Cir.), 19 Am. B. E. 379, 156 Fed. 660; Matter of McCord (D. C, N. Y.), 33 Am. B. R. 304 174 Fed. 73. Eight of director of bankrupt to prefer himself over other bondholders.— It would be inequitable and a fraud upon other bond- holders of a bankrupt corporation to allow a director, also a bondholder, to prefer him- self by appropriating property of the bank- rupt to secure an antecedent debt on which he was liable, at a time when the bankrupt was insolvent. Butterfield v. Woodman (C. C. A., Ist ar.), 34 Am. B. R. 510, 223 Fed. 956, modfg. 33 Am. B. R. 154, 216 Fed. 208. 900 Peefeeeed Ceeditobs. [§ 60-a. is the indorser on a note of such corporation, payment of the note by his procurement constitutes an unlawful preference.^* Any payment made by a bankrupt, under conditions constituting it a preference, to or for the benefit of an indorser, guarantor, or any other surety on the obligation of the bank- rupt, is within the provisions of the section.^"® (4) MisAPPEOPEiATiON OE coKVEESioK OF FUNDS. — A porson who has. misappropriated or converted funds belonging to another may, at the election of the owner of the funds, be treated as a debtor, in which case the owner becomes a creditor, and if he receives a transfer of property to make good the loss occasioned by the misappropriation or conversion, under such circum- stances as to constitute a preference, he is a person " to be benefited " by the transfer, and the property transferred may be recovered.^** So where a trustee of a trust fund transfers from himself to the trust fund certain prop- erty, knowing that a shortage existed in such fund and that he was unable to meet the deficiency, such transfer constitutes a preference which may be recovered.^^"* A customer of a stockholder who deposits stock and security for 208. Arnold v. Knapp (W. Va. Ot. of App.), 34 Am. B. E. 432, 84 S. E. 895. 209. Stem v. Paper (C. C. A., 8th Cir.), 28 Am. B. R. 592, 198 Fed. 642, holding also that the fact that the guarantor or indoraer did not pay or induce the paymenit of the debt, but the payment was made by the bajik- rupt, does not except the case from the opera- tion of tlie rule. To tbe same efifect see Gold- man V. Cohen (C. C. A., 1st Clr.), 44 Am. B. E. 318, 261 Fed. 672. Eicliardson v. Shaw & Davidson, 209 U. S. 365, 19 Am. B. E. 717, 52 L. Ed. 835, 28 Sup. Ct. 512, affg. 16 Am. B. E. 842, holding that where by agreement a stockbroker pledges his cus- tomer's stocks upon general loans, the cus- tomer for whom the stocks are carried on margin by the broker is not a creditor, and does not receive a voidable preference where within the four months' period he closes the transac- tion, pays the balance owing the broker and receives stocks worth more in the market than the sum paid to take them up: Eoblnson v. Eoe (0. C. A., 2d Cir.), 38 Am. B. E. 26, 233 Fed. 936; Smith v. Tostevin (C. C. A., 2d Cir.), 41 Am. B. E. 212, 247 Fed. 102. Payment by broker of profits due from grain speculation. — Where bankrupt pur- chased for appellant, who advanced a mar- gin of 3%, options, or the right to buy grain for future delivery, it being his cus- tom to enter into a contract with third par- ties for the future right to purchase, but under the conitanaiot, no grain was delivered to bankrupt and he made no advances tiheme- on, but was accountable to appellant for balances in the latter's favor, if any there were after selling the grain and making such oflSsets as were chargeable against the appel- lant, it cannot be said that there was any sudh pledge, or contract of pledge, that . payment made to appellant as profits due him from such transactions would not be the subject of a preference In re Dorr ( C. C. A., 9th Oir.), 28 Am. B. E. 505, 196 Fed.. 292. 210. Transfer to pay for property con- verted by bankrupt.— 'Where a bankrupt, as a private banker, received a note from de- fendant for collection, which he collected, but the proceeds of which he converted to his own use or that of his bank, at a time when he was insolvent, and a few diaiys thereafter the banlc was closed, on which day the bankrupt and his wife executed and delivered to the defendant a conveyance of oeirfcain real estaite which he had Iwig there- tofore owned, sending at the same time a letter requesting defendant's agent to hold the deed until he had definite notice of the closing of the bank, upon receiving notice of which the defendant, accepted the deed, such acceptance, with knowledge of the conversion and insolvency, was an election to treat, the transaction as an indebtedness for which the conveyance was tendered by way of security of indemnity, the defendant becoming a credi- tor on a par with other general creditors of the estate., and the conveyance constituted a preferential security, voidable in a suit by the trustee. Atherton v. Green (C. C. A., 7th Cir.), 24 Am. B. R. 650, 179 Fed. 806. 210a. Transfer to restore embezzled trust funds. — ^Bankrupt, a testamentary trustee, at a time when insolvent, was discovered by the surety on his bond not to be in possession of some of the securities belonging to the trust estate. At the instigation of the surety and for the purpose of making good the 'shortage he purchased certain bonds with his own' mioncy and placed tihem', to- gether with the securities belonging to this trust fund which had not gone out of his possession, in a deposit box which, upon his removal as trustee, passed to his successor in trust. Biankrupt was at the time of the traneaction testamentary trustee for more than twenty-five other trust estates, in the case of each of which there was a shortage for which he was responsible. In an action by the trustee in' bankruptcy to recover of bankrupt's successor the securities so de- posited to make up the shortage, — Held, that the transfer of the substituted • securi- ties must, in equity, be deemed to have been made by bankrupt as an individual dealing with himself as trustee, and that, ^ contract obligation having existed by reason of bank- 60-a.J Ceeditoes Onlt Peefebeed. 901 the amount due thereon is not a creditor, and is not preferred when the broker transfers the stock to him upon the payment of the amount due thereon. ^^*'' h. Illustrative cases. — In addition to the cases already cited the cases in the foot-note may be referred to. These cases supplement the authorities already cited but do not readily admit of classification.^" Tupt's default in Ms trustj the transaction constituted a voidable preference under the bankruptcy act. Clarke v. Rogers (0. C. A., 1st Cir.), ae Am. B. E. 413, 183 Fed. 518, affd. 328 U. S. 534, 30 Am. B. K. 39, 57 L. Ed. 953, 33 Sup. a. 587. Burgoyne v. McKillip (C. C. A., 8th Cir.), 25 Am. B. R. 387, 182 Fed. 452, in which the court said: "Though a demand may be founded on a breach of trust, the entire estate of the recreant trus- tee is not thereby necessarily impressed with a trust. The holder of the demand cannot, as an ordinary creditor, take and hold transfers of property from the insolvent defaulter free from the provisions of the bankruptcy act re- specting preferences." 210b. Clarke v. Rogers, 238 U. S. 534, 30 Am. B. R. 39, 57 L. Ed. 953, 33 Sup. a. 587. 211. Transactioln held not to be prefer- ences. — The following have been held not to be preferences, even within the four months' period: The removal of notes more than four months old, Chattanooga Bank V. Rome Iron Co. (C. C, Ga.), 4 Am. B. R. 441, 102 Fed. 755; the payment of in- terests on notes. In re Keller (D. C, Iowa), 6 Am. B. R. 631, 110 Fed. 348 ; the payment of installments of rent. In re Barrett ■ (Ref ., N. Y.), 6 Am. B. R. 199. Compare In re Lange (D. C, N. Y.), 3 Am. B. R. 331, 97 Fed. 197; the avails of book accounts as- signed as collateral to a present loan. Young V. Upson (C. C, N. Y.), 8 Am. B. R. 377, 115 Fed. 193; the collection and appli- cation of the avails of collateral security given before the perio4, In re Little (D. C, Iowa), 6 Am. B. E. 681, 110 Fed. 621; the proceeds of a pledged iire insurance policy, In re West Norfolk Lumber Co. (D. C, Va.), 7 Am. B. R. 648, 112 Fed. 759. See also McDonald v. Daskam (G. C. A., 7th Cir.), 8 Am. B. R. 543, 116 Fed. 276; a payment to an official successor under order of court, Fry V. Penn Trust Co. (Sup. Ct., Pa.), 5 Am. B. R. 61, 195 Pa. 343; a payment in pursuance of a valid executory contract more than four months old, Sabin v. Camp (D. C, Oreg.), 3 Am. B. R. 578, 98 Fed. 974. Apparently contra: In re Sheridan (D. C, Pa.), 3 Am. B. E. 554, 98 Fed. 406; payments to a surety who afterward pays the bankrupt's debt, In re New (D. C, Ohio), 8 Am. B. E. 566, 116 Fed. 116; where a sheriJE still has In his hands money coUeeted on an execution, In re Kenney (D. C, N. Y.), 3 Am. B. E. 353, 97 Fed. 554. Compare however, In re Blair (D. C, N. T.), 4 Am. B. R. 220, 102 Fed. 987; and where a mort- gage is talien as security by a lender who knows that , the borrower Is hard pressed, the latter using the money to pay his debts. In re Pearson (D. C, N. T.), 2 Am. B. E. 482, 95 Fed. '425. See also In re Harpke (C. C. A., 7th Cir.), 8 Am. B. R. 535, 116 Fed. 295; payment of in- terest on dower, In re Eiddle's Sons (D. C, Pa.), 10 Am. B. E. 204, 122 Fed. 559; surrender of leased premises, Hills v. Stimson Co. (Wash. Sup. Ct), 41 Am. B. E. 818, 172 Pac. 1181; re- covery of goods obtained by bankrupt under false pretenses, Mulroney Mfg. Co. v. Weeks (la. Sup. Ct), 44 Am. B. E. 509, 171 N. T^^ 36; retaking property in possession of agent who had failed to comply with State law ruiivirlng public notice of agency, Virginia Book Co. v. Sites (C. C. A., 4th Cir.), 41 Am. B. E. 450, 254 Fed. 46. Where a surety on a construction contract, in pursuance of the suretyship agreement, re- ceives the property cf the principal and com- pletes the contract and pays debts amounting to more than the value of the property, the transfer Is not preferential as to the surety. Angle T, Bankers' Surety Co. (C. C. A., 2d Cir.), 41 Am. B. E. 90, 244 Fed. 401. Transactions held preferences, — The follow- ing have been held preferences: Attachments, In re Burlington Malting Co. (D. C, Wis.), 6 Am. B. E. 369, 109 Fed. 777; In re Schenkein (Eef., N. Y.), 7 Am. B. E 162, 113 Fed. 421; though whether this will continue to be held under the changed conditions resulting from the amendments of 1903 may be doubted ; a transfer of all the bankrupt's assets to a liquidator. In re Wertheimer (Eef., N. Y.), 6 Am. B. E. 187; a cash sale of all property to an outsider and payment in full of several cred- itors. Boyd V. Lemon Gale Co. (C. C. A., 5th Cir.), 8 Am. B. E. 81, 114 Fed. 647; the taking back of goods, whether hypothecated or sold, and the application of their value on account or in full. In ro Kliugaman (Eef., Iowa), 2 Am. B. R. 44; Silberstein v. Stal, 4 Am. B. E. 626, 32 N. Y. Misc. 353, 66 N. Y. Supp. 646; a pay- ment after insolvency by means of a postdated check. In re Lyon (D. C, N. Y.), 7 Am, B. E. 412, 114 Fed. 326 ; affd. 10 Am. B. E. 25, 121 Fed. 723 ; a loan by a banker to the bankrupt of the amount of the latters deposit, In re Cobb (D. C, N. Car.), 3 Am. B. R. 129, 96 Fed. 821; a payment on the bankrupt's note after its sale to and dlEcouzit by a bank. In re Waterbury Furniture Co. (D. C, Conn.), 8 Am. B. R. 79, 114 Fed. 225 ; the making of a lease, Carter v. Goodykoontz (D. C, Ind.), 2 Am. B. R. 224, 94 Fed. 108; repayment of a loan out of a certain fund uuder an agreemeut entered into when the loan was made. Torrance v. Winfield Nat. Bank (Sup. Ct, Kan.), 11 Am. B. R. 185, 66 Kan. 177; agreement that chattel mortgage execute'd prior to four months shall be lien on certain specified articles made within said period, First Nat. Bank of Holdredge v. Johnson (Sup. Ct., Neb.), 10 Am. B. R. 208; transfer of book ac- counts. Matter of Gottlieb (D. C, N. Y.), 40 Am. B. R. 247, 245 Fed. 139 ; stopping payment of check by debtor of bankrupt who was also a creditor of the bankrupt. Matter of Star Spring Bed Co. (D. C, N. J.), 40 Am. B. B. 1, 243 Fed. 957. See also In re Colton, etc., Co. (D. C, N. Y.), 8 Am. B. R. 257, 115 Fed. 158; In re Metzger, etc. Co. (D. C, Ark.), 8 Am. B. R. 307, 114 Fed. 957 ; Swarts v. Siegel .(C. C. A., 8th Cir.), 8 Am. B. R. 690, 117 Fed. 13. The practitioner should, however, note ^ that the provocation for many of these decisions — the necessity of surrender of "innocent" partial payments ■ — is now gone. It wlU bear repeti- tion that none of them are now valuable unless they show the all-essential element of voidable preferences; "reasonable cause to believe that a preference was intended." 902 Pebfeeeed Ceeditoes. [§ 60-b. III. WHAT PREFERENCES ARE VOIDABLE. 212 a. In general. — Prior to the amendment of 1903, this subsection was regarded as broad enough to include a preference according to subsection a, as construed by the Supreme Court in Carson v. Chicago Title & Trust Co.,^^^ where the broad distinction was made between said subsections showing that under subsection h, a transfer from the bankrupt may be avoided by his trustee, subject to the limitation among others, that the creditor had reason to believe that a preference was intended, while under subsection a the intent of the bankrupt is not material.^" But since the amendatory act of 1903, a preference is a name only, unless it may be avoided. Under the law of 1867, preferences were per se void.^-^^ This, however, seems often to have been a distinction without a difference. Strictly, the preference being void, no title passed to the creditor preferred, and the words "may recover the property," etc., in § 39 of that law, were surplusage. Preferences now are not void, but voidable, i. e., title has passed and recovery must be had. This is doubtless in line with the policy of the law, as evidenced by § YO-a, to protect inter- vening innocent purchasers. The resultant distinctions have been somewhat discussed.^** The fact to be noted here is, however, that this subdivision closely fits both in phrase and in purpose the corresponding clauses in the law of 1867. Cases under that law are thus still applicable, both as to what is " reasonable cause to believe " and the practice on and measure of damages in suits to recover.^" b. Eeasonable cause to believe a preference will result. — (1) Iiq- geneeal. — The former law and the present are here not exactly equivalent; though the phrase "reasonable cause to believe" occurs in both. Its meaning is not easily explained. Each case will turn on its ovm facts. ^^* (2) Time of cause to believe. — It was held under the act of 1867 that reasonable cause to believe must exist at the time of the alleged preference.^'' The present section provides that "if at the time of the transfer, or of the 218. See Am. Bankr. Dig. §§ 482-518. Supp. 359; Crooks v. Peonle's Bank, 3 Am. 213. 182 U. S. 438, 5 Am. B. E. 814, 45 L. B. R. 238, 46 N. Y. App, Div. 335, 61 N*. Y. Ed. 1171, 21 Sup. Ct. 906. Supp. 604; Beck v. Connell (Sup. Ct.), 8 214. In re Andrewa (C. C. A., 1st Cir.), Am. B. R. 500, affg. s. c, 6 Am. B. R. 93; 10 Am. BL R. 387, 144 Fed. 922, affd. 14 Levor v. Seiter, 8 Am. B. R. 459, 69 N. Y. Am. B. R. 247, 135 Fed. 599. App. Div. 33, 74 N. Y. Supp. 499; Matter of 216. Atkina v. Spear, 8 Mete. (Mass.), Barthel-eme (Rcf., N. Y.), 11 Am. B. K, 67; 490; Zahm v. Fry, Fed. Cas. 18,198; Rison Baden v. Bertenshaw (iSup. Ct., Kan.), 11 ». Knapp, Fed. Cas. 11,861. Am. B. R. 308, 74 Pac. 639; Ryttenberg v. 216. See In re Phelps (Ref., N". Y.), 3 S'ohefer (D. C, N. Y.), 11 Am. B. R. 652, Am. B. R. 396; In re Oobb (D. C, N. Oar.), 131 Fed. 313; Pratt v. Christie, 12 Am. B. 3 Am. B. R. 129, 96 Fed. 821. R. 1, 95 N. Y. App. Div. 282, 88 N. Y. Supp. Lien of voidable preference. — Notwith- 585; In re Coffey (Ref., N. Y.), 19 Am'. B. standing the rule that a preferential trans- R. 148, 165. Compare also In re Wyly (D. fer is avoidable, and not void, and that re- C, Tex.), 8 Am. B. R. 604, 116 Fed. 38, and covery must be bad, it has been held that In re Bullock (D. C., N. Oar,), 8 Am. B. R. the lien of a trust mortgage, constituting 646, 116 Fed. 667; Long v. Farmers' State a •preference, is discharged by the bank- Bank (C. C. A., 8th Cir.), 17 Am. B. R. 103, ruptcy, and that the creditors claiming 147 Fed). 360; In re Burlage Bros. (D. C.', thereunder have no priority over a claim Iowa), 22 Am. B. R. 410, 169 Fed. 1006;' arising under a prior unfiled chattel mort- Bergdall v. Harrigan (C. C. A., 3d Cir)' gage. Rouse v. Ottenwess & HuxoU (C. C. 33 Am. B. R. 394, 217 Fed. 943 See Am A., 8th Oir.), 31 Am. B. R. 115, 208 Fed. 881. Bankr. Dig. §§ 509-518. 217. See cases cited later under this sec- 219. In re Hunt, Fed. Cas. 6,881 ; Crump tion. V. Chapman, Fed. Cas. 3,455; In re Gui^ 218. For instance: North v. Taylor, 6 Am. r:et'.e. Fed. Cas. 10,622 B R. 233, 62 N. Y. App. Div. 631, 70 N. Y. § 60-b.J ' Intent to Pkefee. ,903 entry of judgment, the bankrupt be insolvent" and the person receiving the preference "shall then have reasonable cause to believe that the enforcement of such judgment or transfer would effect a preference, it shall be voidable." The word "then" refers apparently to the time of the transfer or the entry of the judgment ;^^ it would seem that a creditor may enforce a judgnient entered at a time when he had no craice to believe his debtor insolvent, although at the time he enforces it by execution he has such cause to believe, or has actual knowledge that the enforcement of his judgment will give him a preference,^^^ (3) Intent to peefee; effect of amendment of 1910'. — If there was reasonable cause to believe that a voidable preference will be effected by the transaction, the intent of the debtor is immaterial.^^^ This rule was not firmly established prior to the amendment of 1 9 10, as there were many cases holding that the intent of the debtor was an indispensable element.^^ Keasonable cause to believe a preference was intended is not now essential. Since the amendment of 1910 there must be a reasona:ble cause to believe that the transfer or judgment will effect a preference. The effect of the transaction becomes paramount, being substituted for the intent of the debtor. The change made hj the amendatory act does not dispense with the necessity of proving " reason- able cause to believe." ^^ But the proof of such " reasonable cause to believe " is now to be directed to the effect of the transfer, rather than the intent of" the debtor in making it. If the creditor knows or has " reasonable cause to believe " that his debt will be satisfied in whole or in part by the transfer to the exclusion of any of the other creditors of the same class, it is a preference, 220 Rosenman v. Coppard (C. C. A., 5th B. E. Ill, 129 Fed. 728, 64 C. C. A. 256; Bene- //O. ttosenman V. uupp ^ , ^.^^ ^_ ^^^^^^^j^ ^^ ^^ ^ ^ ^o, IIT N. Y. 1, 68 Cir.), 35 Am. a. K. fSb, ^^s rea. ii*, j^ ^ ggg. Eichaidson v. Germania Bank (C. C. Sheppard-Strasaheim Co. v. Black (O. O. A., a., 2d Clr.), 45 Am. B. E. 351, 263 Fed. 320; 7th Cir.), 33 Am. B. R. 574, 211 Fed. 643; Cohen t. Goldman (C. C. A., 1st Cir.), 42 Am. B. al "-D ^ in n \ B+Ti riv) 9» aJ E. 85, 250 Fed. 599. Stern v. Paper (C. C. A., 8th Cir.) 38 Am. j^^;^^ ^^ prefer.-In the case of Alex- B. R. 593, 198 Fed. 643; In re Leach (C. C. ander v. Eedmond (C. C. A., 2d Cir.), 24 A, 6th Cir.), 22 Am. B. E. 599, 171 Fed. 622; Am. B. E. 620, 180 Fed. 92, the court said: Kentucky Bank & Trust Co. v. Prltchett (Okla. "But it is surely enough to show that he Sup Ct.), 33 Am. B. E. 190, 143 Pac. 338; Mat- ^^^d reasonable cause to believe that there ter of Ballard (D. C, Tex.), 44 Am. B. E. 651. '^^Z s«<='i intent, without inquiring Into the actual mental attitude of the person from The words 'shall then have reasonahle whom he receives the property transferred. cause to believe that the enforcement of a If he has reasonable cause to believe that judgment or transfer would effect a pref- that person is insolvent and has also reason- erenoe " not only refer to the time when th« aibte canise to believe that the effect of the transfer is made, that is when the mortgage transfer will be to enable the transferee is given, but mean that the creditor taking to obtain a greater percentage of his debt it must then have had' reasonable cause to than any other creditor of the same class, believe that the then financial condition of the requirements of th* concluding part of the debtor was such that the enforcement of siection 60 are fully met." the security would work a preference. Matter 223. Hardy v. Gray (C. C. A., 1st Oir.), of Gaylord (D. C, N. Y.), 35 Am. B. R. 544, 16 Am B. R. 3«7, 144 Fed. 922, 75 C. C. A. 225 Fed. 234. 562; In re First Nat. Bank of Louisville 221. Galbraith v. Whitaker (Sup. Ct., (C. C. A., 6th Cir.), 18 Am. B. R. 766, 155 Minni.), 32 Am. Bi. R. 113, 138 N. W. 772. Fed. 100, 84 C. 0. A. 16; Tumlin v. Bryan 222. Schmidt v. Bank of Oomimeroe (Sup. (C. C. A, 5th Cir.), 21 Am. B. R. 319, 165 Ct., N. Mex.), 25 Am. B. R. 904, 110 Pac. Fed. 166, 91 C. C. A. 200, 21 L. R. A. (N. 613; In re Andrews (D. 0., Mass.), 14 Am. S.), 960; Kimmerle v. Farr (C. C. A., 6th B. R. 247, 135 Fed. 599; Brewster v. GoS Cir.), 26 Am. B. R. 818, 189 Fed. 295. Lumber Co. (D. C, Pa.), 21 Am. B. R. 106, 224. Rogers v. American Halibut (A>. 164 Fed. 124; Western Tie & Lumber Oo. v. (Mass. Sup. Ct.), 31 Am. B. R. 576, 103 N. BrowB, 196 U. S. 502, 13 Am. B. R. 447, 25 E. 689; Saule v. First ^at'l Bank (Sup. Ct., Sup. Ot. 339, 49 L. Ed. 571, aflfg. 12 Am. Idaho), 32 Am. B. R. 536, 140 Pac. 1098. 904 Pbbfeeeed Cei^ditoes. [§ 60-b. regardless of the intent of the debtor. ^^^ As the section now stands there must be proof, both of insolvency of the bankrupt at the time of the transfer and reasonable cause to believe on the part of the transferee that such transfer would effect a preference, in order to set aside the transfer as a preference.^^® On the other hand, when a debtor is in failing or insolvent circumstances, he has a right to prefer one creditor in preference to another, and if accepted by the creditor in good faith such preference will be sustained, even though it has the effect to delay, hinder or defeat other creditors.^^'' And where a petition in bankruptcy alleged the insolvency of the bankrupt at the time of the execution of a chattel mortgage, the adjudication is not res judicata upon the issue as to whether the mortgage constituted a voidable preference.^^* Many, if not all the rules as to proof of intent are applicable to proof of effect ; the cases bearing upon what constitutes "reasonable cause to believe that a preference was intended," decided prior to the amendment of 1910, are still in force. ^^ (4) Actual knowledge not eequieed. — The cases under the act of 1867 and the present law, as amended, permit the statement that " reasonable cause to believe," does not require proof either of actual knowledge or actual belief, but only such surrounding circumstances as would lead an ordinarily prudent business man to conclude that the transfer will result in a preference.^^" The Z25. Patterson v. Baker Grocery Co. (Sup. Ct., Ore.), 33 Am. B, R. 740, 144 Pac. 673; Heyman v. Third National Bank (D. C, N. J.), 33 Am. B. R. 716, 216 Fed. 685; Ogden V. Reddish (D. C, Ky.), 29 Am. B. R. 531, 200 Fed. 977; Abele v. Beacon Trust Co. (Mass. Sup. Jud. Ct.), 40 Am. B. R. 743, 117 N. E. 833; Matter of Campion (D. C, N. Y.), 43 Am. B. R. 625, 256 Fed. 902; Watchmaker V. Baines (C. 0. A., 1st Cir.), 43 Am. B. E. 632, 259 Fed. 783. Intent to prefer immaterial. — ^In the case of Herron Co. v. Moore (C. C. A., 9th Cir.), 31 Am. B. E. 221, 208 Fed. 134, the court said: "Under the "bankruptcy act, section #0', as amended by the act of 1910, it is no longer necessary in order to establish a prefer- ence, to prove the existence of the debtor's intent to prefer. It is sufficient if it is shown that the creditor receiving the al- leged preferential payment had at the time when it was made, reasonable cause to be lieve that the bankrupt was insolvent, and that in accepting and retaining the same he would receive a larger per cent, of his debt than the other creditors of the same class." Under the amenclxnent of 1910, the test of a preferential payment is, whether the person receiving the payment, or to be benefited thereby, or his agent acting therein, at the time the payment was made, had reasonable cause to believe that in accepting and retaining said payment he would receive a larger per- centage of his debt than any other creditor of the same class. In re Harrison Bros. (D. C, Pa.), 28 Am. B. E. 684, 202 Fed. 243. NotwlthetandinEr tho amendment of 1910, the element of reasonable cause to believe remains as a fact necessary to be alleged and proven. Carey v. Donohue (C. C. A., 6th dr.), 31 Am. B. E. 210, 209 Fed. 328, revd. on other grounds, 240 U. S. § 430, 36 Am. B. E. 704, 60 L. Ed. 728, 36 Sup. Ct. 386. 226. Matter of Chicago Car Equipment Co. (C. C. A., 7th Cir.), 31 Am. B. E. 617, 211 Fed. 638; Sheppard-Strassheim Co. v. Black (C. C. A., 7th Cir.), 33 Am. B. E. 574, 211 Fed. 643; Beall V. Bank of Bowden (D.H'C, Ga.), 34 Am. B. E. 186, 219 Fed. 316; Matter of Gaylord (D. C, N. X.), 35 Am. B. E. 514, 225 Fed. 234; Canthorn v. Burley State Bank (Sup. Ct., Idaho), 33 Am. B. E. 794, 144 Pac. 160S; Batch- elder V. Home Natl Bank (Sup. Jud. Ct, Mass.), 32 Am. B. It. 555, 105 N. E. 1052; Ken- tucky Bank & Trust Co. v. Pritchett (Sup. Ct, Okla.), 33 Am. B. E. 190, 143 Pac. 338; Abele V. Beacon Trust Co. (Mass. Sup. Jud. Ct). 40 Am. B. E. 743, 117 N. E. 833; Brown v. First State Bank of Weimar (Tex. Civ. App.), 41 Am. B. E. 151, 199 S. W. 895; V\-illiams T. Davifisou (Wash. Sup. Ct.), 42 Am. B. E. 595, 176 Pac. 334; Brittain v. Buerger Comn. Co. (Wis. Sup. Ct.), 43 Am. B. E. 144, 170 N. W. 947; De Forest V. Crane & Ordway Co. (Mont. Sup. Ct.), 43 Am. B. E. 349, 179 Pac. 291. 227. Kentucky Bank & Trust Co. v. Pritchett (Sup. Ct., Okla.), 33 Am. B. E. 190, 143 Pac. 338; Watson v. Adams (C. C. A., 6th Cir.), 39 Am. B. E. 473, 242 Fed. 441. 228. Sheppard-Strassheim Co. v. Block (C. 0. A., 7th Cir.), 33 Am. B. E. 574, 211 Fed. 643. 229. Debus V. Tates (D. C, Ky.), 30 Am. B. E. 823, 193 Fed. 427, in which case the court exhaustively discusses the subject of prefer- ences prior to and since the amendment of 1903. 230. Hnssey v. Eichardson-Boberts Dry Goods Co. (C. C. A., 8th Cir.), 17 Am. B. E. 511, 138 Fed. 598; Eosenman v. Coppard (C. C. A., 5th Cir.), 35 Am. B. E. 786, 228 Fed. 114; Matter of Gaylord (D. C, N. Y.), 35 Am. B. E. 544, 225 Fed. 234; Heyman v. Third National Bank (D. C, N. J.), 32 Am. B. E. 716, 216 Fed. 685; Ar- thur V. Harrington (D. C, N. Y.), 32 Am. B. E. 216, 211 Fed. 215; In re Jacobs (Eef., La.), 1 Am. B. E. 518; In re Eichards (D. C, Wis.), 2 Am. B. E. 518, 95 Fed. 258; Crittenden v. Barton, 5 Am. B. E. 775, 59 N. Y. App. Div. 555, 69 N. Y. Supp. 559; Sebring v. Wellington, 6 Am. B. E. 671, 63 N. Y. App. § 60-b.J Cause to Believe; Actuax Knowledge. 905 Div. 498 71 N. Y. Supp. 788; Hackney v. Eaymiond Bros. Clarke Oo. (Sup. Ct., Neb.), 10 Am: B. R. 213, 68 Neb. 624, 94 N. W. 822, 99 N. W. 675; Sundheim v. Kidge Ave. Bwk (D. C, Pa.), 15 Am. B. R. 132, 13S Fed. 951; In re Hines (D. C, Pa.), 16 Am. B. R. 495, 144 Fed. 54»; In re Virginia Hardwood Mfg. Co. (D. C, Ark.). 15 Am. B. R. 135, 139 Fed. 209; In re Armstrong (D. 0., Iowa), 16 Am. B. R. 583, 145 Fed. 202 ; Stevenson v. Miliken-Tomlinson, 13 Am. B. R. 201, 99 Me. 320, 59 Atl. 472.; SufFel v. McCartney Nat. Bank, 16 Am. B. R. 259, 127 Wis. 208, 106 N. W. 837 ; In re Mills Oo. (D. C, N. Car.), 20 Am. B. R. 501, 162 Fed. 42; Rogers v. Fidelity Sav. Biank &. Loan Oa (D. C, Ark.), 23 Am. B. R. 1, 17'2 Fed. 735 ; Rogers' v. Amerioam Halibut Oo. (Mass. Sup. Ct.), 31 Am. B. R. 570, 216 Mass. 22T, 103 N. E. 689; Matter of The Suther- land Co., Inc. (D. C, Mass.), 40 Am. B. E. 305, 245 Fed. 663; Walter v. National Fire Ins. Co. (Neb. Sup. Ct), 40 Am. B. K. 339, 164 N. W. 569; Abele v. Beacon Trust Co. (Mass. Sup. Jud. Ct.), 40 Am. B. R. 743, IIT N. B. 833; Bossett T. Evans (C. C. A., 8th Cir.), 42 Am. B. R. 587, 253 Fed. 532; Underwood v. Winslow (Mass. Sup. Jud. Ct), 42 Am. B. B. 714. 121 N. E. 524; Cohen v. Tremont Trust Co. (D. C, Mass.), 43 Am. B. E. 522, 256 Fed. 399; Matter of Campion (D. C, N. 1.), 43 Am. B. E. 625, 256 Fed. 902; Schuette & Co. v. Swank (Pa. Sup. Ct), 45 Am. B. E. 373, 109 Atl. 531; Craig V. Sharp (Mo. Ct of App.), 45 Am. B. E. 137, 219 S. W. 95, citing Collier on Bankruptcy (11th Ed.), 904. Cases under Act of 1867. — Buchanan t. Smith, 16 Wall. 277; Eison v. Knapp, Fed. Cas. 11,861; In re McDonough, Fed. Cas. 8,775; Webb v. Sachs, Fed. Cas. 17,325. Absolute kuowledge of insolvency is not re- quired. All that is necessary is the possession by the creditor, at the time, of such informa- tion relative to the debtor's affairs as should lead a reasonably prudent person to conclude that the property of the debtor at a fair valu- ation would not be sufficient to pay his debts. In re rrafflnger (D. C, Ky.), 18 Am. B. E. 807, 154 Fed. 528; Getts v. Janesville Grocery Co. . (D. C, Wis.), 21 Am. B. E. 5, 163 Fed. 417. Knowledge Is not necessary, nor even belief, but only reasonable cause to believe, which is a very different thing. Pratt t. Columbia Bank (D. C, N. T.), 18 Am. B. R. 406, 415, 157 Fed. 137. Neither knowledge nor actual belief are required to be show;?. In re Neill-Piuck- ney-Maxwell Co. (D. C, Pa.), 22 Am. B. R. 401, 170 Fed. 481; Dulany v. Waggaman (Sup. Ct., Dlst Col.), 22 Am. B. E. 36, 37 Wash. L. Rep: 370. Inquiry by ordinarily prudent man. — It is suf- ficient if the facts brought home to the per- son sought to be affected are such as would pro- duce action and Inquiry on the part of "an or- dinarily Intelligent man" (Grant v. Bank, 97 V. S. 80, 24 L. ed. 971) ; ''a prudent business man" (Bank v. Cook, 95 U. S. 343; Toof v. Martin, 18 Wall. 40) ; "a person of ordinary prudence and discretion" (Wager v. Hall, 16 Wall. 584; In re McDonald [D. C, So. Car.], 24 Am. B. E. 446, 178 Fed. 487, afCd. 25 Am. B. R. 948, 184 Fed 986) ; "an ordinarily prudent man" (In re Eggert [C. C. A., 7th Cir.], 4 Am. B. E. 449, 102 Fed. 735; McBlvain v. Hardesty [C. C. A., 2 Cir.] 22 Am. B. E. 320, 169 Fed. 320) ; "a pru- dent man " (Dutcher v. Wright, 94 U. S. 553, 24 L. ed. 130) ; "an ordinarily intelligent and prudent business man" (Wright v. Sampter [D. C, N. Y.], 18 Am. B. E. 355, 358, 152 Fed. 196). "He who deliberately shuts his eyes and ears to means of knowledge, and as to mat- ters which he says 'he is not interested in,' has reasonable ground to believe that ordi- narily diligent inquiry could ascertain.'' In re Coffey (Ref., N. Y.), 19 Am. B. R. 148, 166. Failure to inquire. — A preference may re- sult 'alttough the oreditOT bad no actual kniowledge of the insolvency of his debtor. All that is necessary under section 60-b is that the facts surrounding land aittending the transfer are such that an ordinary businesis man having knowledge of the same facts, would have believed that the bank- rupt was insolvent. In such a case the cred- itor's ooniclusion that he had no ground to believe the bankrupt was insolvent jls not controlling and indeed, is of little if any weight. If a transfer is miade under such oircumstances that an ordinarily intelligent maji' would have been put on inquiry to mate am investigation which, if made, would have shown insolvency, then the transferee is chargeable with such knowledge as the in- vestigation would have disclosed, and the trans- fer will amount to an unlawful preference. Failure actually to investigate will afford no ex- cuse under such circumstances. Matter of States Printing Co. (C. C. A., 7th Cir.), 38 Am. B. R. 526, 238 Fed. 775. Instances of reasonable cause to believe. — ' It has been held that a creditor, who receives a check of $4,000 on the day before the filing of an involuntary petition against his debtor, a corporation, has reasonable cause to believe that a preference was intended. Wright v. Skinner Manufacturing Co. (C. C. A., 2d Cir.), 20 Am. B. E. 527, 162 Fed 315; Morris v. Tannenbaum (Ret, N. Y.), 26 Am. B. R. 368. Where an agent of the two largest creditors of the bankrupt company had knowledge that a financial statement made by the president of the bankrupt might not be true, and received pay- ments in cash on the express condition that such statement should be surrendered, he will be held to have received the money with reason- able cause to believe that there was an Intent to prefer! Matter of Cramer & Rogers Co. (C. C. A., 3d dr.), 42 Am. B. R. 283, 252 Fed. 112. An Indirect repurchase by a creditor of goods to the amount of .$1,475 from an Insolvent debtor within the four months' period, and a resale of the same for about $1,000 is a prefer- ence, and the creditor will be held to have had reasonable cause to believe that such was the intention. In re Andrews (C. C. A., 1st Cir.), 16 Am. B. E. 387, 144 Fed. 922, affg. 14 Am. B. R. 247, 135 Fed. 599. Where a creditor takes a transfer of the resi- dence of one partner within the four months' period and a short time before had taken a like transfer of the residence of the other part- ner he will be deemed to have had reasonable cause to believe that the firm was insolvent. Brewster v. GotE (D. C, Pa.), 21 Am. B. E. 239, 164 Fed. 124. Where creditors of bankrupt accepted In full of their claims in an attempted settle- ment of bankrupt's affairs a dividend amount- ing to $.6364 on the dollar, derived from certain insurance moneys having been previ- ously informed by letter that other claims on notes amounting to $4,900 would be paid by the proceeds of personal property, repre- sented to be worth $2,500', but actually worth less than half that amount, they had reasonable cause to believe that a prefer- ence was intended. Shultz v. Boyt Saddlery Co. (Sup. Ct., Iowa), 33 Am. B. R. 33, 147 N. W. 897. Facts and circumstances disclosed by In- quiry. — If the facts and circumstances 906 Peefeeeed Ceeditoes. [§ 60-b. creditor must have such a knowledge of facts as to induce a reasonable belief of his debtor's insolvency.^^^ Notice of facts which would incite a person of reasonable prudence to an inquiry under similar circumstances is notice of all the facts which a reasonably diligent inquiry would develop.^^ It is to proved to have been within the knowledge and observation of the creditor or as to which he was actually put on inquiry, and inquiry would have disclosed, were such as would naturally cause . a business man of ordinary care and intelligence — an ordinarily careful ajid prudent man of intelligence anJ reason- able experience in business matters — to believe, then it should be held, that the creditor had treasonable cause tj believe the debtor was insolvent, and that the taking and enforcement of the security or transfer " would effect a preference." Matter of Gay- lord (Dl C, iT. Y.), 35 Am. B. R. 544, 225 Fed.. 234. 231. Kuttig Manufacturing Co. v. Edwards (C. C. A., Sth Cir.), 20 Am. B. E. 349, 160 Fed. 619; In re Houghton Web Co. (D. C, Mass.), 26 Am. B. K. 202, 1S.5 Fed. 213 ; SUale t. Farm- ers' Bank (Sup. Ct., Kans.), 25 Am. B. E. 888, 109 Pac. 408, citing text ; Jacobs T. Saperstelu (Mass. Sup. Ct), 38 Am. B. E. 405, 114 N. B. 360. 232. Coder v. McPherson (C. C. A., Sth Cir,), 18 Am. B. E. 523, 152 Fed. 951 ; Pittsburg Plate Glr.ss Co. V. Edwards (C. C. A., Sth Cir.), 17 Am. B. E. 447, 148 Fed. 377; In re Leader (D. C, Arli.), 26 Aia. B. E. 668, 190 Fed. 624; Col- let v. Bronx Nat. Bank (D. C, N. Y.), 29 Am. B. E. 454, 211 Fed. Ill; Herron Co. v. Moore (C. C. A., 9th Cir.), 31 Am. B. E. 221, 208 Fed. 134; Matter of Gaylord (D. C, N. Y.), 35 Am. B. E. 544, 225 Fed. 234; First Bank of Mayville v. Alexander (Okl. Sup. Ct.), 36 Am. B. E. 132, 153 Pac. 646, quoting text ; Matter of Miller (D. C, Ohio), 34 Am. B. E. 275, 221 Fed. 471; Mat- ter of Edwards (D. C, Ga.), 33 Am. B. E. 530, 217 Fed. 102; Conners t. Brockport Nat'l Bank (D. C, Maine), 32 Am. B. E. 882, 214 Fed. 847; Heyman t. Third Nat'l Bank (D. C, N. J.), 32 Am. B. E. 716, 216 Fed. 683; Eussell's Trus- tee V. Mayfleld Lumber Co. (Ct. of App., Ky.), 32 Am. B. E. 357, 164 S. W. 783; Galbraith v. Whitaker (Sup. Ct, Minn.),. 32 Am. B. E. 113, 138 N. W. 772; Lyttle v. Fifth National Bank (D. C, N. Y.), 39 Am. B. E. 690, quoting Collier on Bankruptcy (10th ed.), 821; Matter of The Sutherland Co., Inc. (D. C, Mass.), 40 Am. B. E. 305, 245 Fed. 663 ; Walter y. National Fire Ins. Co. (Neb. Sup.Ct), 40 Am. B. E. 339, 164 N. W. 569; Farmers State Bank v. Freeman (C. C. A., Sth Cir.), 41 Am. B. E. 286, 247 Fed. 579; National Bank of Bakersfleld t. Moore (C. C. A., 9th Cir.), 41 Am. B. E. 409, 247 Fed. 913; Smith V. Powers (D. C, N. Y.), 43 Am. B. E. 303, 255 Fed. 582; Slayton v. Dunn (Vt. Sup. Ct.), 44 Am. B. E. 23, 107 Atl. 307. Extent of Inquiry. — ^ Facts which would put an intelligent business man upon Inquiry con- stitute "reasonable cause to believe," if Intent to prefer would be discovered by following up the inquiry. Stern v. Paper (D. C, N. Dak.), 25 Am. B. E. 451, 183 Fed. 228; Tilt v. Citizens' Trust Co. (D. C, N. J.), 27 Am. B. E. 320, 191 Fed. 441, atfd. 29 Am. B. E. 906, 200 Fed. 410. Lietters and telegrams sent by a debtor to Its creditors, which merely show that it Is In embarrassed circumstances and not able to meet its obligations as they matured, do not constitute notice of Insolvency within the meaning of that term as used in the bankruptcy act, but, when unaccompanied by qualifying circumstances are sufficient to put the creditor upon inquiry. In re Varley v. Bauman Clothing Co. (D. O., Ala.), 26 Am. B. R. 840, 191 Fed. 459. Suggested critical embarrassment of debtor. — Within the four months prior to bankruptcy, payments had been made by the bankrupts on notes for a lumber ac- count which had frequently gone to protest and been the subject of oomsitant complaint. Notwithstanding this, the claimants had accepted an order for more lunuber and were about to fill it, when they learned that the bankrupts were in difficulty and did not do so. They were also advised, on inquiry of a bar.k where the bankrupts were in business, that their condition had improved and it was thought that they would pull through. Ecld, tlicxt this suggested critical embarrassment was enough to put claim- ants on inquiry and that their claim for the balance due ou the notes could not be allowed without surrendering the payments received during the four months' period which constituted voidable preferences. In re Deutschle (D. C, Pa.), So Am. B. R. 348, 183 Fed. 435. Assignment of accounts by corporation to officer. — ^Assignments of accounts, made from time to time, as security for antecedent debts, by a corporation to its president who knew or should have known that the company was then insolvent, the assignee permitting the company to collect the ac- counts so assigned and use the proceeds as it saw fit, constitute voidable preferences under section 60 of the' Bankruptcy Act. ■In re Richards, Inc. (D. C, Sup. Ct.), 28 Am. B. R. 636. But see Grandison v. Robertcon (D. G, N. Y.). 34 Am. B. R. 609, 220 Fed. 985 (affd. 36 Am. B. R. 452, 231 Fed. 785), where it was held that in the absence of evidence showing that the bank receiving the benefit of the assignment had knowledge of the effect thereof upon the affairs of the corporation, the bank did not have reason- able cause to believe that the corporation was insolvent. Mortgage given as security for renewal note. — Where bankrupt borrowed a sum of money from a bank on his own note, which was renewed from time to time, and a few days after the note finally became due at v. time when he was in financial distress which was then quite generally known executed r. mortgage to the bank for the amount there- of, in the absence of satisfactory explana- tion that the note had been paid at the time, it will be presumed that the mortgage was given as security for the old loan, so as to indicate a knowledge on the part of the bank of bankrupt's financial uncertainty and an intent to secure a preference. In ra| Hirahowitz (D. C., Pa.), 28 Am. B. E, 571. 199 Fed. 202. §.60-b.J Cause to Believe; Suspicion. 907 be remembered, however, that the same circumstances which to some minds would merely give ground for suspicion may afford evidence which to other minds would carry conviction, that they not only showed reasonable cause to believe, but actually had created a belief.^''^ If a creditor accepts a transfer under circumstances which would lead a man of ordinary prudence and sagacity to believe that he was being preferred by the debtor, over other creditors of the same class, without making investigation, he will be charged with all the knowledge which he would have acquired had he performed his duty in this regard.^* A creditor is not chargeable with knowledge such as could only be disclosed by the bankrupt's books of account to which the creditor had no access.^^ (5) Meee guess oe suspicion insueficient.' — There must be something more than a mere guess or suspicion.^^® Keasonable cause to believe is not the 233. Batchelder v. Home Nat'l Bank (Sup. Jud. Ot., Mass.), 32 Am. B. R. 555, 105 N. K 1062. 234. In re McDonald (D. C, So. Car.), 24 Am. B. E. 446, 453, 178 Fed. 487, affd. 25 Am. B. R. 948; Russell's Trustee v. Mayfield Lumber Co. (Ct. of App., Ky.), 32 Am. B. K. 857, 164 S. W. 783 ; Lyttle v. Fifth National Bank (D. C, N. Y.), 39 Am. B. H. 690, quoting Collier on Bankruptcy (lOtli ed), 821; Matter of the Sutherland Co., Inc. (D. C, Mass.), 40 Am. B. B. 305, 245 Fefd. 663; Smith v. Coury (D. C, Me.), 41 Am. B. E. 219, 247 Fed. 168; Bassett v. Evans (C. C. A., 8th Clr.), 42 Am. B. B. 587, 253 Fed. 532. I^OBS of stock by fire to put creditor on in- quiry, — In the case of In re Leader (D. C, Ark.), 26 Am. B. E. 668, 674, 190 Fed. 624, the court said: '"Biit a creditor cannot entirely close his eyes and stop his ears in order to keep himself in ignorance. Payment in the ordinary course of business by a going concern is yery much different from payment by a concern that has suspended business and is in course of liquidation. This difference is emphasized when the suspension has been caused by flre. Ander- son knew facts which forced upon liim the con- viction that the partnership was insolvent, and he could not avoid the belief that the payment of the order would constitute a preference. It Is idle to declare a belief In opposition to an ob- vious fact. Dogmatic assertion cannot stand in the face of possitive demonstration. The fact that the entire stock of goods of the partner- ship had been desroyed was in Itself sufficient to put a reasonably prudent creditor on no- tice. Anderson knew there would at least be a loss amounting to the difference between the cash value of the goods destroyed which was about $13,000.00 and the amount of the insurance, wliich was $7,000.00. He knew, as a result of the fire, that there was a depreciatidn of assets in the neighborhood of $6,000.00. He also knew that the loss had not been adjusted, and must have real- ized that it was vrithin the probabilities thait the amount collected' would be less than' $7,OOe.OO, as it afterwards turned out." Notice from financial agency of debtor's financial condition. — A creditor, which, after receiving notice from a commercaal agency as to ttie finajicdal condition of a debtor, immediately sent its agent to interview the debtor who, without making inquiries except of the debtor, procured a mortgage as secu- rity for a pre-existing debt and, with knowl- edge that the debtor would soon become a bankrupt, had it recorded, will be deemed to have had " reasonable cause to believe that the enforcemient of such » * * transfer would effect a preference," within the mean- ing of section 60a of the Bankruptcy Act. Matter of Edwards (D. C, Ga.), 33 Am'. B. R. 530, 317 Fed. 103. 235. In re Wolf Co. (D. C, Pa.), 21 Am. B. R. 73, 164 Fed. 449, affd. s«6 nom. Sharpe V. Allender (0. C. A., 3d Cir.), 23 Am. B. E. 431, 170 Fed. 580. Examination of books. — ^Where at the time a bank received a chattel mortgage on hotel equipment as security from bankrupt, its cashier, after personally inspecting the hotel equipment and bankrupt's books, check- ing up the greater part of bankrupt's liabili- ties and the bills of cost for the prop- erty, was satisfied that bankrupt was solv- ent, the bank became entitled to the benefit of the rule that reasonable cause to believe that a transfer and the effect of its enforce- ment will operate as a preference does not exist where the creditor examines the debt- or's books wliich do not reveal insolvency. Dougherty v. First National Bank of Canton (C. C. A., 6th Cir.), 28 Am. B. E. 263, 197 Fed. 241. 236. Off V. Hakes (C. C A., 7th Cir.), 15 Am. B. E. 696, 142 Fed. 364; Carey v. Dono- hue (C. C. A., 6th Cir.), 31 Am. B. E. 210, 209 Fed. 238, revd. on other grounds, 240 U. S. 430, 36 Am. B. E. 704, 60 L. Ed. 726, 36 Sup. Ct 386; Heyman v. Third National Bank corporation may be imputed to it. Arthur v, 2^- ^^^"^iL''*!^!^''^^?^ ^^- ^- ^- ^''^ ^^ '^'"• Harrington (D. C, N. T.), 32 Am. B. E. 216, 211 B. E. 103, 158 Fed. 647. , , „„ . Fed 215 291. Vitzthum v. Large (D. C, la.), 20 Am. 287. Balcomb v. Old National Bank (C. C. A., B. E. 666, 162 Fed. 6S5. 7th Cif.), 29 Am. B. E. 329, 201 Fed. 679. 298. In re Salvator Brewing Co. (D. C, N. 288. Conners v. Brockport Nat'l Bank (D. C, T.), 25 Am. B. E. 536, 183 Fed. 910. See also Me.), 32 Am B. E 882, 214 Fed. 847. Johnson v. Harrison (Mich. Sup. Ct.), 40 Am. 889. Eutland County Nat. Bank v. Graves (D. B. E. 806, 165 N. W. 773. C, Vt.), 19 Am. B. E. 446, 156 Fed. 168; In re 893. Rubinstein v. Lottow (Mass. Sup. Ct.), Leach (C. C. A., 6th Cir.), 22 Am. B. E. 599, 35 Am. B. E. 243, 220 Mass. 156, 107 N. E. 718. 171 Fed. 622; In re Carlile (D C N. Car ) 29 g^^ j„ ^^ Bl^^^ (D p., N. T.), 22 Am. B. E. Am. B. E. 373, 199 Fed. 612; Putnam v. U. S. „„ :_, „ , oqs Trust Co. (Mass. Sup. Ct), 36 Am. B. E. 658, ^^'"± V a ., ■ , ,r. r, ™ -^ v «« 111 N. E. 969; Abele v. Beacon Trust Co. (Mass. «95. Jackson v. Sedgwick (D. C, N. T.), 2« Sup Jud. Ct.), 40 Am. B. E. 743, 117 N. B. 833. Am. B. E. 836, 189 Fed. 508. See also Payne t. 918 Peefeeeed Ceeditoes. [§ 60-b. allowed.^'* A trustee may recover property where the transfer amounts to a voidable preference under a State Islw.^^^^ A suit for the recovery of preferences is a controversy between the trustee and the preferred creditor, and is not a part of the " proceedings in bankruptcy." ^' (2) Recoveey by tkustee only. — Subsection b provides that a prefer- ence is voidable by the trustee, and he may recover the property or its value. There is no authority in any one else to maintain the required action. Any other rule, even were the statute not clear on this point, would lead to con- fusion. The right of a trustee to recover a preference is not assignable.^'^ All property, including that fraudulently or preferentially transferred, vests in the trustee by virtue of the adjudication and of his appointment; he repre- sents the creditors in all matters pertaining to such property and they have no remedy which will reach such property except through him.^^^ But, if the trustee refuses to sue, or if no trustee has been appointed, it has been held that a creditor may be permitted to do so for the benefit of all.^"** It is unfor- tunate that, in cases where the outlook seems hopeless, and one creditor or a combination of creditors at their own expense proceed and recover, they must share with the others the fruits of their zeal.^"^ To be sure, the amendatory act of 1903 saves to them their reasonable expenses,^"^ but in assets cases this is of little importance. Pro-rating among all may be equitable; but, where a few bear the burden and heat of the day, the hangers-back should not share in the reward. This is, however, a basic weakness of all bankruptcy systems, and a feasible lawful remedy is not yet in sight. (3) AoAiisrsT WHOM ACTION BEOUGHT.^ The words of subsection b are clear : the recovery must be had of the person " receiving it or to be benefited thereby."^**^ Where the proceeds of an execution sale have been paid to a Sehon (W. Va. Sup. Ct. of App.), 40 Am. B. E. S. 20, 25 L. Ed. 43; In re Rothschild (Eef., Ga.), 462, 94 S. E. 34. ■ 5 Am. B. E. 587. 295a. Bes Adjudlcata.— The judgment of a Bight of creditors to bring suit before or referee, disallowing, on the objections inter- after petition filed; intervention of trustee. posed by the trustee in bankruptcy, a claim —Section 64-b(2) of the bankruptcy act im- against the bankrupt estate, on the ground that pliedly recognizes the right of a creditor the creditor had received a preference, con- to institute proceedings to recover, for the stitutes res adjudicata on the question of pref- benefit of the estate of the bankrupt, property erence. Ullman, Stern v. Krausse (C. C. A., 5th fraudulently or preferentially transferred by Cir.), 40 Am. B. E. 426, 246 Fed. 124. liim either before or after the filing or the 896. Sterns Salt & Lumber Co. v. Hammond petition, wherein it provides that, ■when such (C. C. A., 6th Cir.), 33 Am. B. E. 484, 217 Fed. property shall have been recovered by the ^^^' „. , „ .,„.,.,„ „r> efforts and at the expense of one or more of M.) 39 lm!"B ]?TO2',"2l3 Fed 637 ■ ^ reditors, the reasonable expenses of such re- ksn. McCullough V. Davenport Saving's Bank covery shall be paid out of the bankrupt (D. C, Iowa), 35 Am. B. R. 765, 226 Fed. 309. estate; and where such a suit is pending at 298 Belding-Hall Mfg Co, y. Mercer, etc.. the time of the election of a trustee, he is Lumber Co. (C. C, A,. 6th Cir.), 23 Am. B. E. .... i j. i. a i • i-ia. t> x 595, 175 Fed. 335; Strong v. Durdle (Wash. Sup. entitled to become a party plaintiff. Frost Ct.), 38 Am. B. E. 635, 162 Pac. 6; Lovell v. V. Latham & Co. (C. C, Ala.), 35 Am. B. R. Latham & Co. (D. C, Ala.), 32 Am. B. E. 191, 313, 181 Fed. 866. ?^g ^d"- cS!'y.I Tkm''.TTio^:W27el , ^01 For an unsuccessful attempt to cure 683, affd. 29 Am. B. E. 228, 201 Fed. 93. tt'is defect m the bankruptcy system, see In Bight to file cross-biu.— In a suit by a trua- re McNamara, S N. B. N. Rep. 341. tee in bankruptcy to set aside alleged prefer- 302. Bankr. Act, § 64-b(2) as amended, tlal transfers of property by the bankrupt cred- 303. gee under this section, subtitle "Cred- itors of the transferee should not be allowed i+„„„ ,„ , ,, ^.„*„™„j » j. „ onr. to file a cross-bill seeking to Impress a trust 1*°/? ?V-]y ™y ^^ preferred," ante, p. 897. on the property transferred or purchased by Liabuity Of third person, pnvy to illegal the transferees with moneys of the bankrupt, preference.— It seems that a third person and to be subrogated to the right, title and cannot be hplH liahlo tn rpnmr +hp nmnimt of Interest of the trustee. Lovell v. Latham Co. <=^""°'^ °f "^'J iiaDie to repay the amount ol (D. C, Ala.), 32 Am. B. E. 191, 211 Fed. 374. ^^ illegal preference because he was a privy 899. Lovell V. Latham & Co. (D. C, Ala.), 32 to the payment, as this section provides that Am. B. E. 191, 211 Fed. 374, citing text. in such a case a recovery may be had from 300. Compare under § 11, ante; Casey v. Baker tj,. creditor who receives +hp Tinirmpnt (D. C, N. Y.), 32 Am. B. E. 311, 212 Fed. 247. i, , "'^5°'^°'^ ^no receives the payment. See also on general proposition that only a Rubenstein v. Lottow (Mass. Sup. Ct.), 35 trustee should sue, Glenny v. Langdon, 98 U. Am. B. R. 243, 220 Mass. 156 107 N. E. 718. § 60-b.J Kbcoveky of Peefeeence. 919 judgment creditor, before the filing of an involuntary petition, the remedy is by action by the trustee against the creditor for having received a prefer- ence.^"* An action may be maintained against the board of trustees of a town- ship to recover a preference.^**" (4) In what couet; the AMEiTDMEiifTS OF 1903. — The subject has been discussed in detail elsewhere.**^ The condition of things prior to the amenda- tory act was almost intolerable, the State courts being unconsciously hostile and their calendars so crowded as to preclude speedy trials. The sentence at the end of subsection b was inserted by the amendatory act of 1903. The words inserted in § 23-b by the same act clearly refer to this new sentence and remove all doubt that hereafter, as under the law of 1867, all suits to avoid preferences may be brought either in the district court or in the State court which would have had jurisdiction had not bankruptcy intervened.^"*^ If an action be pending in a State court, in which the trustee is a party, the deter- mination of which will settle the question as to the existence of a preferential transfer, the comity existing between the State court and the court of bank- ruptcy will ordinarily require the action to be continued in the State court.^"^ It is thought that where the Federal district court is convenient of access, suits of this character will hereafter be brought in that court, and their deter- mination hastened by a reference to the referee, as special master. Where adjudication was had in one district the trustee may seek to recover property preferentially transferred, by a suit in a district court in another district, where the property was found and the transferee resided.^"® Such suits are analogous to judgment creditors' suits to set aside fraudulent conveyances, and are, therefore, properly within the equity jurisdiction of the court.^"^ It has been held that an action to recover money preferentially transferred should be brought on the law side of the court.^^" But a suit by a trustee in bank- ruptcy to recover the value of certain personal property, alleged to have been fraudulently transferred by the bankrupt to enable the transferee to obtain 304. In re Bailey (D. C, Or.), 16 Am. B. E. tween the bankrupt and tlie transferee InvolT- 2P9, 144 Fed. 214. See nlso Benjamin v. Chand- ing the same property. Collett T. Adams (TT. Icr (D. C, Pa.), 15 Am. B. E. 439, 142 Fed. S. Sup. Ct), 43 Am. B. E. 496, 39 Sup. Cu 372. 217 308. Hills V. McKinniss Co. (D. C, Ohio), 26 305. Painter v. Township of Napoleon (D. C, Am. B. E. 329, 188 Fed. 1012. Ohio) 19 Am. B. E. 412, 156 Fed. 289 ; s. e., 2fl Ancillary jurisdiction. — The action may be Am. B. B. 324, 199 Fed. 637. maintained in the district where the property la 308. See discussion 'under Section Twenty- located eren though It is not the district of the three of this work. defendant's residence or the district where the S06a Since the amendment of 1910 to sections bankruptcy proceedings are pending. Collett v. 23b and 60b the United States District Court Adams (U. S. Sup. Ct), 43 Am. B. E. 496, 39 has jurisdiction of a suit by a trustee In bank- Sup. Ct. 372. ruptcy to recover a preference, although It 309. Pound v. New York Exchange Bank (D. might not have had jurisdiction of the same C, N. Y.), 10 Am. B. E. 343, 124 Fed. 992; Wall controversy before bankruptcy. Golden Hill v. Cox, 181 U. S. 244, 5 Am. B. E. 727, 45 L. Ed. Distilling Co. (C. C. A., 6th Cir.), 39 Am. B. 845, 21 Sup. Ct. 642; Parker v. Black (D. C, E. 731, 243 Fed. 342. N. Y.), 16 Am. B. E. 202, 143 Fed. 560, atfd. 18 307. Davis v. Planters' Trust Co. (D. C, Ky.), Am. B. E. 15, 151 Fed. 18; 0(E v. Hakes (C. C. 28 Am. B. E. 495, 196 Fed. 970. A., 7th Clr.), 15 Am. B. E. 696, 142 Fed. 364; Froceedlne in district conrt after interven- Houghton v. Stiner, 92 N. Y. App. Div. 171, 87 tag in state court. — Where a trustee In bank- N. Y. Supp. 10; Stern v. Mayer, 16 Am. B. E. ruptcy, after commencing a suit In the United 763, 99 N. Y. App. Div. 427, .91 N. Y. Supp. 292; States District Court to set aside a mortgage Volkommer v. Frank, 14 Am. B. E. 695, 107 N. as preferential and fraudulent, intervenes in Y. App. Div. 594, 95 N. Y. Supp. 324; Lesser v. a suit in the State court to foreclose the same Bradford Eealty Co., 17 Am. B. E. 524. 116 N. mortgage, and finds that he cannot fully pro Y. App. Div. 212, 101 N. Y. Supp. 571 ; Matter of teet the Interests of the bankrupt estate In Plant (D. C, Ga.), 17 Am. B. E. 272, 148 Fed. said court, and It appears that the jurisdiction 37; Mason v. Herkimer County Bank (D. C, of said court to grant equitable relief is doilbt- N. Y.), 21 Am. B. E. 98, 163 Fed. 9?0, atfd. suh ful, he may proceed in the District Court. nom. National Bank of Newport v. Herkimer The doctrine of election of inconsistent reme- County Bank, 225 U. S. 90, 28 Am. B. E. 218, 56 dies is not Involved. Hawkins v. Dannenberg L. Ed. 995, 32 Sup. Ct. 657. See discussion of Co. (D. C, Ga.), 37 Am. B. B. 262, 234 Fed. cases cited In Johnson v. Hanley Hoye Co. (D. 752. C, E. I.), 26 Am. B. E. 748, 188 Fed. 752; AU'n State action pending.— It la no defense to an v. Grey (N. T. Ct. of Apn.), 25 Am. B. E. 4?3, action by trustee in bankruT)tcy to set aside a 201 N. Y. 504, 94 N, E. 652; Johnson v. H'-i- conveyance of real property as a preference, son (Mich. Sup. Ct.), 40 Am. B. R. 806, 165 N. that an action is pending in a State court be- W. 773. 920 Peefeeeed Ceeditoes. [§ 60-b. an unlawful preference, ought not to be maintained in a court of equity, over the objection of the defendant, the plaintiff having an adequate remedy at law.^"^^ The bankruptcy court has jurisdiction in a suit to recover a preference although the relief sought requires the application of a State lav7.^^^ The power of the bankruptcy court in a suit by the trustee to set aside preferences is not limited to the mere avoidance of the preference and decreeing that the trustee recover the property or its value, but as a court of equity it may enforce the equitable rights of the defendant as against other creditors of the bank- rupt.^'^ The words " any court of bankruptcy," seem to imply that the district court, while so sitting, is still exercising its bankruptcy jurisdiction. The referee is not a "court of bankruptcy" within the meaning of this elause,^^* although the parties may stipulate that a suit to recover a voidable preference may be heard and determined by the referee, in which case it constitutes in effect an arbitration.^^^ And where a referee determines that certain payments 318. First State Banh of Mllliken v. Spencer (C. C. A., Sth Clr.), 33 Am. B. E. 594, 219 Fed. 503; Turner v. Schaeffer (C. C. A., 6th Cir.), 40 Am. B. B. 829, 249 Fed. 654; Irons v. Bias (W. Va. Sup. Ct. of App.), 45 Am. B. E. 41, 102 S. W. 126. 311. Warmath v. O'Daniel (C. C. A., 6th Clr.), 20 Am. B. E. 101, 159 Fed. 87; Turner v. Schaeffer (C. C. A., 6th Cir.), 40 Am. B. B. 829, 249 Fed. 654. By defendant's consent, a bill in equity by a trustee In bankruptcy to recover property In fraud of the Bankruptcy Act may be entertained by the District Court. Gooch v. Stone (C. C. A., 6th Cir.), 44 Am. B. E. 86, 257 Fed. 631. Adequate remedy at law. — Although equity has cognizance of constructive fraud as well as actual fraud, the question whether a bill In equity lies to set aside a preferential payment of money to the creditor of a bankrupt being doubtful, a demurrer to the bill will be over- ruled, reserving to defendant the right to raise the question of .iurisdiction at the final hearing. Johnson v. Hanley Hoye Co. (D. C, E. I.), 26 Am. B. E. 748, 188 Fed. 752. To establish a liability under section 60-b ol the Bankruptcy Act no actual fraud need be shown. That section merely condemns a trans- fer by a bankrupt within four months for the purpose of creating a preference, and hence the legal remedy is entirely adequate and no relief Is offered in equity that the law does not afford. Simpson v. Western Hardware & Metal Co. (D. C, Wash.), 35 Am. B. E. 851, 227 Fed. 304. 3ia. Miller v. New Orleans Acid & Fertilizer Co., 211 U. S. 496, 21 Am. B. E. 416, 53 L. ed. 300, 29 Sup. Ct. 173, affg. 117 La. 821, 42 S. E. 329. Recovery of preference in violation of state law.^The bankruptcy court has jurisdiction of an action by a trustee in bankruptcy, without the consent of the defendants, to recover preferential payments alleged to have been made in violation of section 66 of the New York Stock Corporation Law, which in- cludes a provision giving the right to proceed against creditors who have received transfers of property or preferential payments when the corporation was insolvent, to recover the payments made to the defendants herein. Under such statute such transfers are void- able only when they are made with the In- tent to give a preference. When it is shown that they were so made, the person receiving the same by means of any prohibited act or deed " shall be bound to account therefor to its creditors or stockholders or their trus- tees." Grandison v. Robertson (D. C., N. Y.), 34 Am. B. R. 609, 220 Fed. 985, mod. 36 Am. B. E. 452, 231 Fed. 785. 313. Allen v. MeMannes (D. C, Wis.), 19 Am. B. R. 276, 156 Fed. 615. . 314. In re Overholzer (Ref., N. Dak.), 23 Am. B. R. 10, holding that where upon the petition of a trustee, the referee in charge issued an order directed to the grantee of real estate to show cause why the conveyance should not be set aside as preferential, the proceeding must be dismissed where, upon the return day, the grantee appears specially by attorney and objects to the jurisdiction of the court; In re Keystone Press, Inc. (D. C, Minn.), 29 Am. B. R. 715, 203 Fed. 710, holding that the referee, in a proceeding by a secured creditor who seeks to have turned over to it the proceeds of a sale of the bank- rupt's property free from liens, has juris- diction to determine whether or not such creditor has received a preference, where such creditor claims the right to prove any part of his debt as an unsecured claim, but that the referee cannot determine the existence of the preference for the purpose of recover- ing the property transferred. 315. Stipulation to refer to referee to hear and determine; review. — ^Where in an action by a trustee in bankruptcy to recover an alleged preference, the parties stipulate and agree that the case shall be heard, tried and etermined before a referee, naming him ; that upon filing the report of the referee judgment may be entered by the clerk in conformity therewith without further notice; that either party may enter an order to the foregoing effect without further notice, and the court in approving the stipulation added thereto the following "judgment shall not be entered until after ten days' notice of the filing of the report of the referee, and of the judgment proposed to he entered," the court has no power to examiine the evidence, rulings of tihe referee or the findings of fact, and if con- clusdons of law sufficient to support the judg- ment directed are supported and justified by the findings of fact, then the judgment must be entered. Such a trial before a referee is little more than an arbitration. Grant v. National Bank of Auburn (D. C NY) 37 Am. B. R. 329, 232 Fed. 201. ' § 60-b.J Recoveey of Peefeeekce. 921 by a bankrupt were preferential, in proceedings properly before him, and the person to whom such payments were made acquiesces in such determination, he is concluded thereby, and may not resist the subsequent recovery of such payments in a suit in the bankruptcy court.^^^ (5) Peemission to sue. — While not strictly necessary, good practice seems to require the trustee to ask permission to bring a suit to avoid a preference.^^''^ (6) Practice. — The practice in such suits is regulated by the rules appli- cable to the court in which they are brought. The right to a jury trial is considered elsewhere.'^^ Careful pleading is essential. The trustee cannot maintain an action unless it is alleged and sustained by proof that he has not iufficient assets in his hands to satisfy the claims of the creditors of the debtor.^^^"" In order to> recover the bill must allege and the proof must sustain the 3ie. Brelt v. Moore (C. C. A., 9tb CIr.), 34 Am. B. B. 295, 220 Fed. 97: Lincoln v. Peojnes' Nat. Bank (U. C, Jiicu.), 44 Am. H. K. 381, ^CO Fed. 422. 311. In re Mersman (Eef., N. X.), 7 Am. B. E. 46. But see Chism v. Bank (Sup. Ct, Miss.), 5 Am. B. R. 56, 27 So. 610. See also under Sec- tion iorty-seven, ante. 318. See Section Nineteen of this work, ante. Watson V. Adams (C. C. A., 6tli Cir.), 39 Am. B. E. 473, 242 Fed. 441. - Questions for jury. — In an action by tbe trustee of a bankrupt to recover an alleged pref- erential payment, it was not error for tbe court to submit to tbe Jury tbe question of bank- rupt's insolvency at tbe time of such payment and of defendant's knowledge tbat a preference was thereby Intended. Bergdoll v. Harrigan (C. C. A., 3d Clr.), 33 Am. B. E. 304, 217 Fed. 943. 318a. Hibschmann v. Bevis (Wash. Sup. Ct), 42 Am. B. E. 154, 174 Pac. 5. 319. Painter v. Napoleon Township (D. C, Ohio), 19 Am. B. R. 412, 156 Fed. 289, holding that a bill, in an action to recover the pay- ment of a township, which fails to allege that the enforcement of the transfer constituting the alleged preference will be to enable the said board of trustees to obtain a larger percentage of its debts than any other creditor of the same class is demurrable; Mayes v. Palmer (C. C. A., 5tb Cir,), 31 Am. B. E. 225, 208 Fed. 97; Utah Association of Creditmen v. Boyle Furni- ture Co. (Utah Sup. Ct.), 31 Am. B. R. 4£8, 136 Pac. 572, holding that an allegation sub- stantially In the language of the statute is suf- ficient. See Am. B. E. Dig. § 672. Sufaciency of complaint in an action by a trustee to set aside a preference, see Lesser v. Bradford Realty Co., 17 Am. B. E. 524, 116 N. y. App. Div. 212, 101 N. Y. Supp. 571, atCg. 15 Am. B. R. 123 ; Wilson v. Citizens' Trust Co. (D. C, Ga.), 37 Am. B. R. 86, 233 Fed. 697; Minnesota, etc. Power Co. v. Losey (C. C. A., 8th Cir.), 44 Am. B. R. 395, 260 Fed. 689. A petition by a trustee is insufficient which fails to allege and prove Insolvency and reason- able cause to believe that a preference was in- tended. In re Leach (C. C. A,, 6th Cir,), 22 Am. B. R. 599, 171 Fed. 622 ; Taylor v. Nichols, 23 Am. B. E. 310, 134 N. Y. App. Div. 787, 119 N. Y. Supp. 1012; Eodolph v. First Nat. Bank of Tulsa (Sup. Ct„ Okla),. 28 Am. B, R. 897, 121 Pac. 629; Carey v. Donohue (C. C. A., 6th Cir.), 31 Am. B. R. 210, 209 Fed. 328 ; revd. on other grounds, 240 U. S. 430, 36 Am. B. R. 704, 60 L. Ed. 726, 36 Sup. Ct. 386; Crim v. Rice (C. C. A., 2d Cir.), 37 Am. B. R. 329, 232 Fed. 570; Hoshaw v. Cosgriff (C. C. A., 8th Clr.), 40 Am. B. B. 694, 247 Fed. 22. A trustee may sue to recover property re- ceived as a voidable preference without allega- tion or proof of a demand and refusal. Mc- CuUoch V. Davenport Savings Bank (D. C., la.), 35 Am. B. B. 765, 226 Fed. 309. Suit by trustee to recover deposits ; petition. — A petition In a suit by a trustee in bank- ruptcy under section 60-b of the Bankruptcy Act to recover deposits made by the bankrupts with tbe defendants, which alleges that the de- posits were not general, that the bankrupt bad no right to check against the same, and that the defendant had the deposits made upon special account "for the purpose of transferring and appropriating the same to its alleged in- debtedness," is sufficient upon general demurrei'. Wilson V. Citizeus' Trust Co. (D. C, Ga.), 37 Am. B. E. 86, 233 Fed. 697. Action to compel surrender of property; waiver. — Where in an action to compel the de- fendants to surrender property they appear specially, but not to raise the question of Juris- dicton of their persons, and claim that because they are adverse claimants and reside in other States where the property is located, the court . has no jurisdiction to make any summary order, and no motion has been made to quash the ser- vice of process nor any exception taken to it, the objection will be deemed to have been waived, although the service was invalid. Alco Film Corporation v. Alco Film Service (C. C. A., 2d Cir.), 37 Am. B. E. 307, 234 Fed. 55. 320. Crooks v. People's Bank, 3 Am. B. R. 238, 46 N. Y. App. Div. 335, 61 N. Y. Supp. 604; In re Nelson (D. C, Wis.), 1 Am. B. R. 63, 98 Fed. 76; Chism v. Bank (Sup. Ct., Miss.), 5 Am. B. R. 56, 27 So. 610; Hicks v. Langliorst (C. C. P., Ohio), 6. Am. B. R. 178; Richter v. Nimmo, 6 Am. B. R. 680, 64 N. Y. App. Div. 619, 7Z N. Y. Supp. 1125; Martin v. Bigelow, 7 Am. B. R. 218, 36 N". Y. Misc. 398, 73 N. Y. Supp. 443; Brown v. Guichard, 7 Am. B. R. 515, 77 N. Y. App. Div. 643, 79 N. Y. Supp. 1127; Murphy V. Ford Motor Co. (D. C, Ohio), 39 Am. B. R. 665, 341 Fed. 134; Taylor v. Fram (D. C, N. Y.), 40! Am. B. R. 377, 243 Fed. 733; Johnson v. Harrison (Mich. Sup. Ct.) 40 Am. B. R. 800, 165 N. W. 773; Cohen V. Gold- man (C. C. A., 1st Cir.), 42 Am. B. R. 85, 350 Fed. 599; Van Slyke v. Huntington (C. C. A. 8th Cir.), 45 Am. B. R. 173, 265 Fed. 86. Further hearing.— Where in a suit by a trustee in bankruptcy to recover alleged preferences, it appears that the question, whether the effect of an assignment of ac- counts receivable by the bankrupt would be to enable any one of the bankrupt's creditors to obtain a greater percentage of his debt than any other creditors of the same class, was not tried out at the hearing, and that no finding on the issue was made by the judge, the issue may be decisive of the validity of the assign- 922 Prefeeeed Ceeditoes. [§ 60-b. four statutory elements constituting a preference. ^^' Some of the more valu- able discussions on practice under the present law will be found in the foot- note.*^ In a suit by a trustee to recover land mortgaged by the bankrupt within the four months' period without consideration, a plea of title, derived from one in whose favor the land court of Massachusetts had decreed the registration of title to tihe land, will be overruled.*^^ A proceeding to set aside an illegal prefer- ence must be governed, as to pleading and practice, by the laws and rules of the court wherein it is instituted; if instituted in a Federal court it is governed by the Federal equity practice.*^^ The trustee may settle or compromise a suit to recover an alleged voidable preference, when deemed advisable for the interests of the creditors, and the court may, in its discretion, refuse to set aside or vacate the agreement.*^* (7) Do WEE IN PEOPEETY COVEBED BY PEEFEEENTIAL TEANSFEE. A wife's release of dower can survive only so long as it attends the conveyance of her husband, and when the conveyance of the husband in which the wife joins is set aside as constituting a preference, the effect is to revive the wife's right of dower. ^'^ f. Property or its value. — (1) In genbeal. — Similar words were used in the law of 1867. The option of suing for the property or for its value rests with the trustee. These words are doubtless merely expressive of the rule of law. It has been held that interest should be allowed either from the time a demand was made upon the transferee for the return of the property trans- ferred, or, in case no demand was made, from the date of the commencement of a suit to recover such property.*^^ Where property is transferred by a bank- rupt to a third person at the instance of a creditor and the money received by the bankrupt is paid to the creditor the trustee cannot recover both the property and the money .*^® In most cases, the value, i. e., damages, is demanded. This in effect ratifies the title which passed through the prefer- ence.^^^ The liability to restore or repay is a quasi contractual obligation imposed by the act upon the preferred creditor, and a suit in assumpsit rather than trespass is the proper form, in those jurisdictions where the distinction between these classes of suits is still retained.*^^ Suits to recover the property in specie should only be brought where it can be identified and is found in ment, and the case should stand for a further District Court may, In its discretion, deny the hearing and trial. Eubenstein v. Lottow (Mass. petition of holders of liens on the bankrupt's Sup. Ct.), 35 Am. B. E. 243, 220 Mass. 156, 107 property, who had not presented their claims N. B. 718. against the estate, to set aside and vacate an Burden of proof. — In an action by a trustee agreement by • the trustee in bankruptcy to in bankruptcy to set aside a deed given by a settle a suit to have a mortgage on the same bankrupt to secure the repayment to the property declared Invalid as a preference, and grantor of money advanced by him to a third to compel the trustee to prosecute said suit to person, the burden of est.iblishing that such final .ludgment. Stanrod & Co. v. Utah Imple- third person had repaid the advance Is on the ment- Vehicle Co. (C. C. A., 9th Clr.), 35 Am B. trustee. Angle v. Bankers Surety Co. (C. C. B. 280, 223 Fed. 517. A., 2d Clr.), 41 Am. B. E. 90, 244 Fed. 401, 324. Matter of Lingafelter (C. C. A., 6th Cir.), affg. 32 Am. B. E, 71, 210 Fed. 289. 24 Am. B. R. 656; Marsh v. Walters (C. C. A., Garnishment. — Where, in an action by a trus- 6th Cir.), 34 Am. B, R. 85. 220 Fed. 805. tee in bankruptcy to recover the value of cer- 335. Utah Association of Creditmen v. Boyle tain personal property alleged to have been Furniture Co. (Utah Sup. Ct.), 31 Am. B. E. transferred by the bankrupt while insolvent 488, 136 Pac. 572; Kaufman v. Tredway, 105 U. and within four months of adjudication, it ap- S. 271, 12 Am. B. E. 682, 49 L. Ed. 190, 25 Sup. pears that the value of the property is cer- Ct. 33; Ourmen v. Talcott (D. C, N. Y.) 23 Am. tain, known and properly alleged, a writ of B. R. 572, 175 Fed. 261, holding that interest Is garnishment may be Issued under the State recoverable from the date on which the goods statute. State ex rel. American Piano Co. v. that were transferred as a preference were sold Superior Court (Wash. Sup. Ct.), 43 Am. B. R. by the transferee. 139, 178 Pac. 827. 326. Golden & Co. v. Loving (Ct of Add D 321. Morris v. Small (Cir. Ct., Mass.), 20 Am. C, 33 Am. B. R. 469, 42 Wash. L Ren 818 * B. E. 138, 160 Fed. 142. 327. Compare Winslow v. Clark 47 N Y 322. Westall v. Avery (C. C. A., 4th Clr.), 22 261. Am. B. R. 673, 171 Fed. 626. 328. Eeber v. Ellis Bros. (DC Pa ) 25 Am S2S. Application to set aside settlement.— The B. E. 567, 185 Fed. 313. § 60-b.J Kecoveky of Peopeety oe Value. 923 the hands of the person preferred. If the property transferred cannot be restored in kind, its value may be recovered. ^^ If the trustee proceeds in equity to recover the actual property transferred, he is only entitled to a delivery of the property and may not have judgment for depreciation or other consequential damages. ^^"^ If a transfer be made within the four months' period in part for a present consideration and in part payment of an antece- dent indebtedness, a recovery may be had for the balance of the value of the property transferred after deducting the value of the present consideration. ^^^ Where the preference consists of suffering or permitting a judgment which has become a lien, the trustee has, -it is thought, the option of suing under § 60-b or under § 67-e.^*^ Though the words "recover the property or its value"*"* do not exactly describe the purpose of such a suit where the transaction amounts to a preference, nor do the words " recover and reclaim the same by legal pro- ceedings," *** describe the purpose where the transaction is a fraudulent trans- fer, the prayer of the bill or complaint may be easily adapted to the circum- stances and may be to annul the lien or to recover possession of the property if seized on execution, or otherwise as the facts require. In any event, the plead- ing should show a demand and refusal to restore.**^ Where the purchaser has sold the property and the evidence shows that he received as much or more than the trustee could have realized from the same property, he will not, in a suit by the trustee to set aside the preferential transfer, be held in an amount in excess of the proceeds of the sale by him.**® (2) Damages. — If the suit is for value, the judgment, if granted, should be for the worth of the property, not the amount realized imder the execution sale by the preferential transferee.**'' He is also entitled to the gross pro- ceeds.**^ IvTor can the court allow by way of reduction of damages such amounts as the preferred creditor has paid to other creditors out of the avails 329. McElvaln v. Hardesty (C. C. A., Sth 333. Bankr. Act, § 60-b. •Cir.), 22 Am. B. R. 320, 1«9 Fed. 32. 334. Bankr. Act, § 67-a. 330. Ernst v. Mechanics and Metals' Nat. 335. in re Phelps (Eef., N. Y.), 3 Am. B. Bank (C. C. A., 2d dr.), 29 Am. B. E. 289, 5. 396; Schuman v. Flickenatein, Fed. Cas. 201 Fed. 664, aflfg. 31 Am. B. R. 291, 200 12,826. Fed. 287. See same caae on Appeal to TI S. 336. Allen v. McMannes (D. C, Wis.), 19 Supreme Court, Hotchkiss v. National City ^m' B R 276 156 Fed 615 ^^f'^!\Yi f k f' ^ Pf"^ 9n ^- ^- ^^^' ^"^' a'« t° ^'<"'°^«'^y °f P^o-^eeds of sale of goods 58 L. Ed. 115, 34 bup. l^t. ZO. preferentially transferred, where such goods Depreciation^— In a suit in equity by a ^e^e retained under agreement with I re- trustee m bankruptcy to recover specific se- ^^^^^j. ^ bankruptcy, sle Ommen v. Talcott curities deposited with a bank, wittin four (j, c., N. Y.), 2a Am. B. E. 572, 175 Fed. months of bankruptcy, the plaintiff cannot ggg ^^^j j^ j. ^e Am. B. R. 689, 188 recover for depreciation of the securities m- -pg^j ^qj especi^ly where the parties^ had stipu^^^^^^^ « wS!?h '^cr'e°ditTr4 ^e'd'anT ar^^^^^^ fani '^%h:Terpri':e^'L^LMlf a't^^^h^ ^^^^ ^Z X'eT^^' '^t%% ^^^^f times as might seem best to its officers. pPTp ;« ^n?'n^- ?• *° <=°^«titute a pref- Hotchkiss V. National City Bank (C. C. A., Tt'^lirar th^tKn^n^ r» """'^ "^°'' 2d Cir.), 34 Am. B. R. 544, 223 Fed. 533. ^°*JS! l^iw Ti, re«fved money 331. In re Manning (D. C., S. Car.), 10 Zi?Tl^JZr^°V^^^°^^''A^)n^^''T A^ Tj Tj <^ii 19^ #011 1S1 °*" * Lumber Co. v. Hammond (C. C. A., ^io o T ' ?Llr/PoV V V ^ 1 a™ 6th Cir.), 33 Am. B. R. 484, 217 F«d. 559 T, ^l- of ?n'r» rZv 'f L B "'r f^' Clarion Bank v. Jones, 21 Wall. 325. 47 N.-Y%?DTv.t54!'anVpXs § 7'o-l: «'«• '^-^-' ^^^ - Campbell, 14 Wall. See also In re Mersman (E«f., N. Y.), 7 Am. B. R. 46. 924: Peefeeeed Ceeditoes. [§ 60-c. of the property transferred.^^* If the latter includes exempt articles, their value cannot be included in the judgment.^** (3) Costs. — This is regulated by the law and rules of practice applicable to the court where the suit is brought. ^*^ IV. SET-OFF OF A SUBSEQUENT CREDIT. a. Prior to amendments of 1903. — Subsection c which, standing by itself, seems clear enough, was wrenched and twisted and fought over by the bar and the courts in an effort to escape the innocent preference doctrine of Carson v. Chicago Title & Trust Co. The controversy raged about the word "recoverable." The question was whether this had reference to a voidable preference only or also to a mere preference in fact. If the former, then subsequent credits after a payment in due course of trade could not be set off, and the creditor not only found the door of the court shut to him if he refused to surrender, but the estate to be distributed increased by his goods sold, perhaps, on the strength of the confidence inspired by such payment. Nothing could be more inequitable. On the other hand, some courts gave a wide meaning to the subsection and declared it applicable even to the technical preference defined in subsection a. The question did not reach the Supreme Court before the amendatory act. But it was held in very exhaustive opinions both by Eeferee James and by Judge Shiras of the Northern District of Iowa that this subdivision of the section applies only to cases where the preferred creditor is compelled against his will to return what he has received and is therefore limited to proceedings taken under subsection h and does not apply to a case where he seeks to enforce a claim which the trustee recites under section 57-g on the ground of preference. ^*^ The authorities each way are indicated in the foot-note. ^*^ b. Meaning of subsection c. — Nor is it likely now that it will be necessary to determine the question. The cases which attempt to enlarge its meaning all turn on the manifest inequity of doing otherwise. Such inequity no longer exists. Only voidable preferences need now be surrendered. Com- mon sense and syntax connect the word "recoverable" in subsection c with 229. North v. House, Fed. Cas. 10,310. C. A., Ttli Cir.), 5 Am. B. E. 267, 105 Fed. 923; 340. Grow v. Ballard, Fed. Cas. 5,848; i° ''S'^y^'" <°^^-' "^>■ S„^"^,B- ,^- =*''?■ l°S„^e|- -n , oi -11 -c J /-. ■. ni J T60; In re Sechler (D. C, Kan.), 5 Am. B. E. Brock V. Terrill, Fed. Cas. 1,914. 579^ io6 Fed. 484; In re Southern, etc., Co. (D. 341. Compare Collins v. Gray, Fed. Caa. C, Ga.), 6 Am. B. E. 633, 111 Fed. 518; In re 3 013 Thompson's Sons (Ref., Pa.), 6 Am. B. E. Contribution by one compelled to surren- ?63, affd s. c., 7 Am. B E. 214, 112 Fed. 651; J , A c J jj. i In re Saldosky (D. C, Mmn.), 7 Am. B. E. 123, der preference.— A preferred creditor of a m j-ed. 511; with contra. In re Arndt (D. C. bankrupt, who has been compelled to sur- Wis.), 4 Am. B. E. 773, 104 Fed. 234; In re render his preference in a suit by the trustee Keller (D. C, Iowa), 6 Am. B. R. 334, 109 Fed. in bankruptcy, is benefited thereby as an un- H^'i°,''to9"T'' <°-o,?- ^°t'' K^'^n^' S; *??' J '^-.•i J ■ u ji i-ui 109 Fed. 784; In re Steers Lumber Co. (D. C, secured creditor, and is bound to contribute n. Y.), 6 Am. B. E. 315,. 110 Fed. 738; alCd. a. c, ratably as a general creditor toward payment 7 Am. B. E. 332, 112 Fed. 406 ; In re Bailey (D. of counsel fees rendered in the commencement C.. Vt.), 7 Am. B. E. 26, 112 Fed. 406; In re and prosecution of the preference suit in the i°^^%'^P-rFl S. Car.), 10 Am. B. R- 513, 123 *^ ■ ,, , , J -i-u 1,- i Fed. 128; Rotan Grocery Co. v. West (C. C. A., name of the trustee and with hia consent. Bt^ cir.), 41 Am. B. E. 153, 246 Fed. 685. A Matter of Stearns Salt & Lumber Co. (C. C. summary of cases pro and con will be found in A., 6th Cir.), 35 Am. B. R. 264, 225 Fed. 1. In re Toplift (D. C, Mass.), 8 Am. B. E. 141. S42. In re Christenseu (D. C, la.), 4 Am. B. E. 114 Fed. 323. 202, 101 Fed. 802. Stay of action. — Where a judgment Is re- 343. Compare Kimball \. Eosenham Co. (C. covered in an action to set aside a preferential C. A., 8th dr.), 7 Am. B. R. 718, 114 Fed. 85; transfer, execution will not be stayed till the Morey Mfg. Co. v. Schiffer (C. C. A., 8th Cir.), defendant has opportunity to prove Its claim in 7 Am. B. E. 670, 114 Fed. 447; Gans v. Ellison bankruptcy, and to have the amount thereof set (C. C. A., 3d Cir.), 8 Am. B. R. 153, 114 Fed. 734; off against the Judgment. Minnesota, etc., Kahn v. Export, etc., Co. (C. C. A., 5th Cir.), 8 Power Co. v. Losey (C. C. A., 8th Cir.), 44 Am. Am. B. B. 157, 115 Fed. 290; McKey v. Lee (C. B. E. 395, 260 Fed. 689. § 60-(i.] Pbefeeences to Bankrupt's Attoeney. 925 "recover'' in subsection b. Standing alone, subsection a. is nothing but an explanation or definition of a preference. The latter is not recoverable, unless the element of reasonable cause to believe appears. Only against a prefer- ence so recoverable then may subsequent credits granted the debtor be set off. The cases holding this doctrine are thought still in point. The practitioner should, hovsrever, note that to entitle to the set-off, the credit must be " in good faith," "without security,"^** and result in "property v?hich becomes a part of the debtor's estate;" also, that any payments on the new credit must be deducted before the set-off is allowed. If the creditor acted in good faith, extended credit without security, and the money or property actually passed into the debtor's possession, he is entitled to the set-off, and he need not show that the money or property remained in the debtor's possession until his bankruptcy.**^ The right of the creditor to set off a new credit given in good faith is restricted to the amount of the new credit remaining unpaid at the ■ time of the adjudication.**® The rule stated in this subsection is an extension of that phrased in § 68-a.**'' Here there is not that mutuality of debt required there. Were there, subsection c would be unnecessary. V. PREFERENCES TO BANKRUPT'S ATTORNEY, a. In general. — In connection with subsection d relative to preferences to bankrupt's attorney, § 64-b (3), on attorney's priorities, should also be read. The services referred to in section 64-b (3) are those already rendered, while the services referred to in this subsection are those "to be rendered," which are paid for in advance " in contemplation of the filing of a petition by or against " the bankrupt. The compensation for the latter services depends both as to payment and amount on the acts of the parties, and what the statute does is to recognize the validity of the payment, but subjects the rea- ■ sonableness of the amount to the supervision of the court.**® Section 60-d 344. Compare In re Tanner (Eef., N. Y.), Bankruptcy (8th ed.), p. 677. Whether any 6 Am. B. R. 196. recovery for such alleged expenditure could 345. Kaufman v. Tredway, 195 U. S. 271, in any event be had in the present action it 12 Am. B. iR. 682/49 L. Ed. 190, 25 Sup. Ct. is unnecessary now to determine; for the 33; In re Morrow & Co. (D. C., Ohio), 13 proof does not disclose that any part thereof Am. B. R. 392, 134, Fed. 686; Price v. Derby- resulted in any advantage to, or increase of, shire Coffee Co., 21 Am. B. R. 280, 128 N. Y. the mortgaged property. Having apparently App. Div. 472, 112 N. Y. Supp. 830; Grandi- voluntarily relinquished possession of the son V. Nat. Bank of Commerce of Rochester mortgaged property without then making any ( C. C. A., 2d Cir. ) , 36 Am. B. R. 438, 231 claim on account of such expenditure and the Fed. 800. proceeds of the sale being now in the pos- Pioperty must become part of estate. — session of the trustee, it would seem that the In the case of Bank of Wayne v. Gold. (N". proper method to collect such amount, if Y. App. Div.), 26 Am. B. R. 722, 146 N. Y. any, as it may be entitled to receive because App. Div. 296, 130 N". Y. Snpp. 942, the of this claim would be by presentation thereof court says: "Counsel for appellant further in the orderly course of the administration urges that in any event it was entitled to of the bankrupt's estate in the bankruptcy recover certain advances made by it in connec- court." tion with the mortgaged property after it 34G. Grandison v. Nat. Bank of Commerce had taken possession thereof under the mort- of Rochester ( C. C. A., 2d Cir. ) , 36 Am. gage, and before the bankruptcy proceedings B. R. 438, 231 Fed. 800. were begun. This claim is made under sub- 347. See an effort to connect the two in division 'c' of section 60 of the Bankruptcy In re Ryan (D. C., 111.), 5 Am. B. R. 396, Act. Reference to this provision of the act 105 Fed. 760. discloses that the further credit given the 348. Furth v. Stahl, 10 Am. B. R. 442, debtor by the creditor, which may be set off 205 Pa. St. 439; Pratt v. Bothe (C. C. A.] as therein provided, must not only be given 6th Cir.), 12 Am. B. E. 529, 130 Fed. 670. in good faith and without security, but Exception in favor of attorneys. In the toast also result in property which becomes case of In re Krbss (D. C, N. Y.), 3 Am. a part of the debtor's estate. Collier on B. E. 187, 190, 96 Fed. 816, Brown, J. used 926 Peefeeeed Ckeditoes. [§ 60-d. is a part of the original bankruptcy act of 1898 and intended by Congress to be a part of the uniform system of bankruptcy to be consistently adminis- tered by the courts given jurisdiction.^*^ A payment of money or a transfer of property by a bankrupt made in contemplation of bankruptcy to an attor- ney or counselor in consideration of future professional services, does not constitute a preference under § GO-b.^^" The transfer to the attorney for his services must relate solely to contemplated bankruptcy and may not cover compensation for other services.^^^ The only legal services which may be paid or secured under this provision are those directly connected with the bank- ruptcy proceeding; it was not the intent that an honest insolvent should lose the benefit of the act because he had no cash in hand with which to pay a lawyer to prepare the petition and schedules ; but as to past services the claim the following language: " While by the gen- eral terms of the act, the debtor is required to turn over all bis unexempt property to the trustee, an exception is here created in favor of an attorney, to a reasonable amount, for services to be rendered to the debtor in bankruptcy; although this is valid so far only as subsequently approved by the court. The charges to be ' approved ' are, I cannot doubt, for the same services which the ' fee ' is designed to be allowed for under section 64, subd. b, par. 3. Both paragraphs are to be construed together, so that it becomes immaterial in the result whether the attor- ney obtains his compensation in the first inst?,nce from the bankrupt under section 60 refunding what, if anything, is disallowed by the court, or whether he waits for an al- lowance by the court under section 64. The latter is evidently the more convenient and desirable practice, and considering that prior payment for an attorney's services to the bankrupt is expressly allowed by section 60, I cannot agree to any such construction of the act as would deprive the attorney of a proper compensation for a necessary service, merely because he did not take it out of the estate at his own estimate in advance." The transfer of an automobile to an attor- ney by a bankrupt prior to bankruptcy, the proceeds of a sale thereof to be applied on ac- count of disbursements and fees for services rendered and to be rendered; is not invalid, where it appears that a reasonable fee for services rendered to the date of the transfer was equal to the value of the property trans- ferred, since by section 60-b, a debtor, in con- templation of bankruptcy, may fully pay an attorney reasonable compensation for services to be rendered, and it is immaterial whether the payment is made at or after the pro- fessional engagement is entered into. In re Cummins (D. C, N. Y.), 2S Am. B. E. 385, 196 Fed. 224. 349. In re Wood & Henderson, 210 U. 8. 246, 20 Am. B. E. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621. 350. In re Wood & Henderson, 210 U. S. 246, 20 Am. B. E. 1, 5, 52 L. Ed. 1046, 28 Sup. Ct. 621 ; Haffenberg v. caiicago Title & Trust Co. (C. C. A., 7th Oir.), 27 Am. B. E. 708, 102 Fed. 874. Future services. — In re Furth v. Stahl, 205 Pa. St. 438, 10 Am. B. E. 442, Mr. Justice Mitchell, after quoting section 60-d, says: "A pledge or payment for a consideration given in the present or to be given in the future, whether in money or goods or services, is not a preference. The object of prohibiting preferences is to ■prevent favoritism, whether for secret benefit to himself or other reason among a debtor's creditors who ought in fair- ness to stand on the same footing. A trans- action by which the debtor parts with some- thing now, in return for someththg he ac- quires or is to acquire in the future, is not within the mischief the act was aimed against. Section 60, therefore, expressly recognizes this class of transactionfl, but as it is capable of abuse, provides for a re- examination and reduction if necessary to a reasonable amount, by the court on petition of the trustee or a creditor." This same section was before the court of appeals for the sixth circuit in the case of Pratt V. Bothe (C. C. A., 6th Cir.), 12 Am. B. E. 529, 130 Fed. 670. In that case Judge Severans, speaking for the court, said: "It would rather seem that Congress, engaged, as many signs indicate, in guarding the as- sets of those in contemplation of baSsruptcy, to the end that they might be brought with- out unnecessary expenditure to the hands of the trustee for distribution to creditors, while it would not deny to the debtor the right to employ and pay for legal assistance in his affairs during that critical period, yet pro- posed a restraint upon that privilege by re- quiring that such payment should be reason- able in amount — in short, proposed to apply to the incipient stage of bankruptcy the provident economy which it sought to apply to the administration of the bankrupt estate. It may have been thought that there was the same reason for such restraint at that stage of affairs as subsequently. And it is to be observed that the transaction would not become the subject of revision unless bank- ruptcy ensued. It put attorneys, solicitors and proctors in no worse position than it did some clas&es of those having business with the debtor." 351. Tripp v. Mitschrich (C. 0. A., 8th Cir.), 31 Am. B. E. 662, 211 Fed 424 § 60-d.j Peesesences to Bankrupt's Attoeney. 927 of the lawyer is no better than that of any other creditor.*^^ If the services performed were reasonably necessary for the protection of the interests of the bankrupt, in contemplation of bankruptcy, compensation may be made therefor out of the bankrupt estate ; the only question open in such a case being the reasonableness of the charge.*^* The law gives him the option, either of collecting his compensation in advance or of asking its allowance, as entitled to priority, under § 64-b (3) ; with, however, this exception, that, if he elects to pursue the former and presumably more tempting method, the court has the power to inquire into the payment and the trustee to recover any excess for the benefit of the estate.^^* This re-examination has been held merely a part of the proceeding and therefore not affected by the now abrogated doctrine that suits to recover preferences must be brought in the State courts ;^^^ and where this method is pursued the amount thus attempted to be used is subject to revision in the court of original jurisdiction, and not elsewhere.*^* "Where payments are made to an attorney in the settlement of a running account, he is in the same position as any other creditor whose claim has been paid within the four months' period.^®'^ The general subject of the employ- ment and compensation of attorneys is considered elsewhere.^^^ b. Practice. — Section GO-d is sui generis and does not contemplate the bring- ing of plenary suits for the recovery of preferential transfers in any juris- diction. It recognizes the temptation of a failing debtor to deal too liberally with his property in employing counsel to protect him in view of financial reverses and probable failure. It recognizes the right of such debtor to have the aid and advice of counsel and in contemplation of bankruptcy proceedings which shall strip him of his property to make provisions for a reasonable compensation to his counsel, and in view of the circumstances the act makes provision that the bankruptcy court administering the estate may if the trus- tee or any creditor questions the transaction, re-examine it with a view to a 35S. Magee v. Fox (C. C. A., 2d Cir.), the meaning of subdivision d. Matter of 36 Am. B. R. 161, 229 Fed. 395. Galler (D. C, N". J.), 32 Am. B. E. 629, 353. Matter of Humphreys (D.-C.,N. Car.), 216 Fed. 558. 34 Am. B. R. 655, 221 Fed. 997. In the case 354. But compare In re Stolp (D. C, of In re Wood & Henderson, 210 U. S. 246, 20 Wis.), 29 Am. B. R. 32, 199 Fed. 488, hold- Am. B. E. 1, 52 L. Ed. 1046, 28 Sup. Ct. 621, ing that the services must he actually ren- the court said: "The act recognizes the dered, if at all, before the institution of right of * * * a debtor to have the aid bankruptcy proceedings, and the payment or and advice of counsel, and, in contemplation transfer ispeeified in subsection d cannot ap- of bankruptcy proceedings which shall strip ply to services rendered as specified in section him of his property, to make provisions for 64-b, providing for an allowance to the bank- reasonable compensation to his counsel. And rupt's attorney as part of the cost of admin- in view of the circumstances, the act makes istration, since the latter section refers to provision that the bankruptcy court admin- services rendered after the bankruptcy pro- istering the estate may, if the trustee or ceedings are instituted, to aid the bankrupt any creditor question the transaction, re- in performing his duties under the Act. examine it with a view to a determination of 355. In re Lewin (D. C., Vt.), 4 Am. B. its reasonableness." R. 632, 103^ Fed. 850. The purpose and in- What constitutes transfer in contempla- tent of this section has been carefully con- tion of bankruptcy. — The fact that it might sidered in the case of In re Habegger ( C. have occurred tO' a bankrupt when he made C. A., 8th 'Cir.), 15 Am. B. R. 198, 71 C. C. an assignment for the benefit of creditors A. 607, 139 Fed. 123. that proceedings in bankruptcy might there- 356. Lazarus v. Prentice (Sup. Ct., U. S.), after be instituted either by or against him, 234 U. S. 263, 32 Am. B. R. 559, 58 L. Ed. and that the attorney to whom the collection 1305, 34 Sup. Ct. 851. of moneys was intrusted might deduct his 357. In re Shiebler & Co. (D. C, N. Y.), fees therefrom, coupled with the fact that 20 Am. B. E. 777, 163 Fed. 545. he afterwards attempted to do so, cannot be 358. See discussion under Section Sixty-two considered as a payment in contemplation of of this work, the filing of a petition in bankruptcy, within 928 Pbefeeeed Ceeditoes. [§ 60-d. determination of its reasonableness.^^® This section added a feature to the bankruptcy act not found in former acts regulating practice and procedure in bankruptcy, therefore, adjudications upon other provisions of the bankruptcy act or concerning the judiciary acts giving jurisdiction to the courts of the United States have no binding effect in the construction of this section.^^'' There is no provision for the enforcement of this section in another court of bankruptcy, where the bankrupt may be personally served with process in a plenary suit; such court is not given authority to re-examiue the trans- action.^®^ A State court has no jurisdiction to re-examine the transfer of property to counsel.''®^ The practice on proceedings of this character — the attorney being usually an officer of the court — is both simple and summary. Being rarely resorted to, there are no stated rules or forms applicable. The amount paid must appear in Schedule B (4) of a voluntary petition. Pro- ceedings to test the propriety of payments to an attorney for all services, namely, those rendered before the payment, as well as those services to be rendered in the bankruptcy proceeding itself, should be taken in the form of a motion to fix the allowance and for an order directing the return of the balance unless an issue is raised.*®^ The motion may be heard on affidavits or orally. A suit to recover will rarely be necessary; though an order to restore, if not obeyed, is perhaps not now the foundation for a proceeding in contempt.^** Since this section makes no provision for the service of process, it seems that such reasonable notice should be given to Jhe parties affected, either by mail or otherwise as the court shall direct, so that an opportunity may be given them to appear in court and contest the reason- ableness of the charges in question.^®^ Any notice to the attorney directed by the court is sufficient.^®® c. Illustrative cases. — Other cases which have originated under this subsec- tion are collated in the foot-note.**'^ 359. In re Wood & Henderson, 210 U. S. 22 Sup. Ct. 293. Compare In re Sims, Fed. 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Oas. D2,88S. Sup. Ct. 621. Payment to attorney in contemplation of 360. In re Wood & Henderson, 210 U. S. bankruptcy; recovery of excess. — A petition 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 by a trustee, for a re-examination by the Sup. Ct. 6i21. court of payments by a debtor to an attorney 361. In re Wood & Henderson, 210 U. S. in contemplation of bankruptcy, is a condition 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 precedent to any determination by the referee Sup. Ct. 621. that any portion of the amount paid to an 362. In re Wood & Henderson, 210 U. S. attorney, as specified in the section, may be 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 recovered by the trustee for th? benefit of iSup. Ct. 621. the estate as an excess over and above what 363. In re Shiebler & Co. (D. C, N. Y.), is reasonable. Matter of Union Dredging Co. 20 Am. B. R. 777, 163 Fed. 545; Tripp v. (D. C, Del.), 35 Am. B. R. 555, 225 Fed. 188. Mitschrieh {C. C. A., 8th Cir.), 31 Am. B. 365. In re Wood & Henderson, 210 U. S. R. 662, 211 Fed. 424: In In re Wood & 246, 20 Am. B. R. 1, 5, 52 L. Ed. 1046, 28 Henderson, 210 U. S. 246, 20 Am. B. R. 1, Sup. Ct. 621 ; Haifenberg v. Chicago Title & 5, 52 L. Ed. 1046, 28 Sup. Ct. 621, Mr. Justice Trust Co. (C. C. A., 7th 'Cir.), 27 Am. B. R. Day said, referring to section 60-d: "This 708, 192 Fed. 874. section does not undertake to provide for a 366. In re Lewin (D. C, Vt.), 4 Am. B. R. plenary suit, but for an examination and 632, 103 Fed. 850. order in the course of the administration of 367. In re Lewin (D. C, Vt.), 4 Am. B. the estate with a. view to permitting only a R. 632, 103 Fed. 850; In re Kross (D. C, reasonable amount thereof to be deducted N. Y.) , 3 Am'. B. R. 187, 96 Fed. 816; In from it because of payments of money or re Goodwin, 2 N. B. N". Rep. 445; In re transfers of property to attorneys or counsel- Tollett, 2 N. B. N. Rep. 1096; In re'Corbett lors in contemplation of bankruptcy proceed- (D. C, Wis.), 5 Am. B. R. 224, 104 Fe' ings." 872. Compare also, under the law of 1867, 364. Comingor V. Louisville Trust Co., 184 In re Sidle, Fed. Cas. 12,844- In re Sms U. S. 18, 7 Am. B. R. 421, 49 L. Ed. 413, Fed. Cas. 12,888. ' SECTION SIXTY-ONE. DEPOSITORIES FOR MONEY. § 61. Depositories for Money. — a Courts of bankruptcy shall desig- nate, by order, banking institutions as depositories for the money of bankrupt estates, as convenient as may be to the residences of trus- tees, and shall require bonds to the United States, subject to their approval to be given by such banking institutions, and may from time to time as occasion may require, by like order increase the number of depositories or the amount of any bond or change such depositories. Analogous provisions: In V. S.: -None in the law; but see General Order XXVin under the law of 1867. In Eng.: See miscellaneous provisions in General Rules. In Can.: Act of 1919, § 26. Cross-references: To the law: Distribution of consideration of composition on confirma- tion, § 12-e. Duty of trustee to deposit money in designated depositary, and disbursement thereof, § 47-a(3) (4). Filing bonds and suits thereon, § 50-h. To the General Orders: Payment of money deposited by check or warrant, XXIX. SYNOPSIS OF SECTION. I. Depositories for Money, 929. a. Designation of banks, 929. b. Depository to give bond; suit thereon, 930. c. Disbursement of moneys by depositories, 930. I. DEPOSITORIES FOR MONEY.' a. Designation of banks. — This section is new. Under the law of 1867, the practice was the same, but rested on the authority of a general order merely.^ The provisions of this section and of section ^Y-a (3) are manda- tory in form and should not be departed from unless the consent of all interested parties has been obtained.^ The designation of banks is usually made by a standing order of the district court. 1. See also Am B. R. Dig. §580 designated depository, pays therefrom to the 2. Act of 1867, General Order XXVII. bankrupt the amount set apart to him as 3. Huttig Manfg. Co. v. Edwards (C. C. A., exempt, as soon as set apart, bv and with the 8th Cir.), 20 Am. B. R. 349, 354, 160 Fed. approval of the referei, h4 should not be ^^T- vTx ^ ^ ^ TXT,. required to repay and deposit such sum in a Liability of trustee. — Where a trustee, designated depository. Matter of Barnett having deposited money of the bankrupt (D. C, Ga.), 32 Am. B. R. 585 214 Fed 263 estate to his own account instead of in a , . . [929] 59 930 Depositoeies foe Mowey. [§ 61. b. Depository to give bond; suit thereon. — The depository must give a bond, which should be large enough to cover the amount on deposit at any time. The fact that a bond has been given by a bank or trust company does not authorize a bankruptcy court to make summary orders directing the payment of deposits to receivers and trustees in bankruptcy while the affairs of the bank or trust company are 'being liquidated under a State law.* It is provided in § 50-h that bonds of "designated depositories shall be filed of record in the office of the clerk of the court and may be sued upon in the name of the United States for the use of any person injured by a breach of their conditions." The reasonable if not necessary implication from the phrase " in the name of the United States " is that the suit shall be brought not by the United States, but by the trustee or other person injured in the name of the United States.® The beneficiaries under a bond given pursuant to this section include all depositing trustees and receivers of bankrupt estates, who should be made parties to a suit on such bond.* There is no right of subroga- tion under such a bond until the creditors have obtained from the principal or the surety payment not merely of the penalty, but of the debtor's entire obligation.'' c. Disbursement of moneys by depositories. — This is regulated by General Order XXIX. It is suggested that deposits by trustees be always in the name of, say " John Doe, as Trustee of Richard Roe, in Bankruptcy No. 765."* Each check should indicate the purpose for which it was drawn. Checks on the funds, if on the clerk's deposit, must be signed by the latter and counter- signed by the judge;® if on a trustee's deposit, must be signed by the latter and countersigned by the referee. A bank which pays a check not so counter- signed may do so at its peril.^" This general order bas been construed some- what strictly." Perhaps this is wise in exceptional cases. Still, a reasonable observance of proper safeguards against unauthorized withdrawals seems enough. 4. Matter of Bologh (D. C, N. Y.), 25 Trust Co. (N. Y., Sup. Ct.), 29 Am. B. E. Am. B. R. 726, 185 Fed. 825. 884, 154 N. Y. App. Div. 596, 139 N. Y. Supp. Preference upon dissolution of depository. 969. — Funds in the possession of a receiver or 6. Illinois Surety Co. v. Jnited States (C. trustee in bankruptcy, which belong to the C. A., 7th Cir.), 36 Am. B. R. 82, 226 Fed. bankrupt estate, will be deemed to be 665. " money paid into court " within the mean- 6. Illinois Surety Co. v. Uniied States (C. ing of the New York Banking Law; and C. A., 7th Cir.), 36 Am. B. R. 82, 226 Fed. where such funds have been deposited by a 665. receiver or trustee in a trust company which 7. Illinois Surety Co. v. United States (C. has been designated as a depository for the C. A., 7th Cir.), 36 Am. B. R. 8i2, 226 Fed. moneys of bankrupt estates under section 6flS. 61 of the Bankruptcy Act, and which has 8. In re Oarr (D. C, N. Car.), 9 Am. B. also been designated by the State comp- R. 58, 17 Fed. 572. troUer as a depository of all funds or 9. 'Sometimes they take the form of a moneys paid into court, he is entitled upon court order, attested by the clerk. See also a dissolution of the trust company to a Trustees' Combined Dividend check and preference over its general creditors by vir- Receipt, in " Supplementary Forms," post. tue of section 190 of the New York Banking 10. In re Cobb (D. C., N. Car.), 7 Am. B. Law under which debts due from a trust R. 58, 17 Fed. 572. company as a designated depository shall 11. Id. be given a preference. Morris v. Carnegie SECTION SIXTY TWO. EXPENSES OF ADMINISTERING ESTATES. § 62. Expenses of Administering Estates. — a The actual and neces- sary expenses incurred by officers in the administration of estates shall, except where other provisions are made for their payment, be reported in detail, under oath, and examined and approved or dis- approved by the court. If approved, they shall be paid or allowed out of the estates in which they were incurred. 'Analogous provisions: In U. S.: Act of 1867, \ 38, R. S., §! 5099, 5187A, 5137B; Act of 1800, § 29. In Eng.: Act of 1883, § 73. to. Can.: None. Cross-iefeiences: To the law: Duties or referees in respect to administration of estate*, § 39. Trustees to account for expenses of administration, § 47. Priority of cost of administering estates, § 64-b (2) (3). SYNOPSIS OF SECTION EXPENSES OF ADMINISTERING ESTATBS. I. Expenses of Administering Estates, 932. a. /Scope of section, 932. b. Priority of payment, 932. c. Auctioneer's services, 932. d. Appraiser's services and fees, 933. e. Sums paid for preservation of properly, 933. f . Allowances to assignees for the benefit of creditors, 933. g. Practice on allowance, 934. n. Employment and Compensation of Attorneys, 934. a. In general, 934. b. Employment of attorney for the trustee, 935. c. Compensation for attorneys, 935. (1) In general, 935. (2) For claimants, 937. (3) For petitioning creditors in involuntary cases, 937. (4) For receivers, 938. (I) Appointed in bankruptcy, 938. (II) Appointed by State court, 939. (5) For bankrupts in involuntary cases, 940 (6) For bankrupts in voluntary cases, 940. (7) For trustees, 941. (8) For assignee prior to bankruptcy, 943. d. Effect of amendments of 1903, 943. [931] 932" Expenses of Administering Estates. [I 62. I. EXPENSES OF ADMINISTERING ESTATES.l a. Scope of section. — Clearly the disbursements authorized by this section are ^1) the "actual and necessary expenses," (2) incurred by officersz in the administration of estates. These include such disbursements as for service of process, for advertising and giving notices,2a for stationery used in replying to inquiries,2i> for perpetuating testimony, for the trustee's bond, for the reut,3 insurance, and other necessary expenses attending the closing out of a going business, for the fees of the appraisers, and for the compensation of attorneys employed by the trustee. They do not include clerical assistance to a referee, except in particular cases where necessary in order that the referee may adequately and efficiently perform his duties.Sa Under the former law, the words were "all necessary disbursements made by him (the assignee) in the discharge of his duty."* The expenses properly chargeable against a bankrupt estate for administration are those which pertain to the property belonging to the estate ; such expenses may not be charged against property which is subject to valid liens nor against those who have vested rights in the bankrupt's property .5 The close connection between tliis section and § 64-b is apparent. Indeed, '.'expenses of administering estates" here seems to be the equivalent of "the cost of administration" in § Ci-b (3). b. Priority of payment. — There is nothing either here or in § 64 to indicate the order of payment in case the assets are not sufficient to pay these expenses nad the priority debts. Nor has the question yet been squarely up.6 A fair construction perhaps would be that "expenses of administering" are the same as the "cost of administration" in § 64-b (3), with the result that they will be paid only in case there is sufficient cash on hand to care for (1) taxes (2) the cost of preserving the estate, and (3) the filing fees paid by creditors.? Whether such expenses should be paid ahead of a valid specific lien at the time of the bank- ruptcy is a question.8 A trustee will be surcharged the amount of penalties incurred for a failure to pay taxes, if there were funds of the estate available for the purpose when the taxes were due.9 c. Auctioneer's services. — ^The courts are reluctant to allow a trustee any sum in payment of the fees of an auctioneer.io 1. See also Am. B. R. Dig. i 684 and cross references thereunder. 2. Bankr. Act, § 1 (18) ; Wilson v. Penn., etc., Co. (C. C. A., 3d Cir.), 8 Am. B. E. 169, 114 Fed. 742. Payment from separate fnnd. — Where the trustee received a sum of money from bank- rupt as the result of a successful prosecution for concealment of assets, which fund It was agreed should be used to defray the expenses of the bankruptcy administration, he can not charge his expenses against the general estate. Matter of Di Cola (C. C. A., 3d Cir.), 33 Am. B. H. 389, 217 Fed. 743. Upon the bankruptcy of a stockbroker, the expense of engaging accountants to unravel the details In the books of a pledgee of the bank- rupt, are chargeable to the claimants, except such as were able to trace their securities with- out the aid of the accountants. Matter of Wil- son & Co. (D. C, N. Y.), 42 Am. B. R. 350, 252 Fed. 631. ga. Matter of Pierce Butler & Pierce Mfg. Co. (C. C. A., 2d Cir.), 40 Am. B. E. 445, 246 Fed. 814; United States v. U. S. Fidelity, etc. Co. (D. C, Tex.), 45 Am. B. E. 295, 263 Fed. 442. 2b. Matter of Capital Security Co. (D. C, Tenn.), 41 Am. B. E. 184, 251 Fed. 927. 8. Consult In re Wlessner (D. C, N. Y.), 8 Am. B. E. 415, 115 Fed. 421. 3a. Matter of Capital Security Co. (D. C, Tenn.), 41 Am. B. R. 184, 251 Fed. 927. 4. Act of 1867. i 28, E. S. ! 5099. B. Matter of Ranch (D. C, Va.), 36 Am. B. E. 75, 226 Fed. 982 citing text; Matter of O'Gara Coal Co. (C. C. A., 7th dr.), 38 Am. B. B. 131, 235 Fed. 883. A mortgagee is not entitled to an attorneys fee stipulated for in a mortgage note where the property is sold by a trustee in bankruptcy. Such a fee can only be allowed where services are actually rendered. Gugel v. New Orleans Bank (C. C. A., 5th Cir.), 39 Am. B. E. 160, 239 Fed. 676. 6. Note In re Burke (Eef., Ohio), 6 Am. B. R. 502. 7. See Bankr. Act, § 6S-a-b (1) (2). 8. In re Frlck (Eef., Ohio), 1 Am. B. E. 719. Contra: In re Tebo (D. C, W. Va.), 4 Am. B. R. 235, 101 Fed. 419; In re Bourlier Cornice & Roofing Co. (D. C, Ky.), 13 Am. B. B. 585, 133 Fed. 958. In Matter of Ranch (D. C, Va.), 36 Am. B. R. 75, 226 Fed. 982, It was held that since the words "of estates" and "bankrupt's estates," as used in sections 62 and 64-b re- spectfully relating to the payment of costs of administration, referred to the unincumbered as sets generally as distinguished from property upon which there Is a specific lien, only such costs as are necessarily incident to the pre- servation of the particular estate, its con- version into money and payment thereof to the lienor, are entitled to payment in prefer- ence to a landlord's lien for rent. .9. Matter of Monsarrat (D. C, Hawaii), 25 Am. B. E. 820, 3 U. S. Dist. Ct. Haw. 641. 10. Payment of fees of auctioneer. — In the case of In re Pegues, 3 N. B. R. 80, Fed. Cas. 10,907, it was said: "The law contemplates that the assignee shall himself sell the property of the estate. There may be cases in which It will be proper to employ an auctioneer, but the necessity for so doing should be first shown to the court and leave obtained." This langu- age was quoted with approval by Judge Long- year in the case of In re Sweet (D. C, Mich.). 9 N. B. E. 48, Fed. Cas. 13,688. § 62.] Peeseevation of Peopeety. 933 d. Appraisers' services and fees. When property is to be administered through the bankruptcy court it is often important that a reliable inventory be made at as early date as possible. The appraisal should be made carefully and accu- rately and compensation therefor, based on the nature of the estate and the circumstances of the case, should be paid and charged against the estate." e. Sums paid for preservation of property. — The trustee may be allowed for all sums necessarily paid for the preservation of the estate. If such sums have been paid by other parties he may, with the approval of the court, repay them especially if they had an interest in the preservation of the property, and if there were circumstances which necessitated prompt action on their part. Thus, if creditors prior to the appointment of a trustee should pay for liens which were being enforced in order to save the property for the estate they would be subrogated to the rights of the lienors. ^^ And it has been held that where creditors have secured a lien of which they are deprived by the operation of the bankruptcy law, and the full benefit of their litigation accrues to others, the bankruptcy court may make a reasonable allowance as an indem- nity for the cost and expenses through which such benefit has been obtained." The compensation of a receiver in bankruptcy lies in the sound discretion of the court. This rule also applies to marshals in taking care of property." "Where expenses are incurred by a trustee in the preservation of property STibject to moa-tgage, solely in the interest of creditors generally, they should be paid out of the estate, and may not be charged against the mortgagees.^^ The expenses of preserving and conducting the business of an estate pending action on a com- position may become part of the expenses of administration in case the com- position is finally denied and an adjudication made.^^* f. Allowances to assignee for the benefit of creditors. — An assignee for the benefit of creditors is not entitled to compensation merely by virtue of his office ; his sole claim to any reward is measured by the extent of his labors in preserving the estate.^® Where he has in good faith protected and preserved property to the benefit of the estate of the bankrupt he is entitled to payment of his legitimate expenses and to compensation for his services and for the serv- ices of his attorney out of the proceeds of the property he has received," and the trustee in bankruptcy may properly allov/ his expenses in converting the property into money, but to the extent only to which his conversion of it into money has saved the estate In bankruptcy similar expenditure.^* Thus, money paid by the assignee for the benefit of creditors, to discharge valid liens upon the property, may be allowed, him.^^ An assignee for the benefit of creditors may also be allowed sums which, pursuant to the terms of the 11. Appraisers! fees.^ Appraisers should 13. In re Lesser (D. C, N. T.) 3 Am B E mate a careful and accurate inventory; It 815, 100 Fed. 433. See also In re Little EiTer should be more than a mere formality, especially Lumber Co. (D. C, Ark.). 3 Am B E 682 107 where receivers are operating a business. An pg,j 553 • • • , allowance of two hundred and fifty dollars ,.' t„ ' o j.,. ,t\ n ■k^ r^ ^ .. . „ „ apiece to three appraisers should be approved, «,J*-Qi° J^^™" <°- ^r ^- ^^'■•>' ^ Am. B. E. where it appears that the case was extraordi- °f"' '"'^*^"- *!^- ^s to compensation for ser- nary, the business consisting of thirty stores '^"=^s of custodian of property, see In re Prick- scattered over New England, and that the re- hardt (D. C, Wis.), 29 Am. B. E. 524, 198 Fed. ceiver and trustee have handled over $66,000.00. 8'^9- Matter of Mills Tea & Butter Co. (D. C, Mass.), 15. In re Vulcan Foundry & Machine Co. (C. 37 Am. B. R. 154, 235 Fed. 812. C. A., 3d Cir.), 24 Am. B. E. 825, 180 Fed. 671. A claim by an appraiser for services rendered „ jj^jt^^ ^j Klnnane Co. (C. C. A., 6th a prior assignee for the benefit of creditors „ , ,„ Am R n 'sqq od'> Fori tro should be allowed as a preferred claim. Mat- ,.''„ .r' " ?• „: '.i ^, ter of Cooper (D. C, Mass.), 40 Am. B. E. 17, „!«• Matter of Sobol (D. C, N. T.), 35 Am. 243 Fed. 797. B- R- 80*. 230 Fed. 652. See also Am. B. K. 12. In re Gregg, 3 N. B. E. 629, Fed. Cas. Dig. § 586. 5,976. 17. Bramble t. Brett (C. C. A., 8th Clr.), 38 934 Expenses of Administering Estates. [§ 62. assignment, he has paid over to the creditors.'^'' Where an assignee for the benefit of creditors remains in possession of the property with the consent of the referee, and performs valuable services for the estate, his expenses and com- pensation for such services, up to the time of the adjudication, should be paid as disbursements.^^ g. Practice on allowance. — Expenses of administration must be reported in detail under oath, and should be accompanied vtdth proper vouchers, and be examined and approved by the court.^^* Where the allowance is for the com- pensation of the trustee's attorney, he should always file an affidavit specifying the services performed. But such an allowance may be made without a notice to creditors.^^ Agreements and stipulations as to payment of costs and ex- penses, entered into by the attorneys for the respective parties have been sanc- tioned, and if fair and equitable will be enforced and carried into effect accord- ing to their terms.^ The allowance of expenses is within the power and control of the District Court both as to occasion and amount and is not subject to col- lateral attack.^* As a rule, all disbursements by the trustee are itemized in his verified reports, and formally allowed on the coming up of such reports for confirmation. II. EMPLOYMENT AND COMPENSATION OF ATTORNEYS.2* a. In general. — Section 62 • strictly only has to do with disbursements by the attorney for the trustee. For convenience, however, the subject of attor- neys a.nd their compensation is generally discussed here.^° Economy in the administration of estates is the policy of the present law,^® and is to be strictly enforced.^ This principle should be kept in mind in fixing the compensation of attorneys.^* Courts will require satisfactory evidence to show necessity of legal aid on the part of the trustee.^® Attorneys should be allowed reason- able compensation for services rendered, but only when they are beneficial Am. B. K. 526, 230 Fed. 385 ; Matter of Morris & 21a. Matter of Capital Security Co. (D. C, Eice (D. C, Mass.), 44 Am. B. E. 146, 2oS Fed. Tenn.), 41 Am. B. E. 184, 251 Fed. 927. 712. 22. in re Stotts (D. C, Iowa), 1 Am. B. E. 641, 18. MacDonald v. Moore, 15 N. B. E. 26, 1 93 Fed. 438. Compare In re Brinker, Fed. Gas. Abb. N. C. 5: ; Burlibolder v. S;ump, 4 N. B. 1,882. E. 579, Fed. Cas. 2,165; In re Colin, 6 N. B. E. 23. King Hardware Co. v. Christoplier (C. 0. 379, Fed. Cas. 2,966. A., 5th Cir.), 34 Am. B. E. 422, 222 Fed. 224. 19. Livingston v. Bruce, 1 Blatch, 318. 23a. United States t. Wood (C. C. A., Sth Clr.), 20. Craigin v. Thompson, 12 N. B. E. 81, Fed. 43 Am. B. E. 711, 257 Fed. 352. Cas. 3,320, 2 Dill. 513; Jones v. Kinney, 4 N. 24. See also Am. B. E. Dig. §§ 101-113. B. E. 649, Fed. Cas. 7,473, 5 Ben. 259. 26. See also Bankr. Act, § e4-b (3). 21. In re Pattee (D. C, Ct.), 16 Am. B. E. 26. Matter of Frank Meis (Eef., Ky.)V IS Am. 450, 143 Fed. 994. B. E. 104. Services of assignee.— In re Pauley (Eef., N. 27. In re Ketterer Manufacturing Co. (D. C, Y.), 2 Am. B. E. 333, Eeferee Hotchklss, writ- Pa.), 19 Am. B. B. 646, 155 Fed. 987. ing the opinion, holds that a general assignee 28. In re Lang (D. C, Tex.), 11 Am. B, E. In possession, prior to bankruptcy, will be al- 794, 127 Fed. 755. lowed out of the estate his disbursements In 29. Necessity of employnnent of counsel by preserving the same, and that he will also be trustee. — In re Davenport (D. C, Tex.), 3 N. allowed reasonable fees as custodian of the B. E. 77, Fed. Cas. 3,587, holding that while In estate, but he cannot be given fees as assignee, prosecuting or defending suits the assignee had and that the attorneys of such assignee should the right to employ counsel, and also had the not be allowed, except In unusual circumstances, right to obtain legal advice whenever really anything out of the estate. necessary to enable him to act for the Inter- In the case of Peter Paul Book Co. (D. C, ests of the estate or of creditors, still an al- N. Y.), 5 Am. B. E. 105, 104 Fed. 786, the court lowance to an assignee for the services of held that no allowance can be made by a court counsel In connection with the compromise of of bankruptcy to an assignee under a general an ordinary claim could not be allowed, it be- Assignment for services rendered as custodian Ing a proceeding of such character that an as- of the property prior to the filing of the pe- signee of ordinary intelligence would be able to tltlon In bankruptcy against the assignor, even act for Himself and without the aid of an at- though such services appear to have been for torney. But In re Colwell (D. C, Mass.), 15 the benefit of the general creditors. The Court, N. B. E. 92, it was held that an allowance was however, said the bankruptcy court is author- proper to the trustee for procuring the ser- Ized to make an allowance for services rendsred vices of counsel to investigate as to the affairs In preserving the estate subseauent to fllins the of the estate, although no litigation resulted, petition. § 62.]' CoMPEi^sATioN OF Attoeneys. 935 to the estate.^** An application to the court for the removal of an attorney for a trustee or receiver will be considered, but will not be granted unless clearly shown to be necessary for the interests of creditors and the estate."^ b. Emplojnnent of attorney for the trustee.^* — This is carefully regulated by statute in England; and the law there, being expressive of the experience of centuries, may be consulted -vith profit. The reported oases under the law of 1867, while not numerous, are valuable.^^ Under the present law, it has been held that the trustee's attorney may be chosen by the creditors in the same way the trustee is chosen;^* although the better opinion is that he should employ his attorney himself without interference from the creditors.*^ Also, that the attorney should not have been the attorney for the bankrupt,^* or for an interest adverse to the general creditors.^'' It is the duty of the trustee to employ counsel to protect the interests of the estate in pending litigations.^^ c. Compensation of attorneys. — (1) In genebal. — An attorney's right to compensation is incident to his employment. Whether it shall be paid out of the assets of a bankrupt estate is the question considered here. It has been held that, under § 64-b (3), the attorneys for the petitioning creditors and for the bankrupt in involuntary cases have an absolute right to compen- sation;^® the amount only is discretionary. It is suggested, however, that the clause "as the court may allow" has relation to all the words of the subdivision and not merely to the clause " and to the bankrupt in voluntary cases."*" Such a view would harmonize the statute and the practice under it. But this discretion must be sound and not unrestrained ; it is subject to review.*^ Generally speaking, the determination as to the amount to be paid 30. Randolph v. Scruggs, 190 U. S. 533; controversy hetween different classes of 10 Am. B. R. 1, 47 Ii. Ed. 1165, 23 Sup. Ct. creditors, the court will usually decline to 710; In re Zier & Co. ( D. C.,.Ind.), 11 Am. authorize the employment by the trustee B. R. 527, 142 Fed. 102; In re Covington of an attorney representing one of such (©. C, N. Car.), 13 Am. B. R. 150, 132 Fed. classes. In re Smith (C. C. A., 6th Cir.), 884; In re Duran Mercantile Co. (D. C, N. 29 Am. B. R. 628, 203 Fed. 369. Mex.), 29 Am. B. R. 450, 199 Fed. 961. 37. In re Rusch (D. C, Wis.), 5 Am. B. 31. In re Champion Wagon Co. (D. C, R. 565, 105 Fed. 607; In re Kelly Dry Goods N. Y.) , 28 Am. B. R. 51, 193 Fed. 1004. Co. (D. C, Wis.) , 4 Am. B. R. 528, 102 "Fed. 32. See also Am. B. R. Dig. § 106. 747. 33. For instance, In re Drake, Fed. Cas. 38. In re McKenna (D. C, N. Y.), 15 Am. 4,058; In re Davenport, Fed. Oas. 8,587; B. R. 4, 137 Fed. 611. In re Noyes, Fed. Cas. 10,371. For an or- 39. In re Curtis (C. C. A., 7th Cir.), 4 Am. der of appointment under the present law, B. R. 17, 100' Fed. 784, approved and fol- see " Supplementary Forms," post. lowed in Smith v. Cooper (C. C. A., 5th 34. In re Smith (Ref., N. Y.), 1 Am. B. CSr.), 9 Am'. B. R. 755, 120 Fed. 230. Oom- R. 37; In re Little River Lumber Co. (D. pare In re Smith (D. C, N. Car.), 5 Am. C, Ark.), 3 Am. B. R. 682, 101 Fed. 558. B. R. 559, 108 Fed. 39. 35. In re Abram (D. C, Cal.), 4 Am. B. 40. In re Morris (D. C, N. Car.), 11 Am. R. 575, 103 Fed. 272; In re Arnett (D. C, B. R. 145, 125 Fed. 841; In re Kross (D. Tenn.), 7 Am, B. R. 522, 112 Fed. 770; In C, N. Y.), 3 Am. B. R. 187, 06 Fed. 816. re Baher (D. C, Tenn.), 9 Am. B. R. 406, 41. In re Curtis (C. C. A., 7th Cir.), 4 119 Fed. 525; Matter of Columbia Iron Am. B. R. 17, lOO Fed. 784; In re Burrus Works (D. C, Mich.), 14 Am. B. R. 5i2«, (D. C, Va.), 3 Am. B. R. 296, 97 Fed. 926; 142 Fed. 234. Smith v. Cooper (C. C. A., 5th Cir.), 9 Am. 3G. In re Teuthom (Ref., Mass.), 5 Am. B. R. 755, li20 Fed. 230. But it will not B. R. 767. usually be disturbed. In re Tebo (L. C, Attorney for bankrupt. — A trustee or re- W. Va.), 4 Am. B. R. 235, 101 Fed. 419. ceiver should not ordinarily employ the at- Review of exorbitant fee. — 'Still, in the tomey who represents the bankrupt or one exercise of its judicial discretion, the court representing interests in a litigation which will not allow an attorney's fee which is are adverse to the general estate, or in con- exorbitant, though recommended by the ref- flict with other interests represented by the eree. In re Carr (D. C., N. Oar.), 8 Am. B. trustee; and where there are matters in R. 636, 11'6 Fed. 556; Matter of Grant (C. 936 Expenses of Administeeing Estates. .[§ 62. attorneys will not be disturbed on appeal except for manifest error.*^ Whether compensation shall be allowed depends on the facts of each case.^^ In deter- mining the amoimt of compensation, the value of the estate must be taken into consideration.** It is not so much what was done by the attorney, as what was really required.*^ The court should not be called upon to settle differences between coimsel as to what proportion of the total amount allowed each should receive.*® The bankrupt should act in good faith and not delay the proceedings in order to have a fee allowed to his attorney.*^ Neither the attorney for petitioning creditors in involuntary bankruptcy proceedings, nor the attorney for the bankrupt, can be allowed compensation out of a fund derived from the sale of property under mortgage foreclosure proceedings, where it appears that such bankruptcy proceedings were of no benefit to the mortgagee.** But if a mortgagee has his lien enforced in such proceedings and thus profits by the result he may be charged with counsel fees.*® If the right to attorney's fees for the collection of a mortgage debt depends upon a statute requiring notice of foreclosure, such right is inchoate dependent upon suit being brought after notice and non-payment by the mortgagor; if bankruptcy intervene prior to the foreclosure, the mortgagee will not be entitled to attorney's fees.®" In some jurisdictions the claim of a mortgagee for attorney's fees incurred by him in protecting his lien during bankruptcy proceedings of the mortgagor will be allowed where the mortgage contained a stipulation that the mortgagee should be paid attorney's fees in case he was obliged to employ counsel.*^ If the referee is not satisfied as to the services rendered by an attorney, he may suspend the hearing for a reasonable time,^^ and it is his duty to reduce the C. A., 2d Cir.), 38 Am. B. R. 210, 238 Fed. nipt for contempt. In re Mayer ■ (D. C, 132, holding that the amount to be allowed as Wis.), 4 Am. B. R. 238, 101 Fed. 695. com'pensation for attorneys is within the 48. In re Goldville Mfg. Co. (D. C, N. discretion of the court, and the determination Car.), 10 Am. B. R. 552, 118 Fed. 892. As will not he disturbed unless there is a plain to allowance to attorney for services per- ahufie of discretion. formed for mortgagee on foreclosure, see In 42. Matter of Atcherley (D. C, Hawaii), re Claussen & Co. (D. C, N. Car.), 21 Am. 25 Am. B. R. 827; Matter of Iron Clad Mfg. B. R. 34, 164 Fed. 300. Co. (C. C. A., 2d Cir.), 33 Am. B. R. 69, 215 49. In re Torchia (D. C, Pa.), 26 Am. B. Fed.. 877. R. 188, 185 Fed. 576. 43. See In re Evans (D. C, N. Car.), S 50. In re Weiland (D. C, Ga.), 28 Am. Am. B. R. 730 (and modiflcation on rehear- B. R. 620, 197 Fed. 116. ing in foot-note), 116 Fed. 909. 51. Matter of Ferreri (D. C., La.), 26 Am. Waiver. — Where attorneys for the bank- B. R. 659, 188 Fed. 675. rupt, for the trustee and petitioning credit- In Pennsylvania, the bankruptcy court ors, and for the trustee himself, all waive in may, under the settled rule of practice, re- writing the deposit in a composition pro- duce an attorney's commission, stipulated ceeding in a sum sufficient to pay their fees, for in the bond and mortgage. In re Wen- in order to expedite and facilitate the pro- del (D. C, Pa.), 18 Am. B. R. 665, 152 Fed. ceeding, they may not thereafter insist upon 672. payment out of the estate. It seems that if Stipulation of fees in mortgage. Where the bankrupt be benefited by the waiver he a mortgage made by the bankrupt stipu- himself should pay the attorneys. Matter of lated for payment of attorney's fees upon Frischnecht (C. C. A., 2d Cir.), 34 Am. foreclosure and the mortgagee came into the B. R. 530, 233 Fed. 417. bankruptcy court, proved his claim, and a 44. In re Ellett Electric Co. (D. C, N. private sale of the property was made by the Y.), 28 Am. B. R. 453, 196 Fed. 40O. trustee, this sale is not an equivalent of a 45. In re Connell & Sons (D. C, Pa.), 9 foreclosure, and the attorney's fee provided Am. B. R. 474, 120 Fed. 846. for in the mortgage should not be allowed. 4G. Hall V. Reynolds (C. C. A., 8th Cir.), In re Roche (C. C. A., 5th Cir.), 4 Am. B". R 36 Am. B. R. 721, 231 Fed. 946. 370, 101 Fed. 956. 47. In re Woodward (D. C, N. Car.), 2 62. In re Dreeben (D. C, Tex.) 4 Am B Am. B. R. 692, 95 Fed. 955. Thus, a fee R. 140, 101 Fed. 110. will not be allowed for defending the bank- § 62. J Attorneys foe Petitionees. 937 amount allowed by a trustee as counsel fees if they are excessive.** Compensa- tion cannot be allowed save for "professional services actually rendered." Additional precedents will be found under the appropriate paragraphs, post. (2) FoK CLAIMANTS. — Attomeys for mere claimants are not entitled to allowances out of the estate;^* not even attomeys for the petitioning cred- itors for services after the appointment of the trustee,**- nor attomeys for creditors who object to the allowance of claims of other creditors.*® But where the trustee has refused or neglected to recover assets or resist a ques- tionable claim, and individual creditors do this for the benefit of all, their attorneys will be allowed compensation for so doing ;*^ attorneys who come to the assistance of the trustee in proceedings instituted by him to compel the bankrupt to disclose property retained by him, may be compensated.** (3) Foe petitioning ceeditoes in involtjntaet cases.** — The allowance to attomeys for the petitioning creditors must be confined to services actually rendered in filing the petition and prosecuting it to the adjudication of the bankrupt ; when this is done the estate passes under the control and jurisdiction of the court and its officers, and there is then neither necessity nor opportunity for the attorneys to render actual services to the estate.^*^ The amount depends on a variety of circumstances, unnecessary to enumerate here. The allowance of a fee to attomeys for petitioning creditors is a matter of right f'' the amount of the allowance is not wholly a matter of discretion ; it must be reasonable, de- termined upon evidence of the service performed and of the value of such ser- vice; it rests in legal judgment and judicial discretion, but not in unrestrained discretion. ^^ The elements to be taken into consideration in making an allow- ance to attomeys for petitioning creditors are (1) the time properly required to be spent &n the controversy ; (2) the intricacy of the question involved ; (3) the amount involved; (4) the strenuousmess of the opposition encountered; (5) the results achieved therein; as well as (6) the policy of the bankruptcy act toward economy in administration.^^ The counsel fees allowed in proceedings 63. Matter of Ferrerl (D. C, La.), 26 "Am. B. Investigate records and to prepare the petition E. 659, 188 Fed. 675. and file It, beyond this, an attorney's services 64. In re Smith (D. C, N. Car.), 5 Am. B. B. are not necessary, and an allowance should not Tk Toi %%^'^il '°- ""■' ^- ^■'' '' ^'"- 61 in'r; Curtfs1c.'c: A., Tth Clr.), 4 Am. B. 55. In re Silverman (D. C, N. Y.), 3 Am. B. « IT, 100 Fed. T84; Smith v. Cooper (C. C. A., E 227 97 Fed 32 ^*-^ Cir.), 9 Am. B. E. 755, 120 Fed. 230; In re 56. Matter of Fletcher (Bef., N. Y.), 10 Am. ^i"."*^!^" ^^'I ^' £°- iP^J^- ^}^diJ? -^-^--J- ?• B. E. 398; In re Eoadarmour (C. C. A., 6th Clr.), *J5 J®^,/f^- ^S^ ' ^^S"^"" °'„ ^"'1*'"^ ^^- ^■• 24 Am. B. E. 49, 177 Fed. 379. See In re Worth 2'"°''o^l ^^\\„^\ '^^L^^^^J- Eeynolds, (C. (D. C, Iowa), 12 Am. B. E. 566, 130 Fed. 927. A ?; ^- 8th Cir.) 36 Am. B. E 721, 231 Fed. 946; claim for such an allowance should be formally ^*"^,? °L^°^*°Jx„ (^* ^- ^'^ ^^'^■^- *3 ^^- ^• presented. In re Stoddard Bros. Lumber Co. ^- 218, 255 Fed. 108. (D. C, Idaho), 22 Am. B. E. 435, 169 Fed. 190. Additional allowance. — Evidence insufficient 57. In re Groves, 2 N. B. N. Eep. 466; In re to authorize. Matter of Terrell (D. C. S. Car.), Little Elver Lumber Co. (D. C, Ark.), 3 Am. B. 40 Am. B. E. 138, 250 Fed. 317. E. 682, 101 Fed. 558. eg. Matter of Smith & Oakland Motor Co. 58. In re Felson (D. C, N. T.), 15 Am. B. E. (Eef., N, J.), 32 Am. B. E. 363. 185, 139 Fed. 275. Amount of allowance.— The value of an at- ™- ,?f. ° i°W . J % '/J i, « » ... torney's services in preparing a petition and 59a. Matter of Munforap. C. N. Car.), 43 fliing the same, and procuring the adjudication, „ • ?; 5" i S?„f ^ » T^- ^ ^u. % „c , should not be more than $100 in ordinary cases. «^^^,?iv*^"' °* ^"'lai'3 (D. C, Ohio.), 38 Am. Matter of Sage (D. C, la.), 35 Am. B. E. 625, B. E 769. ,„ K „ J , ,. . 225 Fed. 397. Where petition was brief and Only one fee will be allowed irrespective of there was no contest, and the attorney did not the number of attorneys employed. Matter of prepare the schedules or perform duties after Munford (D. C, N. Car.), 43 Am. B. E. 218, 255 adjudication an allowance of $100 was con- ■S; , , ^^ » j,x ,. sldered liberal. Matter of Atkins (D. C, Ky.), Right to employ attorney.— A creditor who 34 ^m. B. E. 794, 225 Fed. 639. Where the bank- thinks that an involuntary bankruptcy petition rupt offered a compromise of forty cents on the should be filed, has the right to employ an at- dollar, a fee of $50 has been held sufficient com- torney to investigate the legal questions In- pensatlon for the attorney for the petitioning volved, to give such advice as is necessary, to creditors, and $20 for the attorney for the bank- 938 Expenses op Administeeing Estates. [§ 62. for seizing and holding the property of an alleged bankrupt are for special services, and are a distinct matter.*^ Where two proceedings are started by attorneys representing different creditors, and are thereafter consolidated by order of the court, only a single attorney's fee wiU be allowed, and this should be equitably divided.®* Where two petitions are presented, the first being defective and being shown to be in bad faith, and was subsequently amended to include acts of bankruptcy not alleged in the first petition, Jhe attorneys for the second petitioning creditors are entitled to an allowance for services in securing the adjudication.®^ Compensation should be paid to attorneys for petitioning creditors out of the fund remaining for distribution to unsecured creditors and not out of the proceeds of the sale of incumberedjproperty, prior to the payment of valid liens.®® An allowance will not be permitted for services rendered before proceedings were begun, ®^ nor for services rendered necessary by the attorney's own negligence,®* nor for solicitation of other creditors to join in the petition.®® Attorneys for petitioning creditors who are afterwards appointed trustees are not entitled to allowances for services as attorneys in addition to their commissions as trustees, after appointment as such.'"' (4) EoE BECEivEEs. — (I) Appointed in hcmlcruptcy.''^ — The rules appli- cable to the compensation of attorneys for the trustee apply also to those rupt. In re Talton (D. C, N. C.,), 14 Am. B. H. 617, 137 Fed. 178. Where $2,000 was distributed, allowance of $200 to creditors' attorney was approved. In re Covington (D. C, IT. Car.), 13 Am. B. E. 150, 132 Fed. SS4. In an important case, an allow- ance of $12,500 was cut down by the circuit court of appeals to $2,000. In re Curtis (C. C. A., 7th Cir.), 4 Am. B. E. 17, 100 Fed. 784. A fee of $5,000 to attorneys for petitioning cred- itors was allowed where the estate created by the acts of such attorneys approximated $13,000 in value, and it appeared that the services rendered required a high grade of ability and energy, that the time employed was insufficient to com- mand equal compensation in private practice, that the results had been accomplished against the most strenuous opposition, and the creditors had received the full amount of their claims. In re Berkowitz (Eef., N. J.), 22 Am. B. E. 236. For other cases dealing with the amount of al- lowance to the attorney for petitioning cred- itors, see In re Woodard (D. C, N. Car.), 2 Am. B. E. 692, 95 Fed. 955; In re Silverman (D. C, N. T.), 3 Am. B. E. 227, 97 Fed. 325; In re Har- rison Mercantile Co. (D. C, Mo.), 2 Am. B. E. 419, 95 Fed. 123; In re Ghlgllone (D. C, N. Y.), 1 Am. B. E. 580, 93 Fed. 186; Matter of Mun- ford (D. C, N. Car.), 43 Am. B. E. 218, 255 Fed. 108. 63. HotEschlaeger Co. v. Young Nap (D. C, Hawaii), 12 Am. B. E. 526, 2 XT. S. D. C, Hawaii 108. 64. In re McCraclsen & McLeod (D. C, La.), 12 Am. B. E. 95, 129 Fed. 621 ; In re Coney Island Lumber Co. (D. C, N. Y.), 29 Am. B. E. 91, 199 Fed. 197, holding that but one allowance, based on actual value, can be made for all services rendered to the parties whose rights are Im- bodied in and depend upon the application of the petitioning creditors. ■ 68. In re Southern Steel Co. (D. C, Ala.), 22 Am. B. E. 476, 169 Fed. 702. See also Matter of Fischer (C. C. A., 2d Cir.), 23 Am. B. E. 427, 175 Fed. 531. «6. Matter of Eauch, (D. C, Vs.), 36 Am. B. H. 75, 226 Fed. 982. Compensation of attorneys for petitioning: creditors out of s:eneral fimd. — Where it ap- peared that the property of a bankrupt con- sisted largely of real estate heavily incumbered by liens which would have to be paid before the petitioning and other unsecured creditors could realize anything, it was error for the referee to decree compensation to be paid the attorneys for the petitioning creditor out of the proceeds of a sale of the property when made, it being impossible to ascertain what surplus, if any, would remain for the unsecured creditors after payment of liens. In re Gillaspie (D. C, W. Va.), 27 Am. B. E. 59, 190 Fed. 88. See also In re Freeman (D. C, Ga.), 27 Am. B. E. 16, 190 Fed. 48, holding that where, upon the filing of an involuntary petition In bankruptcy, by a small creditor, the alleged bankrupt's answer the next day admitting bankruptcy, and there- upon the referee, without notice to other credi- tors, passes an order of adjudication, the pro- ceeding will be deemed only nominally an in- voluntary one, and fees of attorneys for the petitioning creditors will not be paid out of the proceeds of the sale of bankrupt's stock of goods to the detriment of one holding a valid mortgage thereon, who participated in the pro- ceedings, if at all, only for the purpose of ob- jecting. Allowance ont of funds payable to secured creditor. — Although a secured creditor may ob- ject to the payment of the fees of attorneys for the petitioning creditors out of funds payable to it, it Is estopped from doing so by Its ac- quiescence for several months. Liller Bldg. Co. V. Eeynolds (C. C. A., 4th Cir.), 40 Am. B. E. 371, 247 Fed, 90. m. Matter of Hart & Co. (D. C, Hawaii), 16 Am. B. E. 725. 68. In re Francis Levy Outfitting Co., Ltd. (D. C.„ Hawaii), 29 Am. B. E. 8. 69. Matter of Sage (D. C, la.), 35 Am. B. B. 625, 225 Fed. 397. 70. Holland v. Mcllwaine (C. C. A., 4th dr.), 34 Am. B. E. 416, 223 Fed. 777. 71. See also Am. B. H. Dig. S 107. § 62.] Attorneys foe Receivees. 939' appointed for receiversJ^ Ordinarily the duties of a receiver in bankruptcy neither require nor justify the employment of an attorney, and no claim for such services is chargeable per se against the estate predicated alone upon the fact of employment and services rendered.''* An attorney for a receiver v?ill be allowed compensation for services only to the extent that the services were rendered in behalf of the estate or to its benefit/* and the fixing of the compensation tor be made rests in the sound discretion of the district judge.'^'^ ITo allowance will be made to the receiver for services rendered by his attorney in the interest of petitioning creditors who were his clients.'^* The receiver should engage counsel who stand independent of the parties to the litigation, and the estate is not chargeable for services which may be given to the receiver by the attorney for either party during the continuance of such relation.'" The n\miber of attorneys employed by a receiver should not enter into the allowance of fees, which should be made as though one attorney had been employed.''^ (II) Appointed by State court.''^ — Where a receiver has been appointed in a State court in an action antagonistic to the interests of the general creditors of the bankrupt, an attorney employed by the receiver will not be allowed com- pensation for his services.^** A State court may not incumber the assets of the bankrupt's estate for services performed by attorneys for a receiver after the proceedings in which he was appointed have been suspended by bankruptcy.*^ Services rendered by an attorney of a receiver appointed in a State court which are beneficial to the estate of a bankrupt corporation, may, in pursuance of unmistakable equitable consideration, be paid for out of the estate.*^ 78 See "For Trustees," in this section, primarily on tlie fact that the services were . not beneficial to the estate. ^ »« T m -r. TT-n n tn n \ nil, 81- Lambert v. National Hog Co. (Pa. Com. 73. In re T. E. Hill Co. (C. C. A., 7th pj ■,_ 43 j^^ g e. 240, 67 Pittsb. Leg. J. 219. Cir.), 20 Am. B. E. 73, 159 Fed. 73. Fees allowed attorneys of recelTer In 74. In re Ketterer Manufacturing Co. (D. state court.— In re Rogers (D. C, Ga.), 8 C, Pa.), 19 Am. B. E. 646, 155 Fed. 987; Am BE. 723, 116 Fed 435 the court said: T TT jji i /T> n n„ \ 01 A™ -D -D The Federal court will decline to recognize I«J^E''J^l^^*.oJ^ V ?;'^;i / ^ ^' tbe authority of the State court to in- 669, 167 Fed. 428. Text, cited and approved number assets of a bankrupt for the fees in In re Leonard (D. C, Nev.), 24 Am., B. E. ^ni expenses of its ofScers entered after 97, I'OS, 177 Fed. 503. the proceedings therein were suspended by 75. Matter of Cash-Papworth, Grow-sir the bankruptcy proceedings. ... If the (C. C A., 2d Cir.), 31 Am. B. E. 709; 210 assets are delivered to the trustees by the Fed. 24. receiver of the State court, this court will 76. In re Oppenheimer (D. C, Pa.), 17 consider any application for compensation Am. B. E. 5'9, 146 Fed. 140; In re Falkca- which may be made by officers of the State berg (D. C, N. Mex.), 30 Am. B. E. 718, court, and, if allowable, will grant suitable 206 Fed. 83'5. compensation." 77. In re Kelley Dry Goods Co. (D. C., 82. Compensation of attorneys for receivei Wis.), 4 Am. B. R. 628, 102 Fed. 748. of corporation appointed by State court. — Agreement by receiver to employ attorney Where a fee has been allowed attorneys by if appointed. — No allowance should be made a State court for services rendered the re- to attorneys who have been employed by a ceiver of a corporation in that court and trust company acting as recdver and trus- ordered to be paid by such received out tee under an agreement made in advance of any funds available for that purpose, that if such attorneys procured its appoint- and prior to the making of such order the ment they stould be retained as advisors. corporation has become bankrupt and its In re Smith (C. C. A., 6th dr.), 29 Am. assets have passed under the jurisdiction B. R. 628, 203' Fed. 369. of the bankruptcy court, such fee is not a 78. In re Falkenberg (D. C, N. Mer.), priority claim constituting a lien on the 30 Am. B. R. 718, 206 Fed. 835. assets of the bankrupt corporation. Such 79. See also Am. B. E. Dig. § 108. claim is allowable only upon equitable con- 80. In re Zier (C. C. A., 7th Cir.), 15 Am. siderations for services from which the estate B. R. 646, 142 Fed. 102, holding that the in bankruptcy has derived benefit, and to the disallowance of fees in such a case rests extent only that they were beneficial in fact. 940 Expenses of Administeeing Estates. [§ 62. (5) Foe bankrupts in involuntaey cases.** — Here the statute limits compensation to services rendered to the bankrupt while performing the duties put on him by the act.®* There has been some discussion as to the meaning of the words. *^ Where there are separate attorneys for different partnership bankrupts but one allowance should be made.®" The test seems to be : did the performance of the prescribed duties materially benefit or hasten the adminis- tration of the estate,®^ and, if so, were the services of the bankrupt's attorney both necessary and instrumental to either of those ends? The bankrupt's attorney may not be allowed for services rendered in defending a suit by the trustee to compel the bankrupt to turn over assets,®® nor for contesting a petition for adjudication of bankruptcy,'^* nor for attending a first meeting of creditors, where it does not appear that his presence was of assistance to the bankrupt in performing duties required under the act,*' nor for resisting the claim of a receiver appointed by a State court prior to adjudication,®" ncr for endeavoring to effect a composition with the bankrupt's creditors.'** (6) Foe bankeupts in voluntaet cases.®^ — Here the cases take a wide range. The allowance itself and the amount are both discretionary. It has been held on the one hand that the attorney for the bankrupt is merely a general creditor entitled to dividends f'^ and, on the other, that he is entitled to an allowance for all services to the bankrupt during the proceeding, whether beneficial to the estate or not, even those connected with the discharge; and, in addition, to priority of payment.®^ The safer rule is that the bankrupt's attorney is only entitled to compensation out of the estate for services which, though performed for the bankrupt, are really "in aid of the estate and its administration." ^* This excludes services in connection with the discharge,®^ and, it is thought, save in exceptional instances, everything done after the appointment of the trustee. But it has been held that an attorney for a In re Standard Fuller's Earth Co. (D. C, Ala..), 88a. Services in resisting adjudication. — 26 Am. B. E. 562, 186 Fed. 578. See State of Where the minority stockholders of a corpo- Missouri v. Angle (C. C. A., 8th Cir.), 38 Am. ration employed an attorney to resist adjudi- B. E. 394, 236 Fed. 644, affg. 35 Am. B. E. 436, cation in bankruptcy, and later sold their stock, 224 Fed. 525. and the attorney withdrew from the case and 83. Seo also Am. B. E. Dig. § 103. adjudication was had by consent, he should 84. See Bankr. Act, § 7, ante; In re Payne not be allowed payment from the estate for (D. C, N. Y.), 18 Am. B. E. 192, 151 Fed. 1,018; professional services rendered the alleged bank- In re Woodard (D. C, N. Car.), 2 Am. B. E. rupt In resisting adjudication. Matter of Mur- 692, 95 Fed. 955. phy Boot & Shoe Co. (D. C, Mass.), 39 Am. B. Compensation of attorney for bankrupt!^- E. 811, 242 Fed. 991. An allowance of $25 to the attorney for the gg. in re Francis Levy Outfitting Co., Ltd. debtor in contemplation of bankruptcy, is suf- (d. C, Hawaii), 29 Am. B. E. S flclent, where he never appeared before the ref- 9, Whitla & Nelson v. Boyd (C. C. A., 9th ^^^ rich°°;'e'r7b^S inrall ^offe^^^l ^'^ ^^.^le"; o^ K^ntt Co' fc^'c A%th Cir . ■claim by attorneys for bankrupt examined 9J- See also Am B. E Dig § 103. and held, that $500, received by them from the 9|; i^J"® ^^'^'^ <"• ^- Iowa), 1 Am. B. E. 535, debtor in contemplation of bankruptcy, is w-i ;J ea. 889. ,,., ^ „ .„ , „ . „ „ ample consideration for all services performed 9S. In re Cross (D. C, N. Y.), 3 Am. B. E. and disbursements. Matter of Union Dredg- 187, 96 Fed. 816; Matter of Hitchcock (D. C, ing Co. (D. C, Del.), 35 Am. B. E. 555, 225 Fed. Hawaii), 17 Am. B. E. 664. 188 A reasonable fee for the bankrupt's attor- 85 See foot-notes of next paragraph, where ney, as part of the costs of administration, is the case in both voluntary and involuntary entitled to priority of payment out of the pro- bankruptcy are collated. eeeds of the sale of mortgaged property. Mat- 86. In re Eschwege (Eef., N. Y.), 8 Am, B. E. ter of Meis (D. C, Ky.) 18 Am B. E. 1C4. 94. In re Mayer (D. C, Wis.), 4 Am. B. E. 282. 87. In re Goldville Mfg. Co. (D. C, S. Car.), f«' ^^ ^-61^ ' f^^'^ed'^ll^Tn '?e ^nleVso^ (D. C, Mo.), 9 Am. B. E. 626, 120 Fed. 848. 95 i^ ^e Brudlin (D. C, Minn.), 7 Am B E. 88. In re Felson (D. C, N. Y.), 15 Am. B. E. 296, 112 Fed. 306; In re Averill, 1 N. B. N. 544; 185 139 Fed. 275; In re Stratemeyer (D. C, In re Duran Mercantile Co. (D. C. N. Mex ) Hawaii), 14 Am. B. E. 120, 2 U. S. D. C, Hawaii 29 Am. B. E. 450. 199 Fed. 961. See also Ex 269 parte Hale, Fed. Cas. 5,010. § 62.J Attoeneys foe Teustees. 941 voluntary bankrupt is entitled to an allowance for services reasonably neces- sary to enable the bankrupt to perform bis duties under the act and to secT^re the benefit of its provisions, including his discharge when entitled thereto.*' Legal services to a bankrupt in having his exemption allowed is a matter between the bankrupt and his attorneys and fees therefor are not allowable.*^ Also, where an offer of composition has been confirmed, the bankrupt must pay his attorney in the matter.®* It is well settled, too, that where the bank- rupt's attorney has received compensation from the bankrupt or any one else shortly before the bankruptcy and the amount is as much as he would have been allowed in the proceeding, no further sum should be paid.®' The allow- ance in voluntary cases is usually! to cover services in drawing the petition and schedules and until the first meeting of creditors, and should be moderate, rather than the opposite.^"'* (7) Foe teustees.^"^ — The fees of the attorney for the trustee are strictly an expense of administration and are payable as provided in this section.'"^ The trustee is not entitled to a counsel fee upon an order rejecting a claim not prosecuted in good faith/"^ nor upon the mere dismissal of the bankruptcy pro- ceedings in cases where a receivership is neither had nor asked.-^"^* It was held earljy in the administration of the present law that a trustee who was also an attorney could be allowed the same fees that would have been paid to other competent counsel,^"* but later cases do not sus- tain that holding, the trustee's fee bein"- limited bv § 48 and General Order XXXV (3).^"^ When an attorney accepts the office of trustee he sur- renders for the time his standing in the court of bankruptcy as attorney for creditors, and must look to them, not to the bankrupt estate or the court, for his compensation.^"® And where an attorney for creditors seeking to remove a trustee is subsequently employed as attorney for the new trustee, his compensation must be limited to services rendered after his employment as attorney for the trustee.^*'' As a general rule an allowance should not be made to a trustee in bankruptcy for compensation for an attorney employed by him for doing such things for the protection and benefit of the estate as do not 96. In re Christianson (D. C, No. Dak.), 23 Stockbrokerage case. — Upon the bankruptcy Am. B. B. 710, 175 Fed. 867. of a stockbroker an allowance cannot be made 97. In re Castlebury (D. C, Ga.), 16 Am. B. to the attorney for the trustee out of securities E. 480, 143 Fed. 1,018; Matter of Bohrman (D. or their proceeds which the claimants have C, Ga.), 34 Am. B. E. 801, 224 Fed. 287. successfully reclaimed. Matter of Wilson & Co. 98. In re Martin (D. C, N. Y.), 18 Am. B. E. (D. C, N. Y.), 42 Am. B. E. 350, 252 Fed. 631. 250, 151 Fed. 780. Attorney working against estate. — An attorney 99. In re O'Connell (D. C, N. Y.), 3 Am. B. B. for a trustee in bankruptcy who, while thus 422, 98 Fed. 83; In re Smith (D. C, N. Car.), 5 acting as attorney for the estate was really Am. B. E. 559, 108 Fed. 39; Matter of Union working against the interest of the estate and Dredging Co. (D. C, Del.), 35 Am. B. E. 555, its creditors, is not entitled to receive compen- 225 Fed. 188. Compare In re Goodwin, 2 N. B. sation for hia services. Matter of De Ban (C. N. Eep. 445. C. A., 6th Cir.), 44 Am. B. E. 409, 260 Fed. 732. 100. Compare In re Carolina Cooperage Co. Action to recover preference. — The reasonable (D. C, N. Car.), 3 Am. B. B. 154, 96 Fed. 950; fee of counsel employed by the trustee to re- Matter of Meis (D. C, Ky.), 18 Am. B. E. 104, cover a voidable or fraudulent preference made holding that where there had been no litiga- by the bankrupt constitutes a part of the trus- tion and where the services to the bankrupt had tee's expenses, and as such a part of the costs not been onerous, an allowance of $75 was ex- and expenses of administration entitled to pref- eesslve and should be reduced to $25. erential payment. Page v. Eogers (C. C. A., Two per cent of the amount realized from 6th dr.), 17 Am. B. E. 854, 149 Fed. 194; revd. the estate has been held a proper allowance. on other grounds, 211 U. S. 575, 21 Am. B E. Matter of Meiss (D. C, Ky.), 18 Am. B. E. 104. 496, 53 L. Ed. 332, 29 Sup. Ct. 159. 101. See also Am. B. E. Dig. § 106. 103. Matter of Borne (D. C, N. J.), 19 Am. B 103. In re Burke (Bef., Ohio), 6 Am. B. B. E. 820, 162 Fed. 971. S02; In re Stotts (D. C, Iowa), 1 Am. B. B. 103a. Matter of Ohio Motor Car Co (C C A. 641, 93 Fed. 438. 6th Cir.), 39 Am. B. E. 218, 241 Fed. 330.' ' ' A trustee in bankruptcy is not entitled to 104. In re Mitchell (Bef., Pa.), 1 Am. B. B. credit for counsel fees for services unconnected 687. with the sale of property subject to lien. lOS. Compare In re Mnldaur, Fed. Cas 9,905 Guge! V. New Orleans Bank (C. C. A., 5th Cir.), Judge Bay In the case of In re McKenna (D 39 Am. B. B. 160, 239 Fed. 676. C, N. Y.), 15 Am. B. E. 4. 157 Fed. 611, hold. 942 Expenses of ADMiNiSTEEiiirG Estates. [§ 62. require professional skill, but are well within the ability of a person possessing ordinary intelligence and business capacity.^*® The determinative question is not whether it is agreeable and convenient to the trustee to have attorneys to act for him, but whether it is reasonably necessary for the welfare of the estate that counsel should be so employed. This rule, in the absence of special elements of difficulty, has general application with respect to such matters as the payment of taxes, the collection of rents,' the payment for water and elec- tricity, and the continuance of insurance in force. But where there are special difficulties in successfully attending to such matters, which could be overcome through the personality of a certain attorney, but probably would have proved insurmountable without his intervention, compensation may be allowed.^"® The amount of the allowance depends on a variety of circumstances, viz. : The time employed, the difficulty of the legal questions involved, the result achieved, the amount at stake, and the size of the estate.^'" The allowance should be moderate, rather than large.^" The fee of an attorney of a trustee for services rendered in the recovery of assets may not depend upon agreement between the attorney and trustee and be deducted from the amount of the recovery; the right to and payment for such services depends absolutely upon the discretion of the court.*^ An allowance should not be made for services rendered before the appointment of the trustee. ^'^ Allowances should not be made until the services are rendered, or usually, until the final meeting of tbat a trustee Is not entitled to compensation for services rendered as an attorney; In re Fel- •on (D. C, N. Y.), 15 Am. B. K. Ib5, 139 Fed. nS; In re Halbert (C. C. A., 2d Cir.), 13 Am. B. E. 399, 134 Fed. 236. 106. In re Byans (D. C, N. C), 8 Am. B. E. 730, 116 Fed. 909. 10?. In re Pldler & Son (D. C, Pa.), 23 Am. B. E. 16, 172 Fed. 632. 108. Matter of Union .Dredging Co. (D. C, Del.), 35 Am. B. E. 555, 225 Fed. 188; In re KnigHt (Bef., Olilo), 5 Am. B. E. 560. 109. Matter of Union Dredging Co. (D. C, Del.), 35 Am. B. E. 555, 225 Fed. 188. 110. In re Knight (Eef., Ohio), 5 Am. B. E. 660; In re Burrus (D. C, Va.), 3 Am. B. E. 296, 97 Fed. 926. Compare also, for an attempt to establish compensation on a sliding scale basis. In re Smith (Eef., N. T.), 2 Am. B. E. 648. See also In re Drake, Fed. Cas. 4,058 ; In re Noyes, Fed. Cas. 10,371; In re Treadwell, 23 Fed. 442; In re Eude (D. C, Ky.), 4 Am. B. E. 319, 101 Fed. 805; In re McKenna (D. C, N. Y.), 15 Am. B. E. 4, 137 Fed. 611; Matter of Tietje (D. C, N. T.), 44 Am. B. E. 638, 263 Fed. 917; Matter of Ninam (Eef., Mich.), 14 Am. B. E. 515, al- lowing fee of $25.00 where the attorney by his diligence recovered assets valued at ?16,000; In re Hoffman (D. C, Wis.), 23 Am. B. E. 19, 173 Fed. 234. The attorneys allowance may be $75 'where the report of the trustee shows assets received to the amount of $7,500. In re Lang (D. C, Tex.), 11 Am. B. E. 794, 127 Fed. 755. An allowance of $15,000 has been held not to be excessive. Page V. Eogers (C. C. A., 6th dr.), 17 Am. B. E. 854, 149 Fed. 194, revd. on other grounds, 211 U. S. 575, 21 Am. B. E. 496, 53 L. Ed. 332, 29 Sup. Ct. 159. Where a trustee and his attorney by per- glstence compelled a silent partner of a bank- rupt to pay back $6,300 which he had with- drawn without right, and it appearing that to cecnre that amount an action was brought and compromised, an allowance of 25 per cent of the amount recovered, after deducting the other expenses attendant on such recovery, is proper. Matter of Tavarro & Co. (D. C, Porto Kico), 39 Am. B. B. 342, 9 P. E. Fed. 414, Fees dependent upon size of estate and ser- vices renciered. — Counsel for the trustee of a bankrupt estate involving $16,147, whose duties were laborious, extending over several years and in four or five different courts, should not be granted an allowance in excess of $2,500, where the assets, which had been recovered by attorneys for so-called antecedent creditors were in . safe hands, and the legal question in- volved was whether the antecedent creditors should share with the other creditors. Matter of Atkins (D. C, Ky.), 34 Am. B. E. 794, 225 Fed. 639. Considerations in arriving of amount of com- pensation. — In Matter of Metallic Specialty Mfg. Co. (D. C, Pa.), 32 Am. B. E. 446, 215 Fed. 937, the Court said: "It is the duty of every- one connected with the administration of the bankruptcy laws to make sure that the fund which would otherwise be distributed among creditors is not diminished by the payment of any fees or charges except those intended by the agts of Congress to be paid. Counsel for the trustee both as representing the trustee and therefore the court, and as members of the bar are in an especial sense to have all their acts, and emphatically their claims to compensation, pass under the supervision of the Courts. As the compensation allowed by the court Is in fact usually paid by creditors or the bankrupt, the power to' fix the amount of compensation ought to be exercised with that degree of care and discriminating Judgment which any one should exercise who is spending the money of another." Additional allowance. — Circumstances held not to warrant the award of additional compen- sation. Matter of Terrell (D. C, S. Car.), 40 Am. B. E. 138, 250 Fed. 317. 111. In re Talton (D. C, N. Car.), 14 Am. B. E. 617, 137 Fed. 178. Compare In re Knight (Ref., Ohio), 5 Am. B. R. 560, with In re Cur- tis (C. C. A., 7th Cir.), 4 Am. B. E. 17, 100 Fed. 784. See also In re Davenport, Fed. Cas. 3,587; In re Cook, 17 Fed. 328. 112. Matter of Stemper (D. C, Ariz.), 34 Am. B. E. 806, 222 Fed. 690 113. In re N. Y. Mail Steamship Co., Fed. Cas. 10,210. § 62.] Effect of Amendment of 1903. 943 creditors. Where the service has been unusual or protracted or the amount asked for is large in proportion to the estate, a notice to creditors of the intention to apply is good practice, though doubtless not essential.^^* An allowance to attorneys for the trustee in bankruptcy intended to cover services still to be rendered, but expressly limited to ordinary services, does not cover extraordinary and, at the time, unexpected and unanticipated services rendered by counsel, and an additional allowance may be granted.^'® A trustee's attorney should not be deprived of his compensation because he had previously acted for the bankrupt ;^^® but where attorneys have acted for a receiver and heen paid for their services, they should not be allowed compensation for services as attorneys to the petitioning creditors. ^^'^ The trustee is entitled "upon an accounting to amounts reasonably expended by him for the services of an attorney, made necesaary for the preservation of thai estate which had been assigned to him as assignee for creditors prior to his appointment as trus- tee.^^* The fact that the attorney for the truate-e is also the attorney for st-veral of the creditors of the bankrupt, will not operate to deny him fair compensa- tion for services which inure to the benefit of the estate.^^^^ The allowance by the referee is not a final adjudication but a mere administrative order subject at any time before the closing of the estate to re-examination.^^^'' (8j i'oB ASSIGNEE praoE TO BANKETjPTCY."® — Attomeys for an assignee, in possession prior to bankruptcy, should not be allowed fees out of the estate, save in unusual circumstances.-^^"' d. Effect of amendments of 1903. — Generally speaking, the policy of the law as amended as to attorneys' allowance is, perhaps, more liberal than was that of the original act.^^ Within proper limits, such a tendency is in aid of administration. The courts may be relied on to check any effort to carry it too far. The amendment of § 64-b (2) should also be read in this connection. It is in line with the practice as previously established in some of the ■districts. ^^ 114. Consult In re Arnett (D. C, Tenn.), 7 Smith (C. C. A., 6tli Clr.), 29 Am. B. K. 628, Am. B. K. 522, 112 Fed. 770 ; Ex parte Whltcomb, 203 Fed. 369. Fed. Cas. 17,529. 118. In re Byerly (D. C, Pa.), 12 Am. B. B. 116. Matter of Metallic Specialty Mfg. Co. (D. 186, 128 Fed. 637. See also Randolph v. Scruggs, C, Pa.), 32 Am. B. B. 446, 215 Fed. 937. 190 U. S. 533, 10 Am. B. E. 1, 47 L. ed. 1165, 23 lie. In re Dimm & Co. (D. C, Pa.), 17 Am. Sup. Ct. 710. B. E. 119, 144 Fed. 402. H8a. Matter of Tietje (D. C, N. Y.), 44 Am. The attorney for the trustee is entitled to re- B. E. 638, 263 Fed. 917, cover from him the atfiount, included in a com- 118h. Setting aside allowance. — A court of position, for services rendered to the trustee bankruptcy is a court of equity and has un- in the collection of debts, although the plaintiff doubted jurisdiction to set aside an allowance also acted as attorney for the bankrupt. Keyes for services and expenses of an attorney of the T. McKirrow (Mass. Sup. Ct.), 9 Am. B. E. 322, trustee In bankruptcy, when it satisfactorily 180 Mass. 261, 62 N. E. 259. appears that the allowance was procured 117. In re Southern Steel Co. (D. C, Ala.), 22 through fraud. Matter of De Eau (C. C. A., Am. B. E. 476, 169 Fed. 702. 6th Cir.), 44 Am. B. E. 400, 260 Fed. 732. Employment by trustee of attorneys repre- 119. See also Am. B. E. Dig. § 108. sentingr creditors. — Attorneys who acted for the 120. In re Pauly (Eef., N. Y.), 2 Am. B. E. receiver and trustee and conducted a contest 333. In Eandolph v. Scruggs, 10 Am. B. B. 1, over a claim filed by bankrupt's wife, who were 190 U. S. 533, 47 L. Ed. 1165, 23 Sup. Ct. 719, also the attorneys for certain creditors hav- a claim for services beneficial to the estate was ing claims in a large amount, may be paid com- allowed. See ante under "Allowances for as- pensatlon for services actually rendered for the signees for benefit of creditors." benefit of the estate, it appearing the interests Attomeys for assignees. — As to the compen- of their clients with respect to the contested sation of atto.neys for general assignees paid claim were not adverse to any class of eredi- t?em prior tq bankruptcy, see Louisville Trust tors, that the estate was not prejudiced by their ^°-/- £2'"i°f°^,;/|* ^- «• 18, 7 Am. B. E 421^ advice to contest the claim, and that it had *« ^ ^d 41^, 2^ Sup. Ct. ^^-^I^ggg^e Klein & been the practice in the district to permit the ^^ < Compare In^'re Ma^s (b C. W. Va.T, 7 attorneys for the petitioning creditors to rep- j^^m. B. B. 764 114 Fed. 600 resent the trustee where their interests were not igi. Coropare Bankr.'Act, §§ 2 (3), 40, 48. adverse to the general creditors, and to allow me. In re Felson (D. C. N. Y.), 15 Am.' B. attorneys for creditors to advise him. In re E. 185, 139 Fed. 275. SECTION SIXTY THREE, DEBTS WHICH MAY BE PROVED. § 63. Debts Which may be Proved. — a Debts of the bankrupt may be proved and allowed against his estate which are (1) a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not, with any interest thereon which would have been recoverable at that date or with a rebate of interest upon such as were not then payable and did not bear interest; (2) due as costs taxable against an involuntary bankrupt who was at the time of the filing of the petition against him plaintiff in a cause of action which would pass to the trustee and which the trustee declines to prosecute after notice; (3) founded upon a claim for taxable costs incurred in good faith by a creditor before the filing of the petition in an action to recover a provable debt; (4) founded upon an open account, or upon a contract, express or implied; and (5) founded upon provable debts. reduced to judgments after the filing of the petition and before the consideration of the bankrupt's application for a discharge, less costs incurred and interests accrued after the filing of the petition and up to the time of the entry of such judgments. h Unliquidated claims against the bankrupt may, pursuant to appli- cation to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate. Analogous provisions: In U. S.: As to provable debts in general, Act of 1867, § 19, R. S., § 5067; Act of 1841, § 5; Act of 1800, § 39; As to unliquidated claims. Act. of 1867, § 19, R. S., § 5067; As to contingent claims. Act of 1867, § 19, R. S., § 5068; Act of 1841, § 5; Act of 1800, | 39; As to surety debts. Act of 1867, § 19, R. S., §§ 5069, 5070. In Eng.: Act of 1883, § 37. In Can.: Act of 1919, §§ 44, 48, 49, 50, 51. Cross-references: To the law: Definition of debt, § 1(11). and vice versa, § 5-g. Suits by and against bankrupts upon provable debts, § 11-a. Provable debts may be discharged, § 17. Proof and allowance of debts, generally; procedure, § 57. Petitioning creditors must have provable debts, § 59-b. Debts which have priority of payment, § 64-b. Dividends to be declared and paid on debts proved, § 65. Set-off in case of mutual debts and credits, § 68. To the General Orders: General regulations as to proof of claims, XXI. [944] § 63.J Synopsis of Section. 945 CroEs-references — ' Continued: To the Forms: Proof of unsecured debt, No. 31; of secured debt, No. 32; of debt due corporation, No. 33 ; of debt by partnership. No. 34 ; of debt by agent or attorney, No. 35; of secured debt by agent. No. 36. Affidavit of lost bill or note. No. 37. See also Supplementary Forms, post; Hagar and Alexander's Bankruptcy Forma (2d ed.). SYNOPSIS OF SECTION. DEBTS IVHICH MAY BE! FROVKD. I. History and Comparative Legislation, 947. n. Determination of Provability, 947. &. As affected by statute, 947. b. Defenses to allowance, 947. c. Proved and allowed, 948. d. Ex contractu and ex delicto, 949. (1) In general, 949. (2) Rule under former, law, 949. (3) Rule under present law, 949. (4) Claims tortuous in character on contract,. 949. (5) Fraud or connivance, 951. 6. The debt must have existed when the petition was filed, 951. f. Equitable debts, 952. g. Debts against more than one person, 953. h. Provability as affected by the person proving, 954. (1) In general, 954. (2) Transactions between husband and wife, 955. (3) Services of minor child, 955. 1. Provability as affected by fraud or preference, 956 j. Cross-references, 956. m. Fixed Liability Absolutely Owing, 956. a. In general, 956. b. Whether then payable or not, 957 c. Evidence by a judgment, 957. (1) In general, 957. (2) Impeaching judgments, 959. d. Evidenced by an instrument in writing, 960. (1) In general, 960. (2) Bills and notes, 960. (I) In general, 960. (II) Who may prove because of promissory note, 960. (Ill) Notes of corporations, 961. (3) Stipulation for payment of collection fees, 962. (4) Interest, 962. 60 946 Debts Which May Be Proved. [§ in. Fixed LiabUity Absolutely Owing — Continued e. Indorser and surety debts, 963. (1) Liability of indorseks, 963. (2) Surety and corporate bonds, 964. f . Liabilities for taxes, 965. g. Other debts falling within this paragraph, 965. IV. Open Accotxnts; Contracts, 965. a. Debt founded on open account, 965. b. Debt founded on a contrad, express or implied, 966. (1) In general, 966. (2) Gambling transactions, 967. (3) Owing at time of filing petition, 968. (4) Breach of warranty, 968. (5) Breach of executory contract, 968. (I) In general, 968. (II) AnPidpatory breach, 969. (6) Contingent contractual liabilities, 970. (7) Continuing contracts, 970. (8) Contracts of employment and for commissions, 971. (9) Breach of covenant in lease, 972. (10) Implied contracts, 972. V. Judgments Entered after Bankruptcy, 973. VI. Claims for Costs, 973. a. In general, 973. b. Costs against an involuntary bankrupt, 974. c. Costs incurred in good faith in an action to recover a provable debt, 974 d. Costs in attachment suits, 975. Vn. Unliquidated Claims, 975. a. In general, 975. b. Effect and purpose of subsection, 976. c. Injuries to person or property, 976. d. Liquidation, how accomplished, 977. 6. Contingent liabilities, 977. Vm. What Debts are not Provable, 979. a. In general, 979. b. Judgments for fines and penalties, 979. c. Alimony due to accrue, 980. d. Rent to accrue, 980. e. Debts outlawed by a statute of limitation, 983. f . Commissions of trustee, 984. g. Cross-references, 984. § 63-a.J Deteemi^n'atioh' of Provability. 947 I. HISTORY AND COMPARATIVE LEGISLATION. A clear understanding of what is a provable debt is important to either the due administration of, or practice under, all bankruptcy laws. If provable, a debt is the basis of its owner's right to a_ pro rata share in the estate ; if provable, with certain exceptions, always stated in the statute,^ it is barred by the discharge. The earlier statutes were inclined to go far afield in defining such debts. Of late, the tendency has been to make the phrasing generic, and leave its construction to the courts. Thus, the present English law, after excepting all "demands in the nature of unliquidated damages arising other- wise 'than 'by reason of a contract, promise or breach of trust," in substance declares provable: "all debts and liabilities, present or future, certain or con- tingent."^ The same is true of the new Canadian act.^* The same tendency is apparent in the United States. Section 19 of the law of 1867 was phrased in greater detail than § 63 of the present statute.^ Much of it was expressive of existing rules of law; these are unquestionably still in force, even though <>mitted from the act of 1898. The omission of other provisions, not expres- sive of geneiral rules, seems to warfant the view that having been dropped out, they are no longer the law. These differences are considered in appropriate paragraphs, post. II. DETERMINATION OF PROVABILITY. a. As affected by statute. — Subsection a indicates those "debts" that are provable; subsection h those debts which, because unliquidated at the time of the petition, are not immediately provable, but may be when liquidated. "Debt" and "liability" are here used somewhat loosely. The definition of the former in § 1 (11) seems hardly applicable, as it results in the truism: a debt is a debt. The tendency of the courts has been to give a somewhat narrow meaning to the word.* ' Strictly, a debt is " something owed." Here this is immaterial; the five subdivisions of subsection a indicate the only obligations of the debtor which are, strictly speaking, provable. b. Defenses to allowance. — In general every existing claim upon which an action at law or in equity could be maintained at the time of the filing of the petition is provable in bankruptcy, and any defense which might have been iirged had action been brought on the claim may be urged against its allowance in bankruptcy.® If the claim is not enforceaible because of some State statute, 1 See Bankr. Act, § 17. bankruptcy upon a debt at that time provable; «.' Eng. Act of 1883, § 37. fliftb, tbe embodiment of an express provision 2a. Can. Bankr. Act of 1919, § 44. making costs incurred by the bankrupt In 3. The difference between the two statutes In certain suits by and against him provable this particular are tersely stated in a previous debts; sixth, the embodiment of a provision edition, as follows (3d ed., p. 380) : that unliquidated claims against the bank- "The following are the most important dif- rupt may, pursuant to application to the ferences: first, omission from the present court, be liquidated in sucli a manner as it act of any express provision authorizing the , ,, rlirppt anrl mav tViprpaffp^r he nrnvprl proving of contingent debts and liabilities, or Shall direct, and may thereatter be proved the liability of the bankrupt, as surety, and allowed against the bankrupt's estate: indorser, or guarantor; seoond", omission of seventh, the lack of any general provision any express provision as to the proving of as to the time when a debt must have be- damages resulting from a conversion or tres- come fixed and owing in order to be prov- pass by the bankrupt; third, omission of any able." express provision as to the apportionment of 4. In re Sutherland. Fed. Cas. 13,639; Ti rent and proving for the same; fourth, the re Fpye, Fed. Oas. 5,021; Wilson v. Bank, embodiment in the present act of an express 3 Fed. 391. provision as to proving a judgment recovered 5. In re Prescott, 9 N. B. R. 385, Fed. after the commencement of proceedings in Cas. 11,389, 5 Biss. 523. 948 Debts Which May Be Peoved. [§ 63-a. and this clearly appears from the character of the claim itself, it is not to be regarded in a strict sense as a provable debt.® Thus it has been held that a feme covert may set up her coverture as a defense to a claim made against her estate.^ And if a corporation enters into an ultra vires contract upon v?hich it could not bring an action it cannot prove a claim arising thereon in bank- ruptcy.* So contracts void because of the consideration being ill^al or because the contract is against public policy cannot be the foundation of a debt prov- able or at least allowable in bankruptcy.^ So as to stock gambling trans- actions. But the burden of proof rests upon those disputing a contract apparently valid.^" So if the statute of frauds would be a defense to an action it may be set up as an objection to the allowance of a claim." The considera- tions here referred to relate more to the allowance of the claim than to the mere presentation of it for the purpose of proof. 0. "Proved" and "allowed." — In this connection, it is important to recall the difference between a debt which may be proved and one which may be allowed. As has been stated, every claim on which an action in law or in equity might have been maintained may be proved ;^^ whether a debt so proved will be allowed is decidedly another matter. This distinction is perhaps some- what artificial, the words " proved and allowed " being in § 63 yoked together and their equivalency to "provable" apparently taken for granted.^ A dis- allowed claim and a non-provable debt are not identical things; and where a debt is disallowed because without foundation the claimant does not have a non-provable debt." It has been held that the term " provable debt " is not limited in its meaning to a debt against the allowance of which no defense can be successfully interposed; as where a claim is disallowed for the reason that it was barred by the statute of limitations it is nevertheless a provable debt, so far at least as the bankrupt's discharge therefrom is concerned.^® 6. In re Talbot (D. C, Mass.), 7 Am. B. 9. In re Chandler, 9 N. B. E. 514, Fed. R. 29, 110 Fed. 924, in which case it was Cas. 590, 6 Biss. 53; In re Greene, 15 N. B. held that in Massachusetts, a wife's claim R. 198, Fed. Cas. 5,751; Ex parte Jones, for money advanced to her husband from her 17 Ves. 332; Lowe v. Waller, 1 Douge, 736; separate estate as a loan cannot be enforced In re Young, Fed. Oas. 18,145, 6' Biss. 53; by either legal or equitable proceeding!), and Ex parte Mumford, 15 Ves. 289; Lehman so cannot be proved against her husband's v. Strassberg, 2 Woods, 554; Ex parte Cot- estate in bankruptcy. trell, 2 Cowp. 742; Ex parte Daniels, 14 Claims unauthorized by statute. — Claims Ves. 191. for merchandise sold and delivered to a co- 10. See Hill v. Levy (D. C, Va.), 3 Am. operative company, on credit, in violation of B. E. 374, and note, 98 Fed. 94. As to a statutory inhibition, are not provable debts gambling contracts, see In re Dorr ( C. C. in bankruptcy, so as to entitle the holders A., 9th Cir.), 26 Am. B. B. 408, 186 Fed. thereof to petition for tlie adjudication in bank- 276; In re Norris (D. C. Minn.), 26 Am. B. ruptcy of said association. In re Wyoming Val- -p nic ion Va,^ ini Lr,A oi=„ j;=„„o„; ley Co-operative Association (D. C, Pa.), & Am. ^- ^^^' ,1^° ,f^'^- ^pl' *°? ^^^° difcussion, B. E. 462, 198 Fed. 436. post, under this section, sub-title, "Gambling 7. In re Eacliel Goodwin, 8 N. B. E. 380, Fed. transactions." "^tl'/fe k^lli Toreene, Fed. Cas. 7,233, 12 '\''TcJ-J^J^''^ ^^"^''''' " ^- ^- ^^ Blateli. 209; Matter of Springfield Eealty Co. °^°' ■''^"- V^- *.^M^- (D. C. Micli.), 44 Am. B. B. 105, 257 Fed. 785. 12. See In re Jordan, 2 Fed. 319. Compare Matter of Machine Metal Products Co. 13. Note that the words "provable debts" Inc. (C. C. A., 2d Cir), 41 Am. B. E. 505, 251 Fed. „c„„r ;„ g 17 „„j xj^ Ji,.^^ "nrnvaliln 280; Garden City, etc. Co. v. Commerce Trust , . „ . ° J-'' ^°" ^'^^ words provable Co. (C. C. A., 7th Cir.), 44 Am. B. E. 340, — Claims in § 59-b. ^*»- "".:... ..... 14- Lesser v. Gray, 236 TJ. S. 70, 34 Am. Fnrcnase or Its own stocli contrary to low u TJ a rq T v^ .171 ok a„T. r'l 0017 by bankrupt corporation.— Where bankrupt, °- ^- ^' °^ ^- '^°- *^1' ^5 bup. Ct. 837. a corporation, purchased from claimant 15. Hargadine, etc. Dry Goods Co. v Hud- shares of Its own stock in a manner contrary rr P A stVi Pir 1 in Am n B 001; to the provisions of the Oklahoma statutes ^°° '^j ^„^'' °"^ y^-'' ^ ^ ' ™ ' relating to the purchase by a corporation of 132 Fed._232, affg. 6 Am. B. R. 657. Where its capital stock, the transaction was void a firm gives a promissory note to secure an and fraudulent as to its creditors and a existing indebtedness of one of the members, claim for the balance due on the purchase price .. „ .+„t„j.„ „f i'„!i„i- • . v . .. should be disallowed. Matter of Sapulpa ^^e statute of limitation 13 not a bar to the Produce Co. (Eef., Okla.), 26 Am. B. E. 900. provability of the note, although the original § 63-a.] Claims Based on Conteacts. 949 But this does not affect the question of the "provability" of a debt for the purpose of determining whether or not it should be paid out of the estate. It would seem better, therefore, to retain the distinction between the " prova- bility" and " allowaibility " of a debt; the latter term including the former and requiring in addition thereto a determination as to whether the debt is a valid claim against the estate. d. Ex contractu and ex delicto. — (1) In gbneeal. — Liabilities grounded in contract are, almost without exception, provable. So also are judgments grounded in tort.^® Whether mere liabilities ex delicto may be liquidated and thus become provable has been doubted, (2) Rule ujstdee foemee law. — Under the former law, such claims, if *' on account of any goods or chattels wrongfully taken, converted or withheld," i. e., if in conversion, were provable, but only after being duly liquidated.^^ With the single exception next noted, other liabilities sounding in tort were not.^^ Debts created by the fraud or embezzlement of the bankrupt were, by the terms of another section, made provable, but were also declared not dischargeable.^^ (3) Rule undee peesent law. — Even the clause above quoted has been omitted from the present law ; the same is silent as to the provability of debts in fraud or for embezzlement. Hence, the argument that such mere liabilities are not provable. But, strictly, debts grounded in tort are as much liabilities as are those entirely ex contractu, and a distinction between those actually liquidated at the time the petition is filed and those which may be thereafter liquidated is somewhat artificial.^" Besides, § 17 now excepts from discharge- able debts many "provable debts" that are unliquidated torts; the words "judgments in actions" in § 17-a (2) having now given place to the word "liabilities." It would seem, therefore, that liabilities for torts per se, and not merely those provable on the theory of quasi-contracts,^^ may now be liquidated and proven and allowed, at least all those that are both in praesenti debts as (distinguished from fines or duties). ^^ (4) Claims toetuous in chaeactee based on conteaot. — The Supreme Court has held that subsection a of this section, defining provable debts, must be r^ad in connection with § 17 limiting the operation of dis- charges, in which the provable character of claims for fraud in general is recognized, by excepting from a discharge claims for frauds which have been reduced to judgment, or which were committed by the bankrupt while acting as an officer, or in a fiduciary capacity ; and that, therefore, if a debt originates, or is "founded upon an open account, or upon a contract, expressed or implied," it is provable against the bankrupt's estate, though the creditor may indebtedness was so barred. Dacovicli v. result from the doctrine stated in the text. Schley (C. C. A., 5tli Cir.), 13 Am. B. K. Consult section seventeen. See also the limi- 752, 134 Fed. 72. tation of the English statute to unliquidated 16. In re Putnam (D. C, Cal.), 27 Am. damages "by reason of a contract, promise, B R 923, 193 Fed. 464, citing text. or breach of trust;" Act of 1883, § 37. 17. Act of 1867, § 19, E. S., § 5061; In re 21. See In re Hirschman (D. C, Utah), Bailey, Fed. Cas. 729; In re Hennocksburgh, 4 Am. B. E. 715, 104 Fed. 69, and In re Fed. "Cas. 6,367; Weaver v. Voils, 68 Ind. Filer (Eef., K Y.), 5 Am. B. E. 582, for 191. tlie prevailing rule before the amendatory act 18 In re Schuchardt, Fed. Oas. 12,483; of 1 903. And compare In re Lazarovic (Eef Oilman v. Cate. 63 N. H. 278. Kan.), 1 Am. B. E. 476, and In re Gushing 19. Act of 1867, § 33, E. S., § 5117. (Eef., N. Y.), 6 Am. B. R. 22. 20. On the other hajjd, it is, of course, 22. For instance, fines for crimes, alimony, true that much practical inconvenience would and rent to accrue. 950 Debts Which May Be Proved. [§ 63-a. elect to bring his action in trover, as for a fraudulent conversion, instead of in assumpsit for a balance due upon an open account.^ In other words, if a party has a cause of action which, at his election, he may main- tain either upon a contract or in tort, then such cause of action becomes a provable debt.^ If the claimant elects to sue in tort upon his claim, his debt is not thereby deprived of its provable character,^^ but if he proves his claim as founded on an implied contract, he will be deemed to have waived the tort, and will be precluded from a recovery based thereon.^® It is a well settled rule that where a tort-feasor, by conversion of personal property, has sold the property converted and received cash therefor, the true owner may sue him for money had and received as on an implied contract.^ It follows that a claim based upon such a transaction is a provable debt. It has, therefore, been held that an obligation resting upon an officer or other person occupying 23. Crawford v. Burke, 195 U. S. 176, 12 Am. B. E. 659, 49 L. Ed. 147, 25 Sup. Ct. 9, revg. 201 111. 581. And see Clarke v. Rogers, 228 U. S. 534, 30 Am. B. R. 39, 57 L. Ed. 953. 33 Sup. Ct. 587; Friend v. Taleott, 228 U. S. 27, 30 Am. B. E. 31, 57 L. ed. 718, 33 Sup. Ct. 505. See cases digested J-jn. Bankr. Dig. § 845. 24. Reinhardt v. Freiderich (Ind. App. Ct.), 34 Am. B. R. 633, 635, 108 N. E. 238, citing Collier on Bankruptcy (9th ed.), 3l9i6, 853, 870, and the following cases: Craw- ford V. Burke, 195 U. S. 176-194, 12, Am. B. B. 659, 25 Sup. Ct. 9, 49 L. Ed. 147; In re Hirschman (D. C, Utah), 4 Am. B. E. 715, 104 Fed. 69; Clark v. Rogers (C. C. A., 1st Cir.), 26 Am. B. E. 413, 183 Fed. 518; Disler v. McCauley, T Am. B. E. 138, 66 N. Y. App. Div. 42, 73 N. Y. Supp. 270; In re Filer (D. C, N. Y.), 5 Am. B. E. 835, 125 Fed. 261, Tinker v. Colwell, 193 U. S. 473, 11 Am. B. E. 568, 24 Sup. Ct. 505, 48 L. Ed. 754 ; Barrett T. Prince (C. C. A., 7th Cir.), 16 Am. B. E. 64, 143 Fed. 302; Sabinal Nat. Bank v. Bryant (Tex. Civ. App.), 39 Am. B. E. 304, 191 S. W. 1179. 26. Crawford v. Burke, 195 tJ. S. 176, 12 Am. B. E. 659, 49 L. Ed. 147, 25 Sup. Ct. 9. Effect of waiver. — When a tort is of a char- acter which may be waived and an action quasi ew contractu maintained, the claim is a debt within the meaning of the bankruptcy act and provable. First National Bank v. Bamfuth (Vt. Sup. Ct), 37 Am. B. B. 315, 96 Atl. 600. 2». standard Varnish Wks. v. Haydoek (C. C C. A., 6th Cir.), 16 Am. B. B. 286, 143 Fed. 318; In re Hirschman (D. C, Utah), 4 Am. B. B. 715, 104 Fed. 69; Bunting Stone Hardware Co. T. Alexander (Tex. Civ. App.), 38 Am. B. E. 631, 190 S. W. 1152, holding that wtiere a cred- itor stands, either in the proceeding in bank- ruptcy or in a suit in a State court, upon a contract as originally made, he waives any right arising thereon in tort, and the claim as a consequence becomes one provable in bank- ruptcy and from which the bankrupt is re- leased when discharged. Bights against joint tortfeasors. — If the prin- cipal wrongdoer has become bankrupt and the plaintif has proved his claim as upon an im- plied contract against such bankrupt, and re- ceived his dividends thereon, he cannot, at the same time or thereafter, maintain an action in tort against those who may have assisted the principal wrongdoer in converting the property. Shonkweiler v. Harrington ^Neb. Sup. Ct.) 42 Am. B. E. 4-15, 1C9 N. W. 258. Waiver of tort, and recovery on qnaBl-con- tract. — In the case of Clcrke v. Rogers (C. C. A., 1st Cir.), 26 Am. D. E. 413, 417, 183 Fed. 518, the court said : " A claim based on .a tort as known at common law is un- doubtedly provable whenever it may be re- solved into an implied contract. For ex- ample, it is a settled rule that where a tort-feasor by conversion of personal prop- erty has sold the property converted, and received cash therefor, the true owner may sue him for money had and received as on an implied contract. This, of course, is a mere fiction of law; but, like all other such fictions, it is effectual when it will accom- plish the ends of justice. So that, in that Ci?8e, the owner of the property may proceed for a tort., or, at his option, on an implied contract, which would entitle him to make proof under section 63. An illustration ap- pears in Tindle v. Birkett, 305 U. S. 183, 186, 18 Am. B. E. 121, 27 Sup. a. 493, 51 L. Ed. 763. On the other hand, a mere tort, for example, a trespass involving a mere destruction of property, does not lay the foundation for a proceeding under that sec- tion. The force of Crawford v. Burke, 195 U. S. 176, 13 Am. B. E. 659, 25 Sup. Ct. 9, 49 L. Ed. 147, is not correctly understood by the appellee here. This is made plain by what is said in Dunbar v. Dunbar, 190 U. S. 340, 350, 10 Am. B. E. 139, 23 Sup. Ct. 757, 47 L. Ed. 1084, in the opening paragraph; so that the result of it all is that claims for mere torts, like personal injuries and injuries to real property, are not provable, as was determined by the Circuit Court of Appeals for the Third Circuit in Brown & Adams v. United Button Co. (C. C. A., 3d Cir.), 17 Am. B. E. 565, ld9 Fed. 48. 79 C. C. A. 70, 8 L. E. A. (N. 8.) 961, and by the Circuit Court of Appeals for the Second Circuit in In re New York Tunnel Co. (C. C. A., 2d Cir.), 20 Am. B. E. 25, 159 Fed. 688, 86 C. C. A. 556." 27. Clarke v. Eogers (C. C. A., 1st Cir.), 26 Am. B. E. 413, 183 Fed. 518 (affd. 328 U. S. 534, 30 Am. B. E. 39, 57 L. Ed. 953, 33 Sup. Ct. 587), citing, as an illustrative case, Tindle v. Birkett, 205 D. S. 183, 18 Am. E. R. 121. 51 L. Ed. 762, 27 Sup. Ct. 493; Eeynolds v. New York Trust Co. (C. C. A., Ist Cir.), 25 Am. B. E. 698, 699, 188 Fed. Cll. § 63-a.J Debts Existing When Petition Filed. 951 a fiduciary capacity to restore to a fund money which he has embezzled is contractual in its nature, and gives rise to a provable debt ih behalf of the beneficiaries against his bankrupt estate.^ A creditor whose claim is grounded in tort is not entitled to priority, even one whose claim rests on conversion. Once the goods are sold and the avails mingled with the debtor's funds, such a creditor's claim is for damages only.^® (5) Pbaud oe connivance. — A claim based upon a fraudulent connivance with the bankrupt to impose upon other creditors, as where money wcs advanced to the bankrupt to give him a fictitious commercial rating, is not allowable.^" And where transactions between the bankrupt and the creditor were such as to indicate an intention to overreach the other creditors and obtain an undue advantage over them; their claims, although provable, may be disallowed.^^ e. The debt must have existed when the petition was filed. — Here the statute is not entirely harmonious. Subsection a (4), unlike the other subdivisions, has no words of time. The rule is that the provability of a claim depends upon its status at the time the petition is filed. ^^ If it be then owing it may be proved ; if it become due after the filing of the petition, even if before the 28. Clarke v. Rogers (C. C. A., 1st Clr.), 26 Am. B. R. 413, 183 Fed. 518, affd. by Supreme Court in 228 U. S. 534, 30 Am. B. R. 39, 57 L. Ed. 953, 33 Sup. Ct. 587, holding that where a trustee converts trust funds to his own use, a liability is created which is provable in the bankruptcy proceed- ings of such trustee as a liability founded " upon an open account, or upon a contract, express or implied." 29. Ungewitter v. Von Sachs, Fed. Gas. 14,343. 30. In re Friedman (D. C, Wis.), 21 Am. B. R. 213,- 164 Fed. 131. 31. Clere Clothing Co. v. Union Trust & Savings Bank (C. C A., 9th Cir.), 35 Am. B. R. 419, 224 Fed. 363, in which it appeared that a clothing company, with other creditors effected a composition, advancing for that purpose money whicli it borrowed from a bank. The trustee made a bill of sale of the merchandise of the bankrupt to the clothing company, which put them on sale. The bank- rupt was then reorganized, the president of the clothing company gaining control. There- after the reorganized company claimed to have sold the merchandise to the clothing company, taking its note. The clothing com- pany presented claims based on this note and on a note for merchandise sold to the bank- rupt. It was held that, on all the evidence, the claims should be rejected, as the reor- ganized corporation was merely an agent of the claimant, and that a corporation may not for a period of over a year so intertwine its affairs and business transactions with a second company as to virtually create the relationship of principal and agent, and then upon the insolvency of the second company insist upon the payment of alleged debts in- curred in the very transactions by which the relationship was created. Holder of promissory note and stock for loan with option to elect which he will take; failure to elect before bankruptcy. — A person, who loans money to a corporation on its promissory note and also takes shares of its stock at par for the amount of the loan, under an agreement providing that he shall have his election whether to become the ab- solute owner of the shares and surrender the note, or to surrender the shares and demand payment of the note, and does not elect which position he will assume until the indebted- ness of the company has accumulated to such an extent as to render it a bankrupt, is estopped from demanding his rights as a creditor, under the agreement. Matter of Silvemail Co. (D. C, Kan.), 33 Am. B. R. 57, 218 Fed. 977. 3S. Matter of Van Horn (C. C. A., 3d Cir.), 41 Am. B. R. 12, 246 Fed. 822 ; In re Burka (D. C, Mo.), 5 Am. B. E. 12, 107 Fed. 674; In re Garlington (D. C, Tex.), S Am. B. R. 602, 115 Fed. 999; Swartz v. Fourth Bank (C. C. A., Sth Cir.), 8 Am. B. E. 673, 117 Fed. 1, 54 C. C. A. 387; In re Adams (D. C, Mass.), 12 Am, B, R. 368, 130 Fed. 3S1, holding that a cred- itor cannot prove for an indebtedness aris- ing between the filing of an involuntary petition and the adjudication of his debtor as a bankrupt; In r« Coburn (D. C, Mass.), 11 Am. B. R. 212, 126 Fed. 218; In re Simon (D. C, N. Y.), 28 Am. B. R. 611, 197 Fed. 105. Compare In re Bingham (D. C, Vt.), 2 Am. B. R. 223, 94 Fed. 79©; In re Reliance, etc., Co. (D. C, Pa.), 4 Am. B. R. 49, lOO Fed. 61&; In re Swift (C. 0. A., 1st Cir.), 7 Am. B. R. 374, 112 Fed. 315, affg. s. c, 5 Am. B. R. 335, 105 Fed. 4S3; In re iCrawford, Fed. Cas. 3,363; in re Ward, 12 Fed. 325; In re Morrill, 19 Fed. 874; Fowler V. Kendall, 44 Me. 448. A breach of contract may result from the filing of a petition, and in such a case the claim for damages ripens simultaneously with the filing of the petition. In re Swift (C. C. A., 1st Cir.), 7 Am. B. R. 375, 112 Fed. 315; In re National Wire Corp. (D. 952 Debts Which Mat Be Peovbd. [§ 63-a. adjudication, it is not " absolutely owing." ^* Wliere a vendee under an execu- tory contract of sale is adjudicated an involuntary bankrupt, tbe vendor's claim for damages for breach of the contract is not provable.** The word "and" in the form of proof prescribed by the Supreme Court requiring that it should state that the debt proved existed " at and before filing of the petition for adjudication of bankruptcy" must be construed either "or" or "and," as the circumstances may require.*^ In addition to claims upon which actions could be brought debts existing at the time of the filing of the petition but not then payable are provable in bankruptcy, and being provable the holder of such debts may be a petitioner to have- the debtor involuntarily adjudged a bankrupt.** And so where money was received by a bankrupt intended to be used for gambling purposes, a considerable portion of it being in his hands at the time of the filing of the petition, the claimant may base his claim upon money had and received, and prove his claim regardless of the intended use of the money.*'' f. Equitable debts. — It has always been the law in England that equitable demands may be proved in bankruptcy.*^ Cases under the former law to the C. Conn.), 22 Am. B. E. 186, 166 Fed. 631. Thus, the obligation of a contract guaran- teeing the redemption of corporate stock, three years after date of issue, is a prov- able claim, although the time for redemp- tion has not arrived at the date of bank- ruptcy. In re Pettingill (D. C., Mass.), 14 Am. B. R. T28i 137 Fed. 840; In re NeflF (C. C. A., 6th Cir.), 19 Am. B. R. 23, 157 Fed. 57, affg. 19 Am. B. R. 911. The status of a claim must depend upon its provability at the time the petition was filed. It cannot be benefited by its status at a later date. In re Neflf (C. C. A., 6th Cir.), 19 Am. B. R. 23, 157 Fed. 57; In re Reading Hosiery Co. (D. C, Pa.) , 22 Am. ]!. R. 562, 171 Fed. 195; Matter of Sterne & Levi (Ref., Tex;), 26 Am. B. R. 535, -539, citing text. In re Board of County Com'rs v. Hurley (C. C. A., 8th Cir.), 22 Am. B. R. 209, 212, 169 Fed. 92, the court said: " The status of claims at the time of the filing of the petition in bankruptcy, and not at any subsequent time, fixes the rights of their owners to share in the diatribu- tion of the estate of the bankrupt. . . . Thus the filing of a petition upon which a subsequent adjudication- of bankruptcy is rendered places all the property of the bankrupt which prior to the filing of the petition he could by any means have trans- ferred or which might have been levied upon and sold under judicial process against him in custodia legis. . . . On that date the property of the bankrupt passes from his control to the court or its receiver, and thence to the trustee. . . . Indeed, the condition at the time of the filing of the petition measures the extent of the estate and the rights of all creditors of the bank- rupt and all parties interested in the prop- erty." See iSynnott v. 'Tombstone Consol. Mines Co. (C. C. A., 9th Cir.), 31 Am. B. R. 421, 208 Fed. 251, citing text. Debts not existing when petition was filed. — The debts founded upon open account or upon contract, express or implied, that are provable under this section, include only such as existed at the time of the filing of the peti- tion in bankruptcy. Lavelo v. Reeves, 227 IT. S. 625, 29 Am. B. R. 493, 57 L. Ed. 676, 33 Sup. Ct. 36S. Where a claim for damages is contingent at the date of an assignment, and not an existing demand presently due, but not pres- ently payable, even though resting upon a contract and capable of liquidation, is not provable. So where under an a'^signment for benefit of creditors the lessors have the right to enter upon the premises and terminate the lease, or at their election to demani damages, a claim for damages at the date of assign- ment was contingent and not provable.- Cut- ting V. Hooper, Lewis & Co. (Mass. Sup. Ct.), 34 Am. B. R. 23, 107 N. E. 931. 33. Phenix Nat. Bank v. Waterbury, 20 Am. B. R. 140, 123 App. Div. 453, 108 N. Y. Supp. 391, aflfd. 23 Am. B. R. 250, 197 N. Y. 161, 90 N. E. 435. 34. In re Inman & Co. (D. C, Ga.), 23 Am. B. R. 656, 175 Fed. 312. 35. In re Slvift (C. C. A., 1st Cir.), 7 Am. B. R. 374, 112 Fed. 315, a£Fg. 5 Am. B. R. 335. 3G. In re Alexander, 4 N". B. R. 178, Fed. Gas. 161. 37. In re Norris (D. C, Minn.), 26 Am. B. R. 945, 190 Fed. 101, in which case it was held that where claimants base their claims, not upon their contracts, but upon money had and received, they will be allowed the amount of their original investments, irrespective of whether the money was intended to be used by the bankrupt for gambling purposes, it appearing from the evidence that a con- siderable part of the money was in bank- rupt's possession just prior to bankruptcy, not having been employed in gambling, but converted by bankrupt to his own use. 38. Ex parte Yonge, 3 Ves. & B. 31; Ex parte Williamson, 2 Ves. 252; Ex parte Dewdney, 15 Ves. 479. § 63-a.J Debts Against Moee than One Peeson. 958 same effect are numerous.^® Such claims are provable under the present bank- ruptcy law, and the Federal courts administering the general law of equity, as accepted in England, and as generally accepted in this country, will recog- nize and establish an equitable claim within the purview of the general rules of equity, though under the decisions of the State court it has no status.** In bankruptcy proceedings which are summary and equitable in their nature, the creditor may invoke the principle of law that money secured by fal;3 and fraudulent representations of material facts may be recovered back by proving a demand for money had and received by the bankrupts to their use.*^ The claim of an assignee for the benefit of creditors and his attorney, for services rendered both prior and subsequent to the bankruptcy, is provable, where such services were beneficial to the estate.*^ If a mortgagee bids in at foreclosure sale the property covered by the mortgage, and takes title he may prove his claim for the amount equitably due on the mortgage debt, to be ascertained by deducting the value of the property.** g. Debts against more than one person. — If the debt is of such a nature that an action upon contract to collect it could be brought against the bankrupt, it is provable, although it might be collected from others. The test is : could the claimant have maintained an action against the bankrupt? Thus, in a case of principal and agent, if the principal has become a bankrupt, the claim may be proved in bankruptcy against him.** ^o the holder of a joint obligation 39. For instance, Sigsby v. Willia, Fed. Gas. 12,849; In re Buckhause, Fed. Gas. 2,0i86. Proof of equitable claims. — In In re Blan- din, 5 N. B. R. 39, Fed. Caa. 1,S27, 1 Low. 543, Judge Lowell of the district court of Massachusetts decided that the wife of a bankrupt might prove in bankruptcy as a creditor of the estate of her husband, for money realized by him out of the property which she held as her separate estate, under the statutes of Massachusetts, the evidence clearly showing that the transaction be- tween her and her husband was intended to be a loan and not a gift. In rendering his opinion the judge said: "It seems to me to be the intent of that statute to give all creditors an equal share of the assets without regard to the mode in which their rights might have been enforced if there had been no bankruptcy; and that the debtor should be discharged from all debts and demands which are liquidated or capa- ble of liquidation. In respect to both debtors and creditors, the act is highly remedial, and the district court is vested with most ample equitable powers to enable it to work out full remedies to all persons. It has always been the law of England that equitable demands may be proved in bank- ruptcy; Ex parte Williamson, 2 Ves. Sr. 353; Ex parte Taylor, 3 Rose, 175. 'A commission in bankruptcy,' said Lord El- don, 'is nothing more than a substitution of the authority of the lord chancellor, enabling him to work out the payment of those creditors who could by legal action or equitable suit have compelled payment.' Ex parte Dewdney, 15 Ves. 498. The nine- teenth section of our statute (Act of 1867) makes provable all debts and liabilities, in language broad enough certainly to cover such as a trustee owes to his cestui que trust, or a partner to his copartner; and so of demands which, but for the bank- ruptcy, would be properly cognizable in a court of admirality. If this be not so, I do not see how the law can be uniform, for proof of debts will depend on the remedies given in the several States, in one of which the very same debt might be sued at law which in another must be prosecuted in equity, and in some of which there is no distinction between law and equity." 40. James v. Gray (C. C. A., 1st Cir.), 12 Am. B. R. 573, 131 Fed. 401; In re ' Peasley (D. C., N. H.), 14 Am. B. R. 496, 137 Fed. 190. 41. In re Arnold & Co. (D. C., Mo.), 13 Am. B. R. 320, 133 Fed. 789, holding that a claim for money obtained by the bank- rupt, to use in gambling ventures, through false representations may be proved. To the same effect see In re Norris (D. C., Minn.) , 26 Am. B. R. «45, 190 Fed. 101. 42. Randolph v. Scruggs, 10 Am. B. R. 1, 190 U. S. 533, 47 L. Ed. 1,165 23 Sup. Gt. 710; Matter of Morrla & Eiee (D. C, Mass.), 44 Am. B. E. 146, 258 Fed. 712. 43. In re Dlx (D. C, Pa.), 23 Am. B. E. 889, 176 Fed. 882. And see In re Davis (C. C. A., 3d Clr.), 23 Am. B. E. 446, 174 Fed. 556. Both of these cases arose under the laws of Pennsyl- vania in which State there is no provision for a deficiency judgment on the bond accompany- ing the mortgage. 44. In re Troy Woolen Co., 8 N. B. E. 412, Fed. Cas. 14,203. 954 Debts Which May Be Peoved. [§ 63-a. tion can prove his claim against any and every person whom he could have sued.*' A holder of a note which has become due and has been protested, if protest were necessary, may prove against the maker or any indorser.*^ If one holds a firm obligation indorsed by. one or more of the individual members, all of whom as a firm and as individuals afterward go into bankruptcy, he may prove his entire claim against the partnership estate, and the estate of each individual indorser; but in the aggregate can recover no more than his full claim.*'' h. Provability as affected by the person proving. — (1) In general. — An assignee of the creditor has a provable debt if his assignor had, even if the assigimient post-dates the bankruptcy.*® But where the creditor is a debtor of the bankrupt in a larger sum that the amount claimed, such claim is not provable.*® An executor may prove a debt against the bankrupt, notwith- standing a provision in the will for a deduction of any debt due the testator from the bankrupt.'" A person who is induced by a materially false and fraudulent statement to take stock in a corporation which subsequently becomes bankrupt, may rescind his contract to take the stock and prove his claim for the amount paid.'' A bondholder holding a bond secured by a trust mortgage may prove the amount of the bond where the property is sold free of liens and the mortgage trustee did not take steps to foreclose the mortgage.'^ Other 45. Proof where several liable. — The . iili^ee in a bond, or the holder of a, claim upon which several parties are personally liable, may prove his claim against each of the estates of those who become bankrupt, and may at the same time pursue the others at law, and he may recover notwithstanding payments after the bankruptcy by other obligors or by their estates dividends from each estate in banicruptcy upon the full amount of hia claim at the time the peti- tion in bankruptcy was filed therein, until from all sources he has received full pay- ment of his claim, but no longer. Board of County Commissioners v. Hurley (C. C A., 8th Cir.), 22 Am. B. R. 209, 169 Fed. 92. One holding promissory notes on which third parties, as well as bankrupt, are liable, may prove his claim against bankrupt's es- tate, and, nothwithstanding that payments on account of said notes have been made. by such third parties after bankruptcy, he is entitled to be allowed dividends on the full amount of his claim as it stood when the petition was filed, until from all sources he has received full payment of hia jm. In re Simon (D. C, N. Y.), 28 Am. B. R. 611, 197 Fed. 105. 46. Downing v. Traders' Bank, 11 N. B. R. 3"71, 2 Dill, 136. 47. In re Howard, Cole & Co., 4 N. B. R. 571, Fed. Cas. 6,750; Mead v. Bank, 2 N. B. R. 173, Fed. Cas. 9,366, 6 Blatch. 185; Emery v. Bank, 7 N. B. R. 217, Fed. Cas. 4,446, 3 Cliff. 507 ; Board of County Commis- sioners V. Hurley (C. C. A., 8th Cir.), 22 Am. B. R. 209, 169 Fed. 92. See discussion under Section Five, ante, and for limita- tions on the doctrine there stated, see La- moille, etc.. Bank v. Stevens' Estate (D. C, Vt.), 6 Am. B. E. 164, 107 Fed. 246, and Shattuck V. Bugh (Eef., N. Y.), 6 Am. B. R. 56. Provability of individual notes of partner to firm, pledged as security for firm obliga- tion. — A partner, under a firm contract made by him personally with a firm creditor, pledged as collateral for a firm' obligation on which he was indorser, certain notes made by him individually to tne firm for personal loans, and, after bankruptcy of the firm and its members, the creditor sold the collateral pursuant to the terms of the con- tract. Held, that the obligation of the part- ner on his notes to the firm was wholly inde- pendent of his obligation as indorser on the firm notes and that the purchaser of the individual notes was entitled to prove a claim thereon against the individual estate of such partner. In re White (C. C. A., 7th Cir.), 25 Am. B. R. 641, 183 Fed. 310. 48. In re Goodman Shoe Co. (D. C, Pa.), 3 Am. B. R. 200, 96 Fed. 494; In re Ameri- can Specialty Co. (C. C. A., 2d Cir.), 27 Am. B. R. 463, 191 Fed. 807; In re Murdock, Fed. Cas. 9,939; In re Pease, Fed. Cas. 10,8«0. For method of proving assigned claims, see discussion under Section Fifty-seven, ante. 49. In re Gerson (D. C, Pa.), 5 Am. B. R. 850, 105 Fed. 891. 60. In re Woods (D. C, Pa.), 13 Am. B. R. 240, 133 Fed. 82. 51. Davis V. Louisville Trust Co. (C. C A., 6th Cir.), 25 Am. B. R. 621, 181 Fed. 10. 52. United States Truat Co. v. (Jordon (C. C. A., 6th Cir.), 33 Am. B. R. 300, 216 Fed. 929. § 63-a.J Persons Who May Pkove. 955 instructive cases on this general subject, in particular those where the creditor is the customer of a stockbroker, will be found in the foot-note.''^ (2) Transactions between husband and wife. — Where the common-law disability of the wife has been abolished by statute, she may have a provable debt against her husband's estate,^* even if a statute prohibits a suit by her against her husband ;^° but her claim is usually looked on with suspicion. ^^ A bankrupt's note to his wife is provable, especially when it does not appear that at the time it was given the husband was in debt.'''' Under a statute con- ferring upon a married woman the same powers in respect to her property as if she were unmarried, it has been held that a contract to pay for a wife's services is not a provable debt;^* and under a statute giving to a married woman her individual earnings "except those accruing from labor performed for her husband, or in his employ, or payable by him," the wife's claim for wages earned as bookkeeper in her husband's store is not provable.^® But it would be otherwise under a statute authorizing contracts to be made by and between husband and wife as though they were unmarried.®" If still a feme covert, a wife who is bankrupt may allege her coverture as a defense and pre- vent proof. ^-"^ Under a statute rendering invalid a direct gift of corporate stock from husband to wife, her loan of the certificates, indorsed in blank to him, creates no allowable claim against his estate.®^ (3) Services of minor child. — The presumption is that a father is entitled to the wages of his minor child. This is overcome by evidence that the child has been emancipated and thus permitted to receive for his own use the compensation or wages earned by him. Unless such evidence is adduced, the father is the proper party to prove a claim for the child's services.®^ The claim of a minor son against his bankrupt father for services rendered will 53. In re Ervin (D. C, Pa.), 6 Am. B. R. 350, Claim npon ante-nuptial contract.— A claim 109 Fed. 135; affd. as Wallersteiu t. Ervin (C. by a wife against her husband, arising out o£ C. A., 3d Cir.), 7 Am. B. R. 256, 112 Fed. 124; an ante-nuptial contract, and based upon a also In re Ervin (D. C, Pa.), 7 Am. B. R. 480, judgment, examined and held to have been 114 Fed. 596; In re Clark (D. C, Wash.), 7 properly allowed as a prior claim against the Am. B. E. 96, 111 Fed. 893; In re Swift (D. C, husband's estate for the principal thereof, but Mass.), 5 Am. B. E. 415, 106 Fed. 65; affd. s. c, that she is not entitled to interest. Murphy v 7 Am. B. E. 374, 112 Fed. 315; In re Graff (D. McLoughlin (C. C. A., 5th Cir.), 41 Am. B. E 7o' C, N. Y.), 8 Am. B. E. 744, 117 Fed. 343; In re 248 Fed. 385. . Chase (D. C, Mass.), 13 Am. B. R. 294, 133 Fed. Claim of wife for services.— Where bankrupt's 79; Matter of National Piano Co. (D. C, Mass.), wife, during the entire period for which she 42 Am. B. R. Ill, 252 Fed. 950. claimed compensation, acted as bookkeeper, col- Proof by president of corporation for money lector and assistant in the business for her advanced to make payments under composition husband, an agreement to compensate her will agreement allowed. McKey v. Bruns (C. C. A., be Implied. In re Cox (D. C, N. Mex.). 29 Am. 7th Cir.), 40 Am. B. R. 189, 243 Fed. 370. B. E. 456, 199 Fed. 952. Claim of parent corporation against subsidiary 55. In re Domenlg (D. C, Pa.), 11 Am B E. corporation. — Where a corporation is so organ- 552, 128 Fed. 146. ized and controlled, and its affairs so managed, 66: So also of child's claim for alleged ser- as to make it a mere instrumentality or adjunct vices rendered a bankrupt father. In re Brew- of another corporation and such subsidiary ster (Ref., N. Y.), 7 Am. B. E. 4S6. corporation becomes bankrupt, the parent 57. In re Kyte (D. C, Pa.), 21 Am. B. E. 110 corporation cannot have its claims paid until all 164 Fed. 302. ... , of the creditors are satisfied. Baker Motor 58. In re Kaufman (D. C, N. Y.), 5 Am B Vehicle Co. y. Hunter (C. C. A., 2d Cir.), 39 Am. E. 104, 104 Fed. 768, construing section 21 of B. E. 122, 238 Fed. 894. the New York Domestic Relation^ Law; In re Director of bankrupt corporation who Invests Suckle (D. C, Ark.), 23 Am. B. E. 861, 176 Fed. money in another corporation, organized to 828, constituting Ark. Stats. (Kirby), § 5213. take over the assets of the bankrupt, may, nn- 59. In re Winkles (D. C, Wis.), 12 Am. B, E. der certain circumstances be held to be a cred- 696, 132 Fed. 590, construing section 2343 of the Itor of the bankrupt. In re Holbrook Shoe & Revised Statutes of Wisconsin, 1898. But see In Leather Co. (D. C, Mont.), 21 Am. B. R. 511, 165 re Cox (D. C, N. Mex.), 29 Am. B. B. 456 199 Fed. 973. Fed. 952. 54. In re Novak (D. C, la.), 4 Am, B. B. 311, 60. Moore v. Crandall (C. C. A., 9th Cir.) 30 101 Fed. 800; Hawk v. Hawk (D. C, Ark.), 4 Am. B. R. 517, 205 Fed. 689. Am. B. R. 463, 102 Fed. 679 ; In re Nelman (D. «1. In re Goodman, Fed. Cas 5 540 C, Wis.), 6 Am. B. E. 329, 109 Fed. 113. This 68. In re Tucker (D. C, Mass.), 17 Am. B. E. Is not the rule In Massachusetts. In re Talbot 247, 148 Fed. 928. But see Tucker v Curtin (C (D. C, Mass.), 7 Am. B. R. 29, 110 Fed. 924. But C. A., 1st Cir.), 17 Am. B. R. 354, 148 Fed. 929' See In re Nlckerson (D. C, Mass.), 8 Am. B. R. as to loan certificates to firm of which the hus- 707, 116 Fed. 1003; Matter of Crumllng (D. C, band was a member. Pa.), 32 Am. B. E. 656, 214 Fed. 503. 9.56 Debts Vvhich May Be Peoved. [§ 63-a, (1). not be allowed unless there is substantial proof of emancipation and that the son performed the services under a homa, fide agreement as to payment therefor.** i. Provability as affected by fraud or preference. — Here there is some con- fusion owing to doubt as to the exact meaning of " provable." ®° Since the amendment of § 57-g by the act of 1903, there can be little doubt; all prefer- ences and the more common frauds, both constructive and in fact, being void- able. If the transaction upon which the debt is based was fraudulent as against the other creditors it is not provable.®* But a creditor must have been guilty of some moral turpitude or some breach of duty whereby other creditors were deceived to their damage to constitute such a fraud as will estop him from sharing with them in the distribution of the proceeds of the estate of his debtor in bankruptcy. A wilful intent to deceive or such negli- gence as is tantamount thereto is an essential element of such an estoppel.*'^ In short, if the fraud may be attacked under either § 60-b or § 70-e, the debt clearly is now not provable until the claimant surrenders his advantage. If the creditor compels the trustee to recover, the claim, because shorn of fraud, as it were, by force, continues not provable. The omission of claims due to the officers of a corporation, from a credit statement issued by the corporation to its creditors, will not estop the officers from proving such claims in the absence of a showing of knowledge of the fraud, or that any creditor extended credit relying on such statement."^ If it is asserted that the contract upon which the claim was based was obtained by fraudulent representations, it must appear that the contract was seasonably disaffirmed ; if the bankrupt had availed itself of the benefit of the contract for nearly four years after the fraud was discovered, the claim will not be vitiated.*® The numerous cases under the former law are probably no longer in point.™ So also of some of those under the new law, prior to the amendatory act.''-' j. Cross-references. — In addition to the references in the preceding para- graphs, the practitioner will find much that bears on the provability of debts under § 17. He should also have in mind the doctrine of set-off, discussed under § 68. III. FIXED LIABILITY ABSOLUTELY OWING. a. In general. — Subsection a (1) provides that debts may be proved and allowed which are " a fixed liability, as evidenced by a judgment or an instru- 63. Matter of Haskell (D. C, Mass.), 36 Am. count for such property in excess of Ms de- ^'.?\f^h ^^^^?^' P®' ,T^ ^ Tii ■ V oo A mands against the corporation, his claim 64. Matter of Kanter (D. C, Maine), 32 Am. • j. ii j.- \. u i,' • i j B. E 776 215 Fed. 276. agamst the corporation should be rejected. Emancipation of child; claim for services. — 67. Crouder V. AUen-West Commission Co. Where bankrupt employed bis minor son at a (C. C. A., 8th Cir.), 33 Am. B. R. 134, 213 stated salary, but it appeared that the son was -pi-j 177 at the time living with Ms parents, paying for •'''"• ^l'- ,r^ r^ „ o^, r^- ^ „„ his board out of the wages paid him by bank- 68. Spencer v. Lowe (C. C. A., 8th Cir.), 20 rupt, there was no such emancipation of the Am. B. B.. 876 198 Fed. 361. son as would D-ustify the allowance of Ws claim 69. Matter of Tear-oif Bottle Seal Co. (C. for unpaid wages. In re Eiff (D. C, Ark.), 30 „ . 9,1 rir ^ qA 4^ Ti 13 bqa ooi TTo,! Am. B. B. 594 205 Fed. 406. '-'■ ■^■> ^°- Cir.), 34 Am. B. R. 694, 224 Fed. 65. In re Owings (D. C, Mo.), 6 Am. B. E. 492. 454,109Fed 623. Ooniro- InreEichard (D. C, 70. For instance: In re Black, Fed. Cas. N. Car.), 2 Am. B. E. 507, 94 Fed. 633. 1 Ann i^ a 1 i th j /~i 10 eno 66. Matter of Hawkins (D. C, Ga.). 41 Am. B. l.*59; In re Schwartz, Fed. Cas. 12,502; E. 671, 249 Fed. 355; In re Lansaw (D. C, Mo.), In re Arnold, Fed. Cas. 551; In re Rundle 9 Am. B. E. 167, 118 Fed. 365; In re Eoyce Dry et al. Fed. Cas. 13.138. Goods Co. (D. C, Mo.), 13 Am. B. E. 257, 133 „ '_ .,. . -t, . t^ , , . Fed. 100, holding that where property of a bank- 71. In re Lazarovic (Ref., Kan.), 1 Am. rupt corporation is traced to the hands of B. R. 476; In re Norcross (Ref., Mo.), 1 Am. managing officer, and such officer fails to ac- B. R. 644. § 63-a, (1).J Fixed Liabihty Absolutely Owing. 957 ment in writing, absolutely owing at the time of the filing of the petition whether then payable or not, etc." In the former law, the words were: " debts * * * existing." The words " fixed liability, absolutely owing " would, therefore, be an unfortunate limitation were it not for the broader words of subdivision (4).''^ b. Whether then payable or not. — These words of the statute characterize the debt rather than the time of payment. To be provable under sub- division (1), a debt must be a fixed liability absolutely owing at the time the petition is filed f^^ but the time of payment is immaterial.''^ The status of the debt at the time of filing the petition controls ; if it be owing at that time it is provable.'* This statutory provision is further emphasized by the provision for the allowance of interest to or a rebate of interest after the date of bank- ruptcy. '° This phrasing has been most discussed in considering the prova- bility of a contract of indorsement not fixed by default and protest until after the petition was filed,''^ and in respect to the provability of a claim for rent to accrue after bankruptcy under a lease for a term of years.''' It has also been well considered in connection with a bond to secure an annuity.'^ Like- wise, when the contract was one of yearly employment.'® Indeed, the words " absolutely owing " seem to have been a stumbling block in the lower courts ; the upper courts have found more equity in the words "founded * * * upon contract, express or implied" in subdivision (4).*" 0. Evidenced by a judgment. — (1) In geneeal. — It follows from the language of the section that, with the rare exception noted later, all judgments actually entered at the date of the bankruptcy are provable debts. A judg- ment is primarily aibsolutely owing when rendered and entered.*^ The rendering of a verdict is not, it seems, a judgment entitling such verdict to proof.^ For instance, a verdict against a bankrupt for damages for personal It. See ander this section post, under title an anticipatory breach of a contract. Mer- "Founded on Contract, Express or Implied." chants' National Bank t. Continental Building 72». An agreement to pay out of an uncer- & Loan Association (C. C. A., 9th dr.), 37 Am. tain fund, as for example, out of net profits, is B. K. 439, 232 Fed. 828. not a fixed liability absolutely owing at the 75. Compare, for similar words, Act of time of the bankruptcy within the purview of laR? s iq T? H g <;nfi7 this section. Matter of Thirty-Five Per Cent. „'' ° ',. '. ^ juui. Automobile Supply Co. (D. C, N. Y.), 41 Am. "6. See discussion, post, under this section, B. K. 101, 247 Fed. 377. subtitle, "Indorser and Surety Debts." 73. In re Swift (D^^C, Mass.) 5 Am. B E. 77. Matter of Mullings Qothing Co. (D. C, 415, 111 Fed. 893. The provability of a claim p > ,- . p p ?»-, „,„ .§„■, ~X. a depends upon its status at the time the petition ^°™-'' 37 Am. B. R. 166, 230 Fed. 681. A is filed. In re Pettingill & Co. (D. C, Mass.), claim for rent eontmgent upon the election 14 Am. B. E. 728, 137 Fed. 143 ; Matter of Jora- of the lessor to enter and terminate the lease ET67'°13'Fe(?°625'^' ^' ^" ^^ ^'''■^' ^^ ^'^' ^' *"■ *° ^^^^^^ damages is not provable. Cot- ■74. Debt "absolutely owlnB."— The status of t™g V; Hooper, Lewis & Co., 34 Am. B. E. a claim at the time of filing the petition in 23, 107 N. E. 931. bankruptcy, and not at any subsequent time, 78. Cobb v. Overman (C. C. A 4th Cir ) fixes the right of the owner to share in the dis- r Am B R ^24 lOQ ^p.^ fi"! vovir Bi-»-n^ '4' tribution of the estate of the bankrupt. If It be ° t^-,^' ^ w 'n ^ o a 't, ^^" ^l^.Z^ owing at the time of the filing of the petition Cobb (D. C, N. Car.), 3 Am. B. R. 788, 100 it may be proved; but if it becomes due only Fed. 370, and holding that the bond of a after the filing of the petition even if before bankrupt to secure the payment of an an- adjudication, it is not a claim to be considered .„„;+„ Z_ i!f. :. x^„„„oi>i„ as absolutely owing." Matter of Mullings """7 ^°^ ^"%}^ provable. Clothing Co. (D. C, Conn.), 37 Am. B. E. 166, 79. In re Silverman Bros. (D. C, Mo.), 4 230 Fed. 681. See also Matter of Hatchcraft (D. Am. B. R. 83, 101 Fed. 219, revB. s. c. 2 Am C, Ky.), 41 Am. B. E. 238, 247 Fed. 187. B R 15 '6 Liability of bnilding and loan association to 'on' a ' ■ j.x.- i- ^ ■,.., „^ shareholders.— The liability of a bankrupt . ^O- See m this section, post, subtitle "Con- building and loan association to shareholders tinning Contracts." for amounts paid In and proportions of profits, 81. Moore v Douglas (OCA Qth Cir \ if any, is fixed, and provable in bankruptcy, qg A™ r R 74n pfn Lh \qq ' '' notwithstanding the fact that it may require "^ „„"?;, ^•,-"- '*"-■ 330 Fed. 399. examination of books to ascertain the exact 82. Black v. McClelland, Fed. Cas. 1,463. amout due to each shareholder. It is treated as 958 Debts Which May Be Peovbd. [§ 63-a, (1), injuries, where no judgment had been entered thereon prior to the bankruptcy proceedings is not a fixed liability evidenced by a judgment within this clause, and is not a provable debt.*^ It was the evident purpose of the provision relative to the provability of a fixed liability "as evidenced by a judgment," to cover judgments arising in tort as well as those arising upon other obliga- tions or liabilities.** In some cases, as where the debt is for alimony, support of a bastard, and the like, the courts will look beyond the form of the judg- ment, and will ascertain the nature of the liability, the original cause of action.*® This doctrine has not been strictly observed where the application was for an injunction to prevent the arrest of the bankrupt or injury to his estate.*® If the judgment has resulted in a void or voida;ble lien, because within four months of the bankruptcy, it is still a provable debt, the lien only being affected.*^ Indeed, it seems the debt on which the judgment was founded, if otherwise provable, may be proved in its stead. A judgment is provable, even if an appeal has been taken thereon, but dividends on it should be withheld.** But where under a State statute a judgment is not final until 83. Effect of verdict of jury. — In the case of Black V. McClelland, Fed. Cas. 1,463, the court, in speaking of the effect of a ver- dict of a jury upon the provability of the amount thereof, said: "Now. a claim which has not obtained the condition of a fixed liability cannot be characterized as a debt due and payable, either presently or at a future day, and such is the immature char- acter of a mere verdict before judgment. It is subject to the control and discretion of the court, and may be superseded alto- gether by arresting judgment upon it or by the allowance of a new trial. No ac- tion could be maintained upon it. It does not bear interest, and no determinate char- acter is impressed upon it until the court has pronounced its judgment that the plain- tiff do recover from the defendant the amount of it." This case was discussed in the case of In re Ostrom (D. C, Minn.), 36 Am. B. E. 373, 185 Fedi 988, and held to be controlling under the present bankruptcy act. The court said: "The Act of 1867, under which the proceeding arose (Rev. St., section 5067), did not contain the words 'fixed liability' which appear in the present act. The deci- sion of the Supreme Court of Minnesota in Kent V. Chapel, 67 Minn. 430, 70 N. W. 3, to the effect that after a verdict there ia no further uncertainty about the claim, and the decision in the case of Clay v. Railroad Company, 104 Minn. 1, 115 N. W. 949, to the effect that a verdict becomes property and passes to the representatives the same as though it had been reduced to a judgment, are not controlling upon the aational courts because this is not a case where those courts are bound to follow the decisions of the State court. "Even if it can be said, in accordance with those decisions, that a verdict created a fixed liability, yet it is not a fix«d liabilty evdenced by a judgment or instrument in writing, conditions which must by the present act, be complied with before even a fixed liability can become a provable debt." 84. Moore v. Douglas (C. C. A., 9tli Clr.), 36 Am. B. H. 740, 230 Fed. 399; Jefferson Transfer Co. v. Hull (Wis. Sup. Ct.), 40 Am. B. E. 844, 166 N. W. 1; Matter of liockwood (D. C, N. X.), 39 Am. B. E. 478, 240 Fed. 161; Matter of Cun- ningham (D. C, N. Y.), 42 Am. B. E. 560, 253 Fed. 663. 86. Turner v. Turner (D. C, Ind.), 6 Am. B. E. 289, 108 Fed. 785. A decree for alimony is neither a fixed lia- bility evidenced by a judgment nor a debt within the meaning of the bankrupt act. Wet- more V. Wetmore, 196 V. S. 68, 13 Am. B. E. 1, 49 L. Ed. 390, 25 Sup. Ct. 172. A father's liability under an agreement with his divorced wife to pay her for the support of his minor children until they respectively be- come of age is not a provable debt against his estate. Dunbar v. Dunbar, 190 U. S. 340, 10 Am. B. E. 130, 47 L. Ed. 1084, 23 Sup. Ct. 757. See also In re Hubbard (D. C, III.), 3 Am. B. E. 528, 98 Fed. 710. 86. For Instance: See In re Lewensohn (D. C, N. Y.), 3 Am. B. E. 596, 99 Fed. 73; In re Cole (D. C, N. Y.), 5 Am. B. E. 780, 108 Fed. 83T, and In re Sullivan (Eef., N. Y.), 2 Am. B. E. 30. And examine In re Fife (D. C, Pa.), 6 Am. B. E. 258, 109 Fed. 880. 87. See discussion under Section Sixty-seven of this work. Doyle v. Heath (Sup. Ct., E. I.), 4 Am. B. E. 7Cj, 22 E. I. 213 ; In re Pease (Eef., N. Y.), 4 Am. B. E. 547; Jefferson Transfer Co. T. Hull (Wis. Sup. Ct.), 40 Am. B. E. 844, 166 N. W. 1. 88. Matter of Berlin Dye Works and Laun- dry Co. (D. C, Cal.), 34 Am. B. E. 823, 225 Fed. 683 (revg. 34 Am. B. H. 452), holding that a judgment of the Superior Court of California directing the payment of money, from which the defendant had appealed, but without giving a supersedeas bond, at the time a petition in bankruptcy was filed against him. Is a final judgment and provable In bankruptcy; affd. sub. nom. Moore v. Douglas (C. C. A., 9th Cir.), 36 Am. B. E. 740, 230 Fed. 399; Compare In re Yates (D. C, Cal.), 8 Am. B. E. 69, 114 Fed. 365; In re Sheehan, Fed. Cas. 12,7S7. Compare Matter of Kroeger Bros. Co. (D. C, Wis.), 43 Am. B. E. 135, 262 Fed. 463, where a judgment in favor of the bankrupt In the trial court was reversed on appeal and a nunc pro tuno judg- ment entered against the bankrupt. § 63-a, (1).J EiXED Liability Absolutely Owing. 95& the action has terminated, and such action is pending until its final determina- tion on appeal, or until the time for appeal has passed, such judgment is not a "fixed liability absolutely owing at the time of filing the petition" if an appeal was pending at such time.*® A claim evidenced by a judgment recov- ered more than ten years prior to bankruptcy is not provable, unless renewed as required by statute.*" A judgment barred by the statute of limitations is a provable claim, where it may be enforced under the State statute in the discretion of the court.*^ A judgment note, with a waiver of exemptions, is a provable claim.®^ And so is a judgment for damages for a breach of promise of marriage.*''* But a judgment for a penalty is not a provable debt.** " (2) Impeaching judgments. — Here the English doctrine is much broader than our own.*® Full faith and credit being necessarily given to the judgments of the State courts when pleaded in the Federal courts, it was, under the former law, held that a judgment of a State court could not be impeached when presented as a claim in bankruptcy, but resort must be had to the State court.*' That it is conclusive between the bankrupt and the judgment creditor is elementary. But where the Tights of general creditors have intervened, the English rule that such a judgment is but prima facie evidence of a provable debt is fairer. The law in the United States seems, however, to be that the trustee or a creditor may attack it in the bankruptcy proceeding for fraud or collusion, but not otherwise.*^ The rule that an ad- judication is binding upon parties and privieis as to questions which were in fact in controversy and determined, and as to those which should have been raised, though they were not, applies in courts of banlcruptcy.^^^ A judgment not regular en its face, or by a court which did not have jurisdiction of the subject-maiter, may of course be attacked anywhere; but jurisdiction need not affirmatively appear,^^ nor can the recitals of the judgment, as a rule, be con- tradicted in a collateral proceeding. Where the amount of a claim has been de- termined by a State court, and judgment entered therein, such judgment is conclusdve upon the bankruptcy court, and the judgment creditor will not bei permitted to prove for a greater amount,^*"* 89. Matter of Berlin Dye Works and Laun- 94. Matter of Abraliamson and PickhandlEr dry Co. ^^ ^^- ^■ ,, ,, "^ ,, , .. _„^ ,.,, K. 626, 136 Fed. 994. ently payable provable under section 63a(l) ^S. Matter of Wisconsin Engine Co. (C. C. of the Bankruptcy Act. Matter of Clark A., 7th dr.), 37 Am. B. B. 106, 234 Fed. 281. Shoe Company (D. C, Mass.), 33 Am. B. E. we. In re Hill & Sons (D. C. Pa.), 26 Am. B. 938 911 T!*t.,l Qii K. 133, 187 B'ed. 214. See as to effect of loan of aao. <,LL rea. ais.. money to be used for gambling purposes, In re Amount due under lease of personal prop- Norris (D. C, Minn.), 26 Am. B. E. 945, 190 Fed. erty. — Where a storekeeper leases apparatus 101. for conveying cash and carrying parcels 107. As to proof of instrunients generally, see J i i .J- it, i • c Am. Bankr. Dig. S 823: as to claims of bank- under a contract providing that in case of ^^^\,^ indorsers or guarantors. Id. §825; as to default in making payments the whole claims against bankrur.t as indorser. Id. § 826. amount shall become due without notice or 108. Matter of Collins (D. C, la.), 37 Am. demand for the entire period of the lease, B. R..'692, 235 Fed. 937. and that the lessor may upon the bankruptcy Notes executed by licensee. — Provisions of df the lessee enter the premises and take pos- a contract for an exclusive patent license session of the apparatus, and it appears that examined and held that certain notes exe- the lessee has defaulted in the payment of cuted by the licensee were in consideration an installment of rent payable in advance, of the grant of the license and are provable § 63-a, (1).] Fixed Liability Absolutely Owing. 981 other joint obligors may prove against his estate for a proportionate share of the amount which they have been required to pay because of his insolvency /°^ Although a note has been paid by an endorser, the holder may prove it in full against the estate in bankruptcy of the maker, and receive dividends thereon. Any surplus over the amount actually due the holder will be held in trust for the endorser. ^^° The holder of negotiable paper of a bankrupt cannot, by filing a claim based thereon and assigning the same to an innocent purchaser, defeat the right of the trustee in bankruptcy to assert defenses against the "daim which he could have interposed had the claim not been assigned.^^-^ The holder of a note which did not mature until after the filing of petitions in bank- ruptcy against the maker and indorser may prove his claim against the latter, for the face of the note, less all payments mads before maturity.-^" ^ Claims based upon notes which are endorsed by the payee as paid may be proved, vsrhere the circumstances are such as to show that the act of endorsement is voidable by the payee because of undue influence in obtaining it.^^*" (Ill) Notes of corporations. — iNotea of a bankrupt corporaition, given for the purchase of stock of another corporation if authorized by its charter, and in the absence of fraud, are valid claims against it.^" But a stockholder of a corporation will not be permitted to prove a claim against the corporation, based upon a promissory note given by the corporation in payment for capital stock purchased from the stockholder.^^^^ A_ claim gf an accommodation indorser on a note made for the benefit of a' de facto corporation which he paid in full, may be allowed, in bankruptcy proceedings of the corporation.^" A note given by a corporation for the indebtedness of another, for which it is in no way responsible, is not provable against the corporation.-'^* iN'otes given by the executive officers of a corporation, in their individual names, the proceeds of which are used for corporate purposes, are provable against the corporation.^^^ Notes given for the payment of corporate stock, transferred without being stamped as required by a State law, are provable in bankruptcy, ;;a.gainst the bankrupt estate of the licensee. of the bankrupt.- Spencer v Lowe (C C. A.. ..-,5 , , ■ ,„. ■ ■ci_„!„„ fin /r" n A Stli Clr.l, 29 Am. B. K. 876, 193 ITed. 361. Matter of Wisconsin Engine Co. (C. C. A . j,^^^ j^^^^^^ „, Bruecis & Wilson Co. (D C "7th Cir.), 37 Am. B. R. 106, 334 Fed. 281. n. Y.), 43 Am. B. E. 501, 258 Fed. 69; Matter of 109. Wright V. Bumph (C. C. A., 5tli Cir.), 38 O'Gara & Magulre, Inc. (D. C, N. J.), 44 Am. Am. B. E. 235, 238 Fed. 138. B. E. 49, 259 Fed. 935. Compare Matter of Na- 110. Young T. Gordon (C. C. A., 4tli dr.), 33 tional Piano Co. (D. C, Mass.), 42 Am. B. E. Am. B. E. 522, 219 Fed. 168. Ill, 252 Fed. 950. 111. Matter of Partridge Lumber Co. (D. C, 113. Matter of Kelley & Co. (D. C, Conn.), 32 N. J.), 33 Am. B. E. 537, 215 Fed. 973. Am. B. E. 877, 215 Fed. 155. Ilia. Matter of Sbatz (D. C, Pa.), 41 Am. B. 114. Corporate notes for payment of debt of E. 576, 251 Fed. 351. another. — In the case of Mapes v. German Bank 111b. The pendency of proceedings by the (C. C. A., 8th Cir.), 23 Am. B. B. 713, 178 Fed. claimant to open a guardianship account by tbe 89, the court said : " The officers of a trading bankrupt, does not preclude the ward from re- corporation undoubtedly have authority to make lying on notes signed by the bankrupt guard- and deliver Its promissory notes for the Just ian which she filed against the estate within debts of the corporation, and the acts of such the time allowed by the Act. Beaven v. Stuart officers in this regard are presumed to be law- (C. C. A., 5th Cir.), 41 Am. B. E. 81, 250 Fed. fully done, when no notice to the contrary is 972. received by the holder of the paper. But It is 112. In re N. Y. Car Wheel Works (D. C, N. beyond the powers of the corporation and its Y.) 15 Am. B. E. 571, 141 Fed. 430; s. c, 14 officers alike to make accommodation paper, or Am'. B. E. 595, 139 Fed. 421. But see In re to guarantee or to pay the obligations of others Smith Lumber Co. (D C, Tex.), 13 Am. B. K. in which it has no Interest, and from which it 123, 132 Fed. 618, holding that where the pur- derives no benefit." chase of its own stock by a corporation renders Assumption of debts of old eoTporation by it insolvent and results in a fraud upon the new corporation. — Where a new corporation rights of creditors, a note given upon such pur- was organized, upon the failure of a prior cor- chase In the hands of the payee is not provable. poration, the stockholders being different from Notes of bankrupt corporation.— Notes signed the old in numbers and proportion of stock held, bv a bankrupt corporation by Its president and and the debts of the former corporation n«t secretary and which are under the corporate having been assumed by the new corporation, seal and were given for moneys indisputably nor the entire assets of the old taken over, and advanced at the time, are prima lade a liability where a bank holding the notes of the old cor- 61 962 Debts Which May Be Proved. [§ 63-a, (1). notwithstanding the State law forbids legal proceedings in the State court based on the transfer of stock for which the notes were given. ^^® (3) Stipulation poe payment op collection fees. — Collection fees stipulated to be paid in a promissory note due before the filling of the maker's petition in bankruptcy, but which was not placed in the hands of an attorney for collection until after such time, are not absolutely owing at the time of the filing of the petition and are not provable.^" The stipulation to pay a certain sum as the expense of collection does not create a "fixed liability" where no services were rendered in making the collection before the bank- rutcy.^^* Where such notes are placed in the hands of an attorney for col- lection prior to adjudication the fees stipulated are provable."^ (4) Inteeest. — Subdivision (1) permits the proof of a debt evidenced by a written instrument, "with any interest thereon which would have been recoverable at that date (the time of filing the petition) or with a rebate of interest upon such as were not then payable and did not bear interest." As a provable debt a note or other instrument in writing is limited to the principal and interest thereon that would have been recoverable at the time of the filing of the petition in bankruptcy. ■'^** The interest due at such time is a part of the provable debt.^^^ Interest stops on all unsecured debts at such time.^^^ But this rule has no application to estates which are solvent.^^ If the debt is due subsequent to bankruptcy only the interest due at the time the petition is filed can be added ; the interest not then accrued must be rebated.^ poralion took tlie notes of the new one with the proceeds of which the old notes were taken up, to the linowledge of the bank, there was no Taluable consideration moTiug to the new cor- poration tor taking np the notes of the old and' the bank was chargeable with notice of such want of consideration and could ..ot prove the new notes against the estate in bankruptcy of the new corporation. In re Standard Cloth- ing Co. (D. C, Ala.), 26 Am. B. E. 124, 1S7 Fed. 172. 115. Loans evidenced 1>y notes of officers of bankrupt. — A claim upon a loan, evidenced by the individual notes of the executive officers of the bankrupt corporation, is provable against the corporation, where It appears that the loan was actually made to and, and that the notes were taken by the officers merely for business reasons. Flower v. Central National Bank (C. C. A., 8th Cir.), 35 Am. B. E. 79, 223 Fed. 323; Hogin V. Central National Bank (C. C. A., St!i Cir.), 35 Am. B. E. 81, 223 Fed. 325. Claim by purchaser of a note, executed in the name of a bankrupt corporation by its president, disal- lowed. Matter of Continental Engine Co. (C. C. A„ 7th Cir.). 37 Am. B. E. 102, 234 Fed. 58. Compare Moerschel v. O'Bannon (C. C. A., 8th Cir.), 40 Am. B. E. 786, 246 Fed. 887. lie. Matter of Wylly, Jr. (D. C, N. Y.), 32 Am. B. E. 145, 210 Fed. 954. 117. In re Keeton (D. C, Tex.), 11 Am. B. E. 367, 126 Fed. 426; s. c, 11 Am. B. E. 370, 126 Fed. 429; In re Garlington (D. C, Tex.), 8 Am. B. E. 602, 115 Fed. 999; In re Gebhard (D. C, Pa.), 15 Am. B. E. 381, 140 Fed. 571 In re Thompson Milling Co. (D. C, Tex.), 16 Am. B. E. 454, 144 Fed. 314; In re Hersey (D. C, la.), 22 Am. B. E. 863, 171 Fed. 998 ; British & Ameri- can Mortgage Co. v. Stuart (C. C. A., 5th Cir.), 31 Am. B. E. 465, 210 Fed. 425, holding that a claim for attorney's fees based upon a mort- gage which provides that the mortgagor shall pay attorney's fees and the costs of collec- tion, is not provable where the mortgage was not due at the date of bankruptcy. See Am. Bankr. Dig. I 824. 118 McCabe v. Patton (C. C. A., 3d Cir.), 23 Am. B. B. 335, 174 Fed. 217. A statnte anthoriiinB snch a stipulation on a promissory note cannot be extended to In- clude Bucli a stipulation in a chattel mortgage. But if the services of an attorney in the col- lection of such note had been performed prior to the filing of the petition the fees stipulated to be paid would have been provable as a debt against the estate of the bankrupt. In re Chadwiek (D. C, Ohio), 15 Am. ¥. E. 528, 140 Fed. 674. 119. In re Edens & Co. (D.' C, So. Car.), 18 Am. B. E. 643, 151 Fed. 940; Merchants' Bank v. Thomas (C. C. A., 5th Cir,), 10 Am. B. E. 299, 121 Fed. 306; Matter of Ballard (D. C, Tex.), 44 Am. B. E. 651. Only reasonable, fee allowed. — Where bank- rupts gave to claimant bank certain notes which contained provisions that in :;ase they were not paid when due and payable and if they were placed in the hands of an attorney for collec- tion, the holder should be paid 10 per cent ad- ditional on the principal and Interest due thereon, as an attorney's foe, such provision called for the payment only of a reasonable at- torney's fee for services actually rendered in conformity with its terms. Mechanics* Ameri- can National Bank v. Coleman (C. C. A., 8th Cir.), 29 Am. B. E. 396, 204 Fed. 24. 180. In re Chandler (C. C. A., Sth Cir.), 25 Am. B. E. 865, 184 Fed. 887 ; Matter of Morrison (C. C. A., 7th Cir.), 44 Am. B. E. 321, 261 Fed. 355. As to proof of interest generally, see Am. Bankr. Dig. § 848. 121. In re Fenn (D. C, Vt.), 22 Am. B. E. 833, 172 Fed. 620. When interest allowable. — Interest is allow- able on claims strictly against the assets of a bankrupt only up to the time of filing the pe- tition in bankruptcy. Where the proceeds, de- rived from the sale by the trustee of the real property of the bankrupt's deceased husband, which descended to her subject to an equitable lien for his debts, are more than sufficient to pay the principal of his debts, Interest should be allowed until the date of the sale. Matter of McAusland (D. C, N. J.), 37 Am'. B. E. 519, 235 Fed. 173. 128. Sexton v. Dreyfus, 219 D. S. 339, 25 Am. B, B. 363, 365, 55 L. Ed. 244, 31 Sap. Ct. 256; Shawnee County v. Hurley (C. C. A., 8th dr.), 22 Am. B. E. 209, 94 C. C. A. 362, 169 Fed. 92. laS. Matter of McAusland (D. C, N. J.), ST Am. B. B. 519, 236 Fed. 173. :§ 63-a, (1).J Indoeseb and Sueety Debts. 963 The rate of interest of course depends upon the State law; if the rate is usurious only the amount legally chargeable may be included as a part of the debt, unless the usury affects the validity of the note, in which case the entire debt is vitiated.^^^ e. Indorser and surety debts. — (1) Liability of indoesees. — The present statute contains no equivalent to § 5069 of the Revised Statutes ;^^® and it was for some time doubted whether an indorser whose liability became fixed after the bankruptcy could prove against the bankrupt's estate. ^^ It is now thought that,' in spite of this omission and the persuasive argument based on the harmonies of the statute, contra/^^ such liabilities, because on "con- tract, express or implied," are provable. The rules of law applicable when the indorser or surety is already liable for a debt of the bankrupt have been considered.-'^" His claim is in no sense contingent, for he" proves the fixed liability of the bankrupt to the principal debtor. But where such person is merely an accommodation party, he will not be allowed to prove his debt.-'^" Where the liability of an indorser becomes fixed after his petition is filed, and prior to the expiration of the time for proof of claims, it is provable as a debt.^^^ Where the indorsers of the notes of a bankrupt corporation take 124. In re Cliandler (C. C. A., Tth Clr.), 25 Am. B. E. 865, 184 Fed. 887. See also In re Orne, Fed. Cas. 10,581. 125. In re Worth (D. C, la.), 12 Am. B. K. 566, 130 Fed. 927. See In re Kellogg (C. C. A., 2d Cir.), 10 Am. B. E. 7, 121 Fed. .333. 126. Act of 1867, § 19. 127. See In re Schaefer (D. C, Pa.), 5 Am. B. E. 92, 104 Fed. 973, as overruled by the same judge in In re Gerson (D. C, Pa.), 5 Am. B. E. 89, 105 Fed. 891; the later ruling, a£Ed. s. c., 6 Am. B. E. 11, 107 Fed. 897; Matter of Shatz (D. C, Pa.), 41 Am. B. E. 576, 251 Fed. 351. See also In re Marks (Eef., N. Y.), 6 Am. B. E. 641. 128. Thus see Collier on Bankruptcy (3d ed.), pp. 382, 383. 129. See discussion under Sections Sixteen and Fif-ty-seven of this work. Compare In re Smith (Hef., N. Y.), 1 Am. B. E. 37; Smith v. Wheeler, 5 Am. B. E. 46, 55 N. Y. App. Div. 170, 66 N. Y. Supp. 780; Hayer r. Comstock (Sup. Ct, la.), 7 Am. B. E. 493, 115 Iowa 187; In re Lamon (D. C, N. Y.), 22 Am. B. E. 635, 171 Fed. 516; Whit- well V. Wright (Sup. Ct., N. Y.), 23 Am. B. E. 747, 136 App. Div. 246, 120 N. Y. Supp. 1065. 130. In re Dunningan, 2 N. B. N. Eep. 755. Compare, on this general subject, Zartman v. Hines (Eef., N. Y.), 6 Am. B. B. 139. 131. Moch V. Market St. Nat. Bank (C. C. A., 3d Cir.), 6 Am. B. E. 11, 107 Fed. 897; In re Smith (D. C, E. I.), 17 Am. B. E. 112, 146 Fed. 912; In re Semmer Glass Co. (C. C. A., 2d Cir.), 14 Am. B. E. 25, 135 Fed. 77 ; Gorman v. Wright (C. C. A., 4th Cir.), 14 Am. B. E. 135, 136 Fed. 164; Heyman v. Third Nat. Bank (D. C, N. J.), 32 Am. B. E. 716, 216 Fed. 685; Manheim V. Loewe (N. Y. App. Div.), 42 Am. B. E. 606, 185 App. Div. (N. Y.), 601, quoting Collier on Bank- ruptcy (11th ed.), 963. Payment of note of bankrupt. — A claimant who had deposited collateral to secure a note of the bankrupt and had afterward paid the same at the bankrupt's request and for his benefit, held under the evidence to be entitled to have his claim therefor allowed against the bankrupt estate. Matter of Maiman (D. C, Me,), 43 Am. B. E. 507, 256 Fed. 127. Beimbnrsement to Indorsers. — Where certain directors of a bankrupt corporation having in- dorsed notes which were discounted and the proceeds used in the company's business, paid the notes at maturity, they are as muck en- titled to reimbursement as if each had con- tributed his share In cash and will be per- mitted to prove a claim therefor against the bankrupt's estate. In re Salvator Brewing Co. (C. C. A., 2d Cir.), 28 Am. B. E. 56, 193 Fed. 989. Trustee of indorser also trustee of maker. — Where a partnership and each of its two members have been adjudicated bankrupt and the trustees of the firm are also trustees of each individual member, under the provisions of sections 173, 185 and 186 of the New York Negotiable Instruments Law, a claim, based upon notes made by one of the bankrupts and indorsed by the other member of the firm and which had not matured when bankruptcy intervened^ is provable against the individual estate of such indorser, although no notice of non-payment was given to him. In re Mc- Intyre & Co. (D. C, N. Y.), 38 Am. B. R. 459, 198 Fed. 579. Contingent liability of endorser. — ^A surety or an indorser for a bankrupt, whose liabil- ity is contingent, cannot prove a claim of his own by reason of such liability. It is only the creditor's claim which is provable. An indorser on the note of a bankrupt who pays the note cannot prove a claim on the note and also on the implied promise of the bankrupt made at the time of the indorsement to repay him in case he is compelled to pay such note. A corporation prior to bankruptcy executed a trust mortgage to secure bonds issued and delivered to secure indorsers of its notes. On the foreclosure of the mortgage after bankruptcy of the corporation a deficiency judgment was entered, and the trustee under the mortgage filed a proof of claim baseii thereon. The notes were all assigned to one party who advanced money to the indorsers who paid said notes. Held, that the claim on the deficiency judgment should be rejected,' but the claim on the notes should be allowed ■without deduction on account of the enforce- ment of the ^collateral; that on taking up the notes the indorsers were entitled to prove their claims for the full amount thereof and. 964 Debts Which May Be Peoved. [§ 63-a, (1). up the notes aaid the bonds of the corporation held as collateral are turned over to such indorsers, the latter are then in the attitude of sureties, having paid the principal debt of the principal, and are therefore subrogated to the col- lateral held by the creditor. ^^^ Where one of the indorsers, who pay the note or become liable therefor, is a bankrupt, the indorsers may prove a propor- tionate share of the note against the co-indorser.-^^^ (2) SuEETY AND coEPOEATE BONDS. — Where the liability of the principal upon an administration bond has been legally liquidated and ascertained, both as to the amount and the person to whom due, so as to fix the liability of the surety thereon at the time of the filing of a petition in bankruptcy, by or against such surety, such liability is a provable debt.-^^* The liability of a surety on a bond of an ofiieer whose duty it is to collect and pay over public funds becomes fi^ed on the officer's failure to make payments of the money collected, and if such failure occurs prior to the adjudication of the bank- rupt surety, such liability is provable against his estate.^^^ And in the case of an indemnity bond to secure the performance of a building contract, a bankrupt principal is relieved from his obligation upon discharge, and the surety may pay it off and be subrogated to the rights of the creditor and have the pro rata part of the bankrupt's estate applied to the principal debt.^^® Where a surety pays the amount of the damages secured, he is entitled to share with all the creditors of the bankrupt, but not to the prejudice of the beneficiary obligees of the bond.^^'^ Corporate bonds issued under proper statutory author- ity to secure the payment of money borrowed for. the transaction of the busi- ness of the corporation are valid claims.^^* The holders of the bonds of a corporation, secured by a trust mortgage on the property of the corporation, receive a dividend on the full amount of suc^ 802; Murphy v. Nicholson (N. J. Ot. of claims and then apply the proceeds of the Errors and App.), 34 Am. B. E. 670, 94 Atl. mortgaged property applicable to the pay- 62; United States v. Illinois Surety Co. (C. ment of the balance of the claim on the honds C. A., 7th Cir.), 38 Am. B. E. 880, 226 or deficiency judgment. Matter of Astoroga Fed. 653. Paper Co. (D. C, N. Y.), 37 Am. B. E. 751, Distribution between surety of bankrupt 234 Fed. 792. and other creditors. — ^A surety_ company gave 132. In such a case the indorsers, regarded a bond securing persons furnishing labor or as sureties, entitled to subrogation, can ob- material to a municipal contractor. In ex- tain no more from the collateral originally press terms the obligation was joint and sev- delivered to the creditor than the creditor eral. By a contemporaneous agreement the itself could have don:;. They can claim only contractor indemnified the surety company the amount paid by them with interest, and against any payments that the latter might upon the payment of such sum' the bonds and make under the bond. After the contractor other bonds" issued as interest thereon, will had incurred debts exceeding the amount be liquidated. Sauve v. Fleschutz ( C. C. A., of the bond several creditors sued both 8th Cir.), 34 Am. B. E. 49, 219 Fed. B42. the contractor and the surety in the 133. Wright v. Eumph (C. C. A., 5th Cir.), State court and the surety was permitted to 38 Am. B. E. 235, .238 Fed. 138. pay the amount of its liability on the bond 134. Hibbard V. Bailey (C. C. A., 3d Cir.), into court, which was subsequently distrib- 12 Am. B. E. 104, 129 Fed. 575, revg. 10 uted, each creditor receiving about 50 per Am. B. E. 545, 123 Fed. 185. As to liability cent, of his debt. Thereafter the contractor of firm on note given to surety of one of was adjudged a bankrupt and its plant sold the members on an official bond, see In re by the trustee. Beld, that the surety's claim' Speer Bros. (D. C, Or.), 16 Am. B. E. 524, for the amount paid into court, for which it 144 Fed. 910. As to liability under bail bond also held a judgment, should be allowed; to United States for person indicted for steaJ- but other creditors must credit the dividend ing funds of a bankrupt estate, see In re received from the State court and confine Caponigri (D. C, K. Y.), 27 Am. B. E. 513, themselves to the balance. Matter of Amer- 193 Fed. 291. ican Product Co. (C. C. A., 3d Cir.), 35 135. Loeser v. Alexander (C. C. A., 6th Am. B. E. 54, 224 Fed. 401. Cir.K 24 Am. B. E. 75, 176 Fed. 265. 137. Matter of American Product Co. (D. 136. Williams et al. v. U. S. Fidelity Co., C, Pa.), 34 Am. B. E. 367, 222 Fed. 126. 236 U. S. 549, 34 Am. B. E. 18J, 59 L. Ed. 138. In re Waterloo Organ Co. (C. C. A., 713, 35 Sup. Ct. 289, revg. 28 Am. B. E. 2d Cir.), 13 Am. B. R. 477, 134 Fed. 341. § 6.3-ay (4).] Open Debt Accou-n'ts. 965 and not the trustee, are entitled to prove their individual claims on the bonds against the bankrupt corporation.^** f. Liabilities for taxes. — "While taxes are not in a strict sense debts, they are so regarded for many purposes under the bankruptcy act, and they are legally due and owing on the day they are assessed, although not payable until after adjudication.^*" While technical proof of them is not required and they must be paid even if not presented for proof, they are to be treated as provable debts or demands embraced in the class "founded upon an open account or upon a contract express or implied," "-^ for various purposes — including that of computing the indebtedness of an alleged bankrupt. ^*^ A sum exacted by a State for the privilege of increasing the capital stock of a corporation is a provable debt entitled to a pro rata distribution with the debts of other general creditors."* g. Other debts falling within this paragraph. — The liability of a director of a savings bank under a statute for loss, of funds embezzled by an officer constitutes a " fixed liability absolutely owing," within the meaning of this section."* An agreement by a son to pay interest on a certain sum to his father during his lifetime, and to pay the principal to the father's heirs within five years after his death, is not a "fixed liability absolutely owing," and the amount agreed to be paid is not a provable claim against the son's bankrupt estate."^ IV. OPEIf DEBT ACCOUNTS: CONTRACTS. a. Debt founded on open account. — Subdivision 4 of this subsection makes a debt " founded on an open account " provable and allowable. These words, in' view of the words that follow, seem almost unnecessary. It is meant thereby to permit a creditor to prove for a balance due on a running account between him and the bankrupt. If a debt is founded upon an open account its provability is not affected by the fact that the creditor has elected to sue as for a fraudulent conversion rather than for a balance due,^*® or for damages 139 M.iclirv y Hanclolpli Macon Coal Co. (C. Del.), 15 Am. B. E. 390, 140 Fed. 495, afld. 17 C. A., 8tli Cii'.), 24 Am. B. E. Yin, ITS Fed. 881. Am. B. E. 5G5, 149 Fed. 48. „ ' \., , t , „i •„!, i._„ Paymei:t cf taxes by mortgagee. — Where the Bonds payable only from surplus which has gggignee of a tLiid mortgage elects to sue out never existed.— Where bonds of a banJirupt ^ judgment on a mortgage bond and have the com:"ny expressly declare on their face that mortgaged property sold without notice to the both the principal and interest are payable only trustee In bankruptcy, the property will be held out of certain named funds to be created out of to have been sold subject to the tax burdens the surplus earnings of the company, and there . and the assignee will not be permitted to come never have been any surplus earnings, there into a court of bankruptcy, which is a court cannot be a fixed liability absolutely owing to of equity, and recover from the general funds the holders of the bonds. Synnott v. Tomb- of the estate the amount of the taxes which he stone Consol. Mines Co. (C. C. A., 9th Cir.), 31 paid under the plea of their being a part of the Am. B. E. 421, 208 Fed. 251. expense of administration. Matter of Gracey A provision in the bonds of a bankrupt cor- (D- C, Pa.), 39 Am. B, E. 463, 241 Fed. 981. poration, that at maturity any surplus shall be , "2. Raw Boiler Works v. Schull & Anderson divided between the bondholders, and stock- (C. C. A., 8th Cir.), 36 Am. B. E. 531, 230 Fed. holders, does not defeat the holders' claim to 587. . „ , „.,, „. „ ,t^ ^ „ , prove as general creditors for prineipr.l and 143. Matter of York Silk Mfg Co. (D. C, Pa.), interest. Matter of Interborough Eealty Co. (C. ^6 Am^L \S ' ^ I'^'^' 735. C A 2d Cir ) 34 Am B B. 541, 223 Fed. 646. I**- I" ^ Brown (C. C. A., 9th Cir.), 21 Am. L. a., ^a '-l^•^ js* A™- ,•"•"*/ '' ^, ^.- , „ B. E. 123, 164 Fed. 673; In re Walker (C. C. A., 140. In re Sherwood (CC. A., 2d Cir), 31 g^j^ civ.), 21 Am. B. R. 132, 164 Fed. 680. Am. B. E. 769, 210 Fed. 754; Hecox v. Teller 145. i^'-.e Hartman (D. C., Pa.), 21 Am. B. County (C. C. A., 8th Cir.), 28 Am. B. E. 525, jj g^Q ^gg pg^ y^g 198 Fed. 634; In re Flynn (D C, Mass ), 13 -^g^ Crawford v. Burke, 195 U. S. 176,- 12 Am. Am. B. E. 720, 134 Fed. 14o ; In re Fisher & B E 659 49 L Ed 147 25 Sun Ct 9 revp- 901 CO. (D. C N. ,1.), 17 Am. B E. 404, 148 Fed. 907. fn. 58lTKreiHein v *krgerr^2S8^ ij ' I li, 34 See Am. Bankr. Dig. § 849. Am. B. E. 862, 59 L. ed. 118. 435 Sup. Ct. 685, 141. In re United States Button Co. (D. C, revg. 28 Am. B. E. 908, 52 Ind. A-p. 199. 966 Debts Which May Be Proved. [§ 63-a, (4): sustained in consequence of false and fraudulent representations."^ Pay- ments made by the bankrupt on an open account within the four months' period do not affect the provability of the balance due, provided the net result of transactions evidenced by the account is the enrichment of the bankrupt estate."* b. Debt founded on a contract, express or implied (1) In general. — Subdivision 4 also provides that a debt may be proved and allowed which is "founded on a contract, express or implied." These are the most generic and valuable words in the subsection. The contract must, of course, be founded on a legal consideration, not against public policy, and, if by a cor- poration, not ultra vires}'^^ The claim need not be evidenced by a judgment or instrument in writing. But it is the debt resting on the contract, and not the contract liability that is provable. If there is no present liability under the contract when proof is made there can be no provable claim. '^'* Where a contract is broken by the bankruptcy of the debtor, damages may be recovered for the breach. ^^^ But if the contract is of such a nature that it may be consummated notwithstanding the bankruptcy of one of the parties, such bankruptcy does not constitute a breach of the contract, nor does it authorize 147. Tindle v. Birkett, 205 U. S. 183, 18 Am. B. R. 121, 51 L. Ed. 762, 27 Sup. Ct. 493, aflfg. 15 Am. B. E. 179, 183 N. Y. 267, 76 N. E. 25. 148. Wild & Co. V. Provident Life & Trust Co., 214 U. S. 292, 22 Am. B. R. 109, 53 L. Ed. 1003, 29 Sup. Ct. 619; Jaquith v. Alden, 18'9 U. S. 78, 9 Am. B. R. 733, 47 L. Ed. 717, 23 Sup. Ct. 649. In the ease of Yaple v. Dahl-Millikan Grocery Co., 193 U. S. 526, 11 Am. B. R. 596, 48 L. Ed. 776, 24 Sup. Ct. 552. it was held where a creditor has a claim upon an open account for goods sold and delivered during the period of four months before the adjudication in bank- ruptcy, the account being made up of debits and credits, leaving a net amount due from the bankrupt estate, that payments made under such circumstances did not constitute preferences which the creditor was bound to surrender before proving his claim in bank- ruptcy. 149. As to illegal contracts see Am. Bankr. Dig. § 840; as to ultra vires acts of cor- porations, see Idem, § 850. Illegal or immoral consideration. — ^In the absence of proof, an illegal or immoral con- sideration should not be assumed. Matter of Wray (C. C. A., 2d Cir.), 37 Am. B. R. 28, 233 Fed. 418. Corporate contract by lumber company to guaranty the completion of a building con- tract held ultra vires. In re Smith Lumber Co. (D. C, Tex.), 13 Am. B. R. 118, 132 Fed. 618. See also In re Waterloo Organ Co. (C. C. A., 2d Cir.), 13 Am. B. R. 466, 134 Fed. 341; Forsyth v. Woods, 11 Wall. 484; Buckner v. Street, Fed. Cas. 2,098; In re Chandler, Fed. Cas. 2,590; In re Young, Fed. Cas. 18,146; In re Jaycock, Fed. Cas. 7,244; In re Green, Fed. Cas. 5,751. Compare also In re Ervin (D. C, Pa.), 7 Am'. B. R. 480, 114 Fed. 596. Public policy not opposed by brewers' con- tract with bankrupt saloon keeper restricting the bankrupt from selling any other beer than that manufactured by the brewer. Mat- ter of Clark (Ref., Cal.), 21 Am. B. R. 776. Illegal contract for sale of liquors not established without proof that the sale was illegal at place where made. Jacobs v. Bal- lentine Breweries Co. (C. C. A., 1st Cir.), 2i ^.21. B. 1!. m": 103 Ppd. ?m. ' See also Thomn- son, Belden & Co. v. Leisy Brewing Co. (C. C. A., 8th Cir.), 41 Am. B. E. 682, 249 Fed. 462. Agrreement to repiir'-hase nE->it<»l pt-Ht. — Where a corporat!on. when selling shares of Hie capital steels to ol.nimant, a<»reed to renurelmie the same after the expiration of three years, upon claimant's giving notice that he so desired, such contract is invalid and cannot be made the basis of a claim in the bankruptcy proceedings of the corporation, especially In view of section 664 of the New York Penal Law forbidding the purchase by a corporation of Its capital stock except out of surplus profits arising from the business of the corporation. In re Tichenor- Grand Co. (D. C, N. Y.), 29 Am. B. E. 409, 203 Fed. 720. Compare Matter of National Piano Co. (D. C, Mass.), 42 Am. B. E. Ill, 252 Fed. 950. ISa. In re Ellis (C. C. A., eth Cir.), 16 Am. B. R. 221, 143 Fed. IQiS, where a sub- contractor was held to have no claim' prov- able in bankruptcy for materials furnished to a contractor, where the agreement between them required no payment, unless payment was made to the contractor by the owner. 151. In re National Wire Corp. (C. C, Conn.), 22 Am; B. R. 186, 166 Fed. 631; In re Inman & Co. (D. C., Ga.), 22 Am. B. R. 524, 175 Fed. 31- ; Matter of Desnoyers Shoe Company (D. C, 111.), 32 Am. B. R. 51, 210 Fed. 533. § 63-a, (4). J Debts rouNDED on Conteact. 967 the rescission or abandonment of such contract. ^'^ The form of the contract is not material so long as it imposes a contractual obligation upon the debtor ; as for instance, stock certificates issued by a corporation, entitling the holder to purchase merchandise, and to receive dividends thereon out of the profits of the corporation; such certificates being payable in merchandise after two years, are contracts of the corporation and the amount due thereon is provable against its estate. ^^* (2) Gambling transactions. — If the contract is illegal because in vio- lation of a statute prohibiting betting and gaming, it may not be provable, but this rule will not prevent the allowance of a claim where money was fraudu- lently procured by the bankrupt to bet on horse races. ^^* The rule applies to speculative contracts for the future delivery of cotton and grain, no actual delivery being intended.^^^ The provability of claims based on " bucket shop " transactions will depend largely upon State statutes ; if such transac- tions are unlawful, debts arising therefrom are not provable.*^* If the contract involves the purchase and the actual delivery of the stock or grain, it is not a gambling transaction, although it provides for future delivery, and the pay- ment was " on a margin." ^^'' 152. In re Morgantown Tin Plate Co. (D. C, W. Va.), 25 Am. B. E. 836, 184 Fe"d. 109 (revd. in part, l)ut on other grounds, 26 Am. B. R. 8151, 191 Fed. 9), citing Carey V. Nagle, Fed. Cas. 2,403; Vandegrift v. Cowles Eng. Co., 161 N. Y. 435, 444, 45 N. E. 941, 48 L. R. A. 685. 153. In re Spot Cash Hooper Co. (D. C, Tex.), 26 Am. B. E. 546, 188 Fed. 861. 154. In re Arnold (D. C.,.Mo.), 13 Am. B. E. 320, 133 Fed. 789. Where bankrupt had issued to claimants certificates stating, in substance, that he had received certain sums of money in full payment for a specified number of shares in the " pool " of a company, under whose name bankrupt was doing business, and it was further provided in the certificates that the company would invest the money according to its judgment and pay the hold- ers their pro rata shares of the profits oa hand on the first of each month, claimants having the option to withdraw the whole or any part of their money on the first of any month upon ten days' notice of intention so to do and the company being privileged to cancel the certificate on the first day of any January upon thirty days' notice. It was held that the relation created was that of lender and borrower, and not that of partners, so that claimants were entitled to prove, in bankruptcy proceedings, for the money advanced, notwithstanding the fact that such money was intended to be used in a gambling enterprise. In re Norris (D. C, Minn.), 26 Am. B. E. 945, 19» Fed. 101. 155. In re Aetna Cotton Mills (D. C, S. Car.), 22 Am. B. E. 629, 171 Fed. 994. 156. Transactions with bucket shop. — In the case of Streeter v. Lowe (C. C. A., Ist Cir.), 25 Am. B. E. 774, 184 Fed. 263, it appeared that a customer of the bankrupt who was a stockbroker, filed a proof of claim for the balance due from the bank- rupt on account of the purchase and sale of stock by the bankrupt for the account of such customer. The trustee objected to the claim on the ground that it was founded upon wagering contracts and therefore was invalid. It appeared that the bankrupt had rendered accounts to the creditor in which the transactions were treated as real sales and purchases and in these accounts he entered also certain cash payments actually made as margins by the creditor to the bankrupt. The evidence showed, however, that the bankrupt was the keejjer of a bucket shop, neither making nor intending real sales and purchases of stock, but only wagers on its price, and that the creditor understood that the transactions were wagers and did not intend that the orders which he gave the bankrupt should be carried out by actual sale or purchase. It was held that the creditor was not entitled to prove a claim for the entire balance alleged to be due on account of purchases and sales, but t at under E«v. Laws of Mass. Chap. 99, sec. 4, providing for the recovery of pay- ments made on margins, the creditor was entitled to have his claim allowed to the extent of the cash payments actually made as margins and interest thereon. 157. Actual delivery contemplated. — Un- der section 8416 of the Revised Code of Montana subjecting to a penalty " any per- son conducting any brokerage business, bucket shop or office where grain or other securities are sold on margins," where bank- rupt, a stockbroker, converted stock which had been left in his posses .ion to secure the balance due him on the purchase price, about one-fourth of which had been paid, under an agreement stating that the stock had been sold "with the distinct under- standing that actual delivery is contem- plated," a claim against bankrupt's estate for the difference between the value of the 968 Debts Which May Be Proved. [§ 63-a, (4). (3) Owing at time of filing petition. — Subdivision 4 does not repeat the words " absolutely owing at the time of the filing of the petition against him," bilt it is provable that they should be read therein/^* for it is evident that the status of a debt founded on a contract is to be determined as of the time when the petition was filed. ^^* If it be owing at the time of the filing of the petition it may be proved ; but if it becomes due only after the filing of the petition, even if before adjudication, it is not a claim to be considered as one absolutely owing.^"* For instance, where an agreement takes effect on a cer- tain day, which is subsequent to the filing of a petition against the bankrupt, the indebtedness arising from such agreement is not a provable claim against his estate.*®^ (4) Bbeach of waebanty. — A claim for damages for breach of warranty upon a sale of personal property is for a debt founded upon a contract and is provable, although the amount thereof is undetermined.^^ And this rule obtains although because of actual fraud in the sale there might be an independent claim purely in tort.^®^ But the term "represent and warrant" does not imply a promise to reimburse claimants for damages on account of the failure of a certain tract of land to cut as much timber as represented.^®* (5) Breach of executory conteact. — (I) In general. — A claim for damages for the breach of an executory contract is provable, if it may be liquidated under section 63-ib.^*^ Such doubt as may have arisen as to the provability of such a claim is caused by the conflict in authorities as to whether an action will lie for damages for the breach of an executory con- tract before the stipulated time of complete performance has arrived."® If the damages resulting from the breach may be definitely ascertained there seems no good reason why a claim based thereon should not be admitted to proof."^ stock at the time of bankruptcy and the missioners v. Hurley (C. C. A., 8th Clr.), 22 balance due is not illegal as based upon a Am. B. R. 200, 169 Fed. 92; Matter of Mul- contract prohibited by law. In re Dorr (C. lings Clothing Co. (D. C, Conn.), 37 Am. B. C. A., 9th Cir.), 2© Am. B. R. 408, 186 Fed. R. 166, 230 Fed. 681. 276. 161. Phoenix Nat. Park Bank v. Water- 158. In re Swift (C. C. A., Ist Cir.), 7 bury (N. Y., Ct. of App.), 23 Am. B. E. Am. B. R. 374, 112 Fed. 315. See also Mat- 250, 197 N. Y. 161, 90 N. E. 435. ter of Jorolemon-Oliver Co. (C. C. A., 2d 162. In re Grant Shoe Co. (C. C. A., 2d Cir.), 32 Am. B. E. 467, 213 Fed. 625. Cir.), 12 Am. B. R. 349, 130 Fed. 881, affg. 159. In re Adams (D. C, Mass ), 12 Am 11 Am. B. E. 48, 125 Fed. 576. B. E. 368, 130 Fed. 788; In re Birgham 163. Grant Shoe Co. v. Laird Co. 212 U. (D. C, Vt.), 2 Am. B. R. 223, 96 Fed. 79"; S. 445, 21 Am. B. R. 484, 53 L. Ed. 591, 29 In re Pettingill (D. C, Mass.), 14 Am. B. Sup. Ct. 332. R. 728, 137 Fed. 443. Compare In re Ger- 164. Switzer & Johnson v. Henking (C. son (C. C. A., 3d Cir.), 6 Am. B. E. 11, 107 C. A., 6th Cir.), 19 Am. B. E. 300, 153 Fed. Ted. 897, holding that while the liability 784. of an indorser on a note does not become 165. In re Spittler (D. C, Conn.), 18 Am. fixed and absolute until after his bank- B. R. 425, 151 Fed. 942; In re National ruptcy, it may still be proved against his Wire Corp. (D. C., Conn.), 22 Am. B. E. estate, if such liability has become fixed 186', 166' bed. 631. within the time limited for proving claims; 166. See discussion of this question and Colman Co. v. Withoft (C. C. A., 9th Cir.), cases cited in In re Stern (u. C. a., 2d 28 Am. B. E. 328, 195 Fed. 250; Synnott v. Cir.), 8 Am. B. E. 569, 16 Fed. 604. Tombstone Consol. Mines Co. (C. C. A., 9th 107. In re Stoever (D. C, Pa.), 11 Am. B. E. rw \ qi Ain Tl Tf 421 2(18 Fpd 2'il ■ Tot- 345, 127 Fed. 304; In re Stern (C. C. A.. 2d Cir.), 31 Am. a. K. idi ^us ±ea. ^81, ooi (,,^^ g ^^ g ^ ggg ^^3 ^^^ ^^, ^^^^^^ ^^ tmg V. Hooper, Lewis & L;0., ii Am. iS. K. Spengler (D. C, la.), 39 Am. B. E. 64, 238 Fed. 23, 107 N. E. 931. 862. 160. Zavelo v. Eeeves, 227 U. S. 625, 29 Breach of written contract; measure of Am. B. R. 493, 57 L.Ed. 676, 33 Sup. Ct. 365; damages.— A claim for damages arising out TO. ■ T>.T„t T3„„i, „ ur„+„,i,„„.., io:y XT V 0^ tli^ breach of a written contract whereby Phoenix Nat. Bank v. Waterbury. 197 N. Y. bankrupt was to purchase certain articles 161, 90 N. E. 435; Board of County Com- to be produced by claimant Is provable; and § 63-a, (4). J Beeach of Executory Conteact. 969 (II) Anticipatory breach, — It is well established that if a party to an executory contract has by his own act made compliance with such contract impossible, or had repudiated its terms, the doctrine of anticipatory breach applies, and the other party may elect to defer suit until the time of perform- ance has elapsed, or he may sue at once for the breach.*®* Under this doctrine where a contract is renounced before, performance is due, and the renuncia- tion goes to the entire contract, and is absolute and unequivocal the breach is complete and a cause of action immediately arises on the contract."' Whether the intervention of bankruptcy proceedings, especially in case of involuntary proceedings, constitutes an anticipatory 'breach giving rise to a claim provable in bankruptcy has been variously determined;"" but it has now been finally determined that bankruptcy proceedings, whether voluntary or involuntary, resulting in an adjudication of bankruptcy, are the equiva- lent of an anticipatory breach of an executory agreement.*'^ Bankruptcy is a the measure of damages is the difference be- tween the contract .price and the cost of production. Pratt v. Auto Spring Repairer Co. (C. C. A., l3t Cir.), 28 Am. B. R. 483, 19© Fed. 495. Measure of damages under subscription with mercantile agency. — Where a mercan- tile agency contracted with the bankrupts whereby it agreed to furnish information regarding the character aand credit of per- sons in business in the United States and Canada to the bankrupts for the period February 1, 1910, to April 30, 1911, for the sum of $150 "payable May 1, 1910," and from the date of the contract until a petition in bankruptcy was filed against the bankrupts on March 4, 1910, such agency did whatever it was called upon to do, but no service was rendered subsequent thereto, the agency was entitled to prove its claim for $150 against the estate upon the theory that the written contract at the basis of the claim was a promise to pay a definite sum of money contained in a non- negotiable instrument in writing. In re Glick (D. C, N. Y.), 25 Am. B. R. 871, 184 Fed. 967, citing with approval decision of Referee Hotchkiss in Matter of Buffalo Mirror & Beveling Co. (Ref., N. N.), 15 Am. B. R. 122. 168. Application and effect of doctrine. — As stated by the court in Board of Commerce v. Security Trust Co. (C. €. A., 6th Cir.), 34 Am. B. R. 762, 225 Fed. 454: " This doctrine was established in Eoehm v. Horst, 178 U. S. 1, 44 L. Ed. 953, 20 Sup. Ct. 7'80, in which the English and America,n cases are reviewed; was declared by thi= court in Weber v. Grand Lodge, 169 Fed. 53a, 533; in El Paso Cattle Co. v. Stafford, 176 Fed. 41, 47; was reaffirmed in The Eliza Lines, 199 U. S. 119, 129, 50 L. Ed. 115, 26 Sup. Ct. '8, and in Citizens' Bank v. Davisson. 239 U. S. 312, 234, 57 L. Ed. 1153, 33 Sup. Ct. 635, and is the settled law in the United States and England. This rule is held to apply also to cases in which, by reason of bankruptcy, disability to perform results. In the case, In re Neff (C. C. A.. 6th Cir.), 19 Am. B. R. 33, 157 Fed. 57, «1, 84 C. C. A. 561, it was said by Mr. Justice Lurton, then a judge of this court: 'Bankruptcy is a com- plete disablement from performance and the equivalent of an out and out repudiation, subject only to the right of the trustee, at his election, to rehabilitate the contract by performance.' "He cited In re Swift (C. C. A., Ist Cir.), 7 Am. B. R. 374, 112 Fed. 315, 60 C. C. A. 264, and In re Pettingill (D. C, Mass.), 14 Am. B. E. 728, 137 Fed. 143, in which Judge Putnam and Judge Lowell, respec- tively, expressed the same opinion. In these cases the authorities are carefully collated and considered." 169. Roehm v. Horst, 178 U. S. 1, 44 L. Ed. 953, 20 Sup. Ct. 780; Matter of MuUings Clothing Co. (C. C. A., 2d Cir.), 38 Am. B. R. 189, 238 Fed. 58. 170. In support of the provability of the claim. — See Ex parte Pollard, 2 Low. 411; Fed. Cas. No. 11,252; In re Swift (C. C. A. 1st Cir.), 7 Am. B. R. 374, 112 Fed. 315, 319, 321; In re Stern (C. C. A., 2d Cir.), 8 Am. B. R. 569, 116 Fed. 604; In re Pettingill & Co. (D. C, Mass.), 14 Am. B. R. 728, 137 Fed. 143, 146, 147; In re Neff (C. C. A., 6th Cir.), 19 Am. B. R. 23, 157 Fed. 57, 61; are referred to; and see Peimsylvania Steel Co. v. New York City Ry. Co. (C. C. A., 2d Cir.), 198 Fed. 721, 736, 744. To the contrary: In re Imperial Brewing Co. (D. C, Mo.), 16 Am. B. R. 110, 143 Fed. 579; In re Inman & Co. (D. C, Ga.), 171 Fed. 185; s. c, 23 Am. B. R. 566, 175 Fed. 312; besides which a number of oases arising out of the relation of landlord and tenant are cited: In re Ells (D. C, Mass.), 3 Am. B. R. 564, 98' Fed. 967; In re Pennewell (C. C. A., 6th Cir.), 9 Am. B. R. 490, 119 Fed. 139; Watson v. Merrill (C. C. A., 8th Cir.), 14 Am. B. R. 453, 136 Fed. 359; In re Roth & Appel (C. 0. A., 23 Cir.), 24 Am. B. R. 588, 181 Fed. 667; Colman Co. v. Withoft (C. C. A., 9th Cir.), 28 Am. B. R. 328, 195 Fed. 250. 111. Central Trust Company v. Auditorium Assn.. 240 U. S. 581, 36 Am. B. R. 679, 60 L. Ed. 811, 36 Sup. Ct. 412; Planters' Oil Co. y. Gresham, Tex. Ct. of Civ. App.), 42 Am. B. R. 29, 202 S. W. 145. 970 Debts Which May Be Peoved. [§ 63-a, (4). complete . disablement from performance of a contract, and the equivalent of an out and out repudiation, subject, of course, to the right of the trustee to carry out the contract for the benefit of the bankrupt estate. ^'^ It follows that a claim, for breach of contract may be proved, although the time of per- formance had not arrived vyhen the petition was filed, on the theory that the bankruptcy proceedings is an anticipatory breach and a complete disablement on the part of the debtor, thus making him liable for damages immediately upon filing the petition."^ A claim for damages for the breach of an executoiy contract of lease where the lessee is a corporation and has voted to wind up and its stockholders have applied to the court for the appointment of a receiver to wind up its affairs and dissolve the corporation, is a claim founded upon a contract and provable in bankruptcy."* (6) CoKTiiirGEiirT conteactttal liabilities. — While contingent contrac- tual obligations may not be proved,"' yet if liabilities thereunder mature by the happening of the contingent event upon which they depend, after the filing of the petition, and in time to admit of proof, they become provable debts. ^''* The importance of these doctrines when applied to indorser and surety liabilities has already been considered."^ (7) Continuing conteacts. — ^A discharge does not operate upon a con- tract of a continuing character in such a manner as to permit the bankrupt to enjoy the benefit arising therefrom after the filing of the petition, and at the same time exempt him from liability to pay for such subsequent enjoy- ment."* It seems that a bond to pay an annuity may be proved at the penalty of the bond, provided the latter is less than the value of the annuity based on the mortuary tables."® Bonds to secure the faithful performance of the duties of another, an officer, are of a continuing nature. There is a cause of action for each breach. The liability, because of those breaches which have occurred before the filing of the petition, is provable, but this does not destroy the continuing obligation of the bond.*^'* The liability of a 17«. In re Ne£E (C. C. A., Bth Cir.), 19 Am. B. 137 Fed. 143, holding that a claim for a breach E. 23, 157 Fed. 57; Planters' Oil Co. v. Gresham of a contract to purchase stock at a fixed date, (Tex. Ct. of Civ. App.), 42 Am. B. E. 29, 202 S. after the bankruptcy. Is provable; In re Imper- W. 145. ial Brewing Co, (D. C, Mo.), 16 Am. B. E. 110, Directors' liability. — Matter of Hutchcraft (D. 143 Fed. 579. C, Ky.), 41 Am. B. E. 238, 247 Fed. 187. Claim (or unpaid subscription of stools.— 173. Wood V. Fisk & Eobinson (N. Y. Sup. Where a corporation, for the stock of which Ct.), 31 Am. B. E. 824, 156 N. Y. App. Dlr. 497, the bankrupt had subscribed, made an asslgn- 141 N. Y. Supp. 342; Matter of Scott, etc., Co. ment for the benefit of creditors, followed by a T. Cent. Trust Co. (C. C. A., 7th dr.), 32 Am. -ecelvershlp, prior to the bankruptcy of the B. E. 417, 216 Fed. 308, mod. sub. nom. Cen- subscriber, a claim on such subscription is tral Trust Co v. Auditorium Assn., 240 U. S. not "contingent." Matter of Thompson (D. C, 581, 36 Am. B. B. 679, 60 L. Ed. 811, 36 Sup. Ct. Wash.), 42 Am. B. E. 142, 257 Fed. 140. 412. 177. See subtitle " Indorser and Surety 174. Matter of Mullings Clothing Co. (C. C. A., Debts," . C, Mass.), 5 Am. B. R. 19, 104 Fed. 331; Aiken v. Haskins, 6 Am. B. R. 46, 34 N. Y. Misc. 505, 70' N. y. Supp. 293. Provability of costs in suit against bank- rupt. — ^Where, long before bankruptcy pro- ceedings were instituted, claimant had brought an equity suit against bankrupt in the State court, to enjoin the use of a cer- tain word in connection with their business, in which it had been stipulated between the parties that the referee should not be limited to the statutory allowance, but that his fees should be fixed at a certain rate per hovir and that each side should pay one-half of the stenographer's bill, the prevailing party to be allowed to tax bis share as a disbursement in the case, the claimant, having Jiad a, decision in his favor and having paid the stenographer's fees and the referee's fees having been paid prior to the filing of the petition in bank- ruptcy, was entitled under section 63-a of the bankruptcy act to prove a claim against the bankrupt's estate for these item's, the same to be considered as costs in the equity suit rather than as a debt due prior to the institution of bankruptcy proceedings upon a contract ex; ss or implied. In re Brewster & Co. (C. C. A., 2d Cir.), 24 Am. B. R. 838, 180 Fed. 109. Liability of customers of bankrupt stock- taokers for costs and expenses. — Customers of bankrupt stockbrokers who find their property in loans while they are entitled to a credit balance, ought not to be called on to pay any part of the disbursements and should have a docket fee. But customers carrying stocks on margin thereby give the broker the right to pledge them as collateral, and should bear the expense of disentangling the resulting rights in proportion to their in- terests, but are not entitled to a docket fee. Those customers who faii to establish any claim should not bear any costs. Matter of Pierson, Jr. & Co. (D. C, N. Y.), 35 Am. B. E. 213, 25 ed. 889. 203. In re Lyons Beet Sugar Refining Co. (D. C, N. y.), 27 Am. B. R. 610, 192 Fed. 445. 204. Costs incurred in good faith. — The mere fact tliat a creditor believes his debtor to be in financial straits does r.ot preclude him from asserting his legal rights, or impute bad faith to him in so doing, so as to bar his claim for costs where he prosecuted his claim to judgment, issued execution and was proceeding to sell prop- erty levied under the execution when the debtor filed a voluntary petition in bank- ruptcy. In re Harnden (D. C, N. Mex.), 29 A. M. B. R. 504, 200 Fed. 173. 205. Gardner v. Cook, Fed. Cas. 5,226; In re Ward, Fed. Cas. 17,145; In re Davis, Fed. Cas. 3,616. See Matter of Thompson Mercantile Co. (Ref., Min.), 11 Am. B. R. 579. 206. In re Williams, Fed. Cas. 17,705; In re Welch, Fed. Cas. 17,367; In re Jenks, Fed. Cas. 7,276; Zeiber v. Hill, Fed. Cas. 18,20©; In re Holmes, Fed. Cas. 6,631. § 63-b.J Unliquidated Claims. 975 a provable debt for his taxable costs and disbursements; so, perhaps, has the sheriff, if the party does not pay him. But that either has, where the costs and disbursements are incident to a lien dissolved by § 67-f, may be' doubted.^"^ The cases as a rule discuss the right to priority rather than the right to prove.^® There can be no priority under § 64-b (5) where there is no " debt." ^** However, the words of the subdivision make it clear that costs can be proven under it only (1) if taxable, (2) in a suit brought by a creditor, (3) on a provable debt, (4) before the filing of the petition, and (5) incurred in good faith. Lacking one or more of these elements, costs are not provable unless within the meaning of subdivision (2).^^° d. Costs in attachment suits. — The costs and disbursements in an attach- ment suit pending against a hankrupt at the time of the filing of the peti- tion, the attachment lien being dissolved by the adjudication, are not a claim which should be paid by the trustee out of the bankrupt's estate. The costs and disbursements are a mere incident of the lien and fail with the lien.^^^ But it has been held that such a claim incurred in good faith by a creditor though within four months of the bankruptcy, is a provable claim against the estate though the lien is dissolved,^^^ and this seems to be the better authority under the present law. That the costs and disbursements in an attachment suit cannot be proven as a debt against the bankrupt and that the lien for the costs fails with the attachment lien, see the cases, under the act of 1867, cited in the foot-note. ^^* An examination of the cases under such note shows, however, that in many of them, although it was held that the lien for costs failed with the attachment lien, and although there was no claim therefor against the bankrupt, still the bankruptcy court may, in the exercise of its equitable jurisdiction, require the trustee to pay such charges as have benefited the estate in his hands, though incurred before the bank- ruptcy; if he received the benefit of the attachment he was obliged to sustain the burden.''" Vn. UNLIQUIDATED CLAIMS. a. In general. — Subsection h permits the liquidation, and subsequent proof and allowance, of an unliquidated claim against the bankrupt. Our earlier Bankruptcy Acts invariably have been regarded as excluding from considera- tion unliquidated claims arising, purely ex delido?^^^ The law of 1867 per- ZOT. In re Young (D. C N. T.), 2 Am. B. E. 64-b (5), where, as in California, the State 673, 96 Fed. 606; In re Jennings (Eef., N. T.), jaw provides that the legal costs and dis- 8 Am. B. R. 358. Compare Matter of Hessler >,,„<,„„„„*, „f „„ o+tafTiTnpTit Qui'f VirmnrVit Foundry & Mfg. Co. (D. C, N. Y.), 43 Am. B. bujsemer.ts ot an attachment suit brought jj 246 before the commencement of proeeedmga m 208. Compare In re Allen (D. C, Cal.), 3 Am. insolvency shall be a preferred debt. In B. E. 38, 96 Fed. 512; In re Lewis (D. C, re Amoratis (C. C. A., 9th Cir.), 24 Am. B. i.), 4 Am. B. E. 51, 99 Fed. 935. And gen- jj jgg jyg pg^j g^g ''f^. rJ'il^tl^ih 1 (11). >K^^'\ r*""^^/ ?^- ?• ^- ''^' i'^- 210 Text cited with approval in In re Ham- Cas. 4.955, 1 Low. 306; Gardner v. Cook, 7 den (D. C, N. Mex.), 29 Am. B. E. 504, 200 Fed. N. B. E. 346, Fed. Cas. 5,326; In re Geo. S. 173. ,T. ^ „ ^, o A n 1, Ward, 9 N. B. R. 349, Fed. Cas. 17,145; 67i"96'Fed' 6M "^ ^ ' '^' ^^ ^« ^^*j«' ^^ ^^ ^- ^- ^^^' ^ed. Cas. 6,- 212 In re Allen (D. C, Cal.), 3 Am. B. R. 38, 213, 6 Biss. 436; In re Preston, 6 N. B. E. 96 Fed. 512. 545, Fed. Cas. 11,394. See, however, ap- Costs of attachment suit under laws of parently contra, In re Foster, Fed. Cas. State.— A claim for costs actually and 4,960, 2 Story, 131; In re Hausberger, S necessarily expended by claimant in an at- N. B. E. 92, 2 Ben. 504; London v. King, tachment suit brought against the bank- 50 Ga. 30"2; In re Preston, 5 N. B. E. 293. rupt in good faith before the filing of the . 214. See In re Fatune, 2 N. B. E. 662, Fed. petition in bankruptcy, is a provable claim Cas. 4 955; Garden v^ Cook 7 N.B. R. 346, Fed. J^ , ,. „„ ,!;, ■' t 4.i,„ v„„i,™,«*„„ «„(■ Cas. 5,226; In re Ward, 9 N. B. R. 349, Fed. under section 63 (3) of the bankruptcy act p^s. 17.145; In re Jenks, 15 N. B. E. 301, Fed. and is entitled to priority under section Cas. 7,276; Zeiber v. Hill, 8 N. B. R. 239, Fed, Debts Which Mat Be Peoved. [§ 63-b. mitted the liquidation of damages for conYcrsion only ; tbat, as has been shown, was (aside from debts grounded in fraud or embezzlement) the only tortious liability provable. The words of the present law are much broader and seem to be taken from E. S., § 5068, which regulated the liquidation of " contingent •debts and contingent liabilities." b. Effect and purpace of subsection. — Subsection h adds nothing to the class of debts which may l_o p;oved under subsection a; its purpose is to permit an unliquidated claim, coming un-Jcr t::o provisions of subsection a, to be liquidated as the court shall dircct.215 It should be taken as evidence of an intent that contingent debts whose present value is eapcble of ascertainment are provable and that those whose present value is not so cipiible of ascertain- ment are not provable.2l8 Unliquidated claims based upon a mere tort are not provable217 but vdiere the tort-feasor obtains something of value for which an equivalent price ought to be paid, even if the tort as such be forgiven, there may be a provable claim quasi ex eon- troci«.217a A claim for unliquidated damages for loss of future profits is provable in bank- ruptcy, where it is based on a contract right.218 If the nature of the claim is such that it can only bo liquidated in a court having exclusive jurisdiction confoii'cd by statute, it cannot be proTed.219 Cases under the former law will be found in the foot-note.220 c. Injuries to person or property.— A claim for unliquidated damages for personal injuries alleged to have been caused to a servant by the failure of a master to furnish safe appliances, arises ex delicto and is not of such a^ Cas. 18,206; lu re Holmes, 14, N. B. E. 493, Fed. Cas. 6,631. 214a. SchaU v. Camors (U. S. Sup. Ct.), 44 Am. B. R. 547, 40 Sup. Ct. 135. 815. Dunbar v. Dunbar, 190 XJ. S. 340, 349, 10 Am. B. E. 139, 47 L. Ed. 1084, 23 Sup. Ct. 757; Scliall v. Camors (U. S. Sup. Ct.), 44 Am. B. R. 517, 40 Sup. Ct. 135. Matter of Hutch- craft (D. C, Ky.), 41 Am. B. R. 238, 247 Fed. 187. Ajtt unliquidated claim will only be allowed under section e3-b, upon application to the court to direct the manner of liquidation. In re Silverman Bros. (D. C, Mo.), 4 Am. B. E. 83, 101 Fed. 219. Class of provable debts not enlargred by sec- tion 63-b. — Section 63-b of the bankruptcy act, providing for unliquidated claims against the bankrupt, which may be liquidated upon ap- plication to the court in such manner as it shall direct, and may thereafter be proved and al- lowed against his estate, adds nothing to the class of debts which may be proved under paragraph o of the same section, its purpose being to permit an unliquidated claim coming within the provisions of section 63-a, to be liquidated as the court should direct. Matter of Eoth & Appel (C. C. A., 2d Cir.), 24 Am. B. E. 5SS, ISl Fed. 667; In re Southern Steel Co. (D. C, Ala.). 25 Am. B. E. 358, 183 Fed. 498; ?I tier of Mullings Clothing Co. (C. C. A., 2d dr.), 38 Am. B. R. 1S9, 238 Fed. 58; Moore x. DouKlns (C. C. A., 9th Cir.), 36 Am. B. R. 740, 230 Fed. 399, ateg. 34 Am. B. E. 823, 225 Fed. 683. Taxes and premiums of insurance. If they are not a fixed liability, are not such unliquidated claims against the bankrupt as can be proved, for only those claims can be admitted to proof under this provision which can be liquidated by legal proceedings instituted at the time of the bankruptcy. Matter of Pittsburg Drug Co. (D. C, Pa.), 20 Am. B. E. 227, 237, 164 Fed. 482. Agreement of tenant to repair. — A discharge in bankruptcy of a tenant who has agreed to keep the property in repair operates as a dis- charge of any unliquidated demand for failure to comply with such agreement. Kellogg v. King (Miss. Sup. Ct.), 39 Am. B. E. 762, 75 So. 134. 216. Dunbar V. Dunbar, 190 TT. S. 340, 10 Am. B. E. 139, 47 L. Bd. 1084, 23 Sup. Ct. 757 ; Matter of Hutchcraft (D. C, Ky.), 41 Am. B. E. 238, 247 Fed. 187. 817. Schall V. Camors (U. S. Sup. Ct.), 44 Am; B. E. 547, 40 Sup. Ct. 135, wherein the court, speaking through Mr. JusUice Pitney^ said: " Can it be supposed that the present Act was intended to depart so widely from the pre- cedents as to include mere tort claims among the provable debts? Its sixty-third section does not so declare in terms, and there is nothing in the history of the Act to give ground for such an inference. It was the result of a long period of agitation, participated in by commercial conventions, boards of trade, chambers of commerce, and other commercial bodies. To say nothing of measures proposed in previous Congresses, a bill in substantially the present form was favorably reported by the committee on the judiciary of the House of Eepresentatives In the first session of the Fifty- Fourth Congress. Having then failed of pas- sage it was submitted again in the second ses- sion of the Fifty-Fifth Congress as a substi- tute for a Senate bill after disagreeing votes of the two houses, it went to conference and as the result of a conference report became law. It is significant that section 63, defining "Debts Which may be Proved," remained unchanged from first to last, except for a slight and in- significant variance In clause (5) In the final print; the word "interests" having been sub- stituted for "interest." House Eept. No. 1228, 54th Cong., 1st Sess., p. 39; House Eept. No. 65, 55th Cong., 2d Sess., p. 21; Senate Doc. No. 294, 55th Cong., 2d Sess., p. 22. Evidently the words of the section were carefully thosen ; aud the express mention of contractual obligatiovs naturally excludes those arising from a mere tort. Since claims founded upon an open ac- count or upon a contract, e>:press or implied, often require to be liquidated, some provision for procedure evidently was called for. Clause b. fulfills this function, and would have to re ceive a strained interpretation in order that it should include claims arising purely em delicto. Such claims might easily have been mentioned if intended to be included. Upon every consideration we are clear that claims based upon a mere tort are not provable." See also In re Hlrschman (D. C, Utah), 4 Am. B. E. 715, 104 Fed. 69; In re Filer (Eef., N. T.), 5 Am. B. R. 5S2; Matter of United Button Co. (D. C, Del.), 15 Am. B. E. 390, 140 Fed. 495; Matter of Griffin (D. C, Mass.), 33 Am. B. R. 894, ISS Fed. 389; Boyd v. Anplewhite (Miss. Sup. Ct), 45 Am. B. E. 325, 84 So. 16. § 63-b.J Unliquidated Claims. 977 nature as to authorize a waiver of tlie tort and a recovery upou the quasi- contract, and is, therefore, not provable against the master's estate in hank- ruptcy,^^^ So, a judgment, in an action under an employer's liability act to recover for personal injuries, is not a provable claim against the bankrupt's estate.^^^ A claim for unliquidated damages, resulting from injury to the property of another, not connected with or growing out of any contractual relation, is not a provable debt in bankruptey.^^ d. Liquidation, how accomplished. — The liquidation is usually accomplished by a suit in the proper State court, but it can be in the bankruptcy court when all the facts are admitted.^^* The proof of the claim, though unliqui- dated, may be filed, and thereupon the claim is before the court to be dealt with as the interests of the parties may require; there must be liqui- dation before proof by such means as the court or referee may direct.^^^ If it seems best the referee may withhold action on the claim or postpone the dividend thereon until the status of the claim is fully determined.^^* Unliquidated claims may be liquidated either by a hearing before the referee, by a plenary suit in any court of competent jurisdiction, or by permitting a pending action upon such claims to proceed to judgment.^^ It is not necessary to declare the rules for determining the amount due upon unliqui- dated claims; ordinarily such determination will be based upon the prin- ciples controlling the ascertainment of damages in other cases where there have been breaches of contractual obligations.^® e. Contingent liabilities. — There is a broad distinction between "unliqui- dated damages" and "contingent liabilities."^^* The phrase "unliquidated claims" may refer to both. The former law provided for the liquidation of contingent debts and liabilities,^* and the cases under it, as well as those 217a. Schall v. Camors (U. S., Sup. Ct.), 44 825. In re Rubel (D. C, Wis.), 21 Am. B. E. Am. B. E. 547, 40 Sup. Ct. 135. 566, 170 Fed. 1021. 218. Matter of Manhattan Ice Co. (D. C, N. ggs. lu re Merteus (C. C. A., 2d Cir.), 16 Am. Y.), 7 Am. B. B. 408, 114 Fed. 400-n, attd. 8 Am. b. E. 825, 144 Fed. SIS. ^•2W. In-Tl\fwtj%. C, Wash.), 28 Am. B. oJ'^L^V^^''^^^Kl.^t£, S^"^" <°- *^- ^- ■^•'• E. 58, 194 Fed. 751, in which a claim by a sub- 22 Am. B. E. 382, lfa9 I'ed. lUli. contractor against a United States contractor, Accoimtingr before referee to determine claim based upon the bond given by the contractor, of fiolvent partner. — Where oue purcuer has was held not provable, because under the Paid all the debts of a partnership whose other statute requiring the bond actions thereon cau member has been adjudged a bankrupt, the only be brought in the circuit court. sum which may be shown upon a partnership 220. In re Smith, Fed. Cas. 12,975 ; In re Coot, accounting to be due him from such other Fed. Cas. 3,151; Ex parte Lake, Fed. Cas. 7,991; member is a debt which will be discharged by Abbott V. Eo.wan, 33 Ark. 593. See discussion bankruptcy, and therefore provable against the ante, subtitle "Implied contracts." estate of the bankrupt partner. In such case, 221. Matter of Urgniore & Sons Co. (Eef., an accounting being necessary to make proof Cal.), 10 Am. B. E. 661. See ante, II, d (4) of claim, the court has power under section "Claims tortious In character." 63-b of the bankruptcy act, to order the claim 222. In re Crescent Lumber Co. (D. C, Ala.), liquidated before the referee. Matter of Hirth 19 Am. B. K. 112, 154 Fed. 724. D. C, Minn.), 26 Am. B. R. 666, 1S9 Fed. 926. A claim by an employee for personal In- 228* See Matter of Structural Steel Car Co. juries^ unliquidated and not reduced to judg- (Eef., Ohio), 13 Am. B. E. 373; In re Kenuey ment, until after the adjudication in bank- (D. C, Ind.), 14 Am. B. R. 611, 136 Fed. 451. ruptcy of the employer, is not a debt provable 229. Consult Zimmer v. Schleehauf, 115 Mass. in the bankruptcy proceedings. Bberlein v. 52. Fidelity & Deposit Co. (Wis. Sup. Ct.), 37 Am. gso. Bankr. Act, 1867, § 19 (E. S., § 506E), B. E. 614, 159 N. W. 553. •- provided as follows: "In all cases of contingent A claim by the New York State Industrial debts and contingent liabilities contracted by Commission based upon an award against the jijg bankrupt, and not herein otherwise pro- bankrupt for personal injunes to an em- j^^^ ^ ^^g creditor may make claim therefor, ?i7tcy' rd'\S?"r'e^du1.rd^"to"rud'gVeir Is'^S^i -d have his claim allowed with the right to provable under this section. Matter of Bock- share in the dividends, if the contingency hap- away Soda Water Co. (D. C, N. T.), 36 Am. pens before the order for the final dividends; B. E. 640. or he may, at any time, apply to the court to 223. Brown & Adams v. United Button Co. have the present value of the debt or liability (C. C. A., 3d Cir.), 17 Am. B. R. 565, 149 Fed. ascertained and liquidated, which shall then be 48, affg. 15 Am. B. E. 390, 140 Fed. 495. done iu such manner as the court shall order, 224. In re Rouse (Eef., Ohio.), 1 Am. B. E. and he shall be allowed to prove the amount so 393. ascertained." '62 978 Debts Which May Ee Proved. [§ 63-b. under its predecessor, drew a clear distinction between demands whose exist- ence depended on a contingency and existing demands where the cause of action depended on a contingency; the former not being provable in any event and the latter only when liquidated.^^ The present law has no similar clause and it has been vigorously asserted that contingent claims cannot now be liquidated or proven.^^ We have already seen, however, that an indorser or a surety may have a provable claim, even if the contingency fixing it does not happen until after the bankruptcy. The same reasoning will doubtless extend to all existing demands based on contract where only the cause oft' action depends on a contingecy. Such a construction harmonizes the statute both as to distribution of assets and to the dischargeability of debts, and explains an omission for which there was no reason, in fact, which, if inten- tional, was wrong. Such a contingency may, it is thought, be liquidated under the terms of subsection h; with, however, this limitation, that both (1) the contingency must happen and (2) the liquidation be accomplished during the time within which a claim may be proven.^' The test as to whether a 231. Raggin v. Magwire, 15 Wall. 549; French v. Morse, &8 Mass. Ill; Jemison v. Blowers, 5 Barb. (N. Y.) 686; McNeil v. Knott, 11 Ga. 142; In re Mead, 14 Fed. 287. 232. In re Imperial Brewing Co. (D. C, Mo.), 16 Am. B. R. 110, 143 Fed. 579, In re American Vacuum Cleaner Co. (D. C, N. .J.), 26 Am. B. R. 621, 192 Fed. 939. Efiect of distinction between present act and act of 1867. — Mr. James W. Eaton, the able editor of the third edition of Col- lier on Bankruptcy, uses the following lan- guage in commenting upon the inferences to be drawn from the failure of the present act to provide for proof of contingent lia- bilities as was done under the act of 1867: " The provisions of the act of 1898 concern- ing the proof of contingent claims' differ materially from' those contained in the acts of 1841 and 1867. Section 63-a (1) provides for fixed liabilities absolutely owing at the time of the petition but not then payable. Section 57-i provides for the proof of con- tingent claims of the surety of the bank- rupt where the creditor has not proved his claim. G. O. 21 (4) has only to do with the claims of a surety. Apart from these provisions there is nothing in the act of 1898 or the General Orders which refers expressly to contingent claims. It must therefore be assumed that Congress did not intend to include such claims among prov- able debts. (See cases cited under the pre- ceding paragraph.) This will be seen by a comparison with the terms of tne preced- ing act. Revised Statutes, section 5069 (section 19 of the act of 1867), reads: (Section inserted as in Note 230). " Clearly, then, in enacting this para- graph ( subdivision 1 ) , Congress must have had in mind this liability of sureties and other persons in similiar relations, as well as other contingent liabilities, and under the present law such claims or debts cannot be proved unless the liability has become fixed and absolutely owing before the com- mencement of the proceedings in bank- ruptcy. Subdivision 4 provides that ' debts are provable which are founded upon an open account or upon a contract express or implied.' But contingent liabilities are not in any proper sense debts; they are mere contracts, and do not become debts until the contingencies happen on which demana for payment can be made. Those con n- genci«s may indeed happen pending pro- ceedings in bankruptcy, but there is no provision in the present act for the proof of such a debt if the liability becomes fixed after the commencement of proceedings but before final dividend. The statute of 1867 did permit proof in such cases, but it is believed that imder the present statute it cannot be done. Inasmuch as in all pre- vious bankruptcy acts legislators have thought it necessary to insert an express provision in order to give to one the right to prove such contingent debts and con- tingent liabilities, the omisson of such pro- visions from the present act seems to show an intention on the part of Congress to leave the liability of the bankrupt on such contracts unaffected. Such construction of the statute cannot be assailed as not in conformity with the spirit and tendency of bankruptcy legislation. It is true that su",h liabilities, if not provable, are not in any way affected by a discharge. And there may be many liabilities which, in consequence, will remain outstanding against the bank- rupt after the proceedings in bankruptcy. But to a certain extent that was true under the former act. Under all bankruptcy laws there is a certain date fiied after which debts which come into existence may be collected from the after-acquired property of the bankrupt. That time, under the pres- ent act, is the date of filing the petition." 233. Bankr. Act, § 57-n, and discussion under Section Fifty-seven of this work, subtitle " Time limitation on allowance of claims." § 63. J Debts not Peovable. 979 claim is really contingent or simply one unliquidated by legal proceedings is this: Have all the facts necessary to be proved to fasten liability already occurred ? If so the claim is not contingent. But as long as it remains uncer- tain vrhether a contract will ever give rise to an actual liability and there is no manner of removing the uncertainty by calculation, it is too contijigent to be a provable debt.^^* Thus, it has been held, in respect to leases, that, although a landlord's claim was not a fixed liability at the time the petition was filed, if it was liquidated within the year, it became a provable debt.^^^ A claim for future services under a written contract with the bankrupt for a term of years is a contingent liability and not provable in bankruptcy.^^® The condi- tional preliminary proof authorized by the former law should, however, not be permitted. ^^^ A claim cannot be proved for a breach of a covenant in a lease to the effect that the lessee would after re-entry indemnify the lessor against all loss of rents and other payments which might occur by reason of the termination of the lease, since in such a case the damages, if any, could not be ascertained until the term of the lease had expired as originally limited, or there had been a reletting. ^^^ VII. WHAT DEBTS ARE NOT PROVABLE. a. In general. — From what has already been said, it results that substan- tially all liabilities either ex contractu or ex delicto, provided they are liqui- dated either before the bankruptcy, or, if not, thereafter, are provable debts under the terms of subsection i. There are exceptions, which, and the reasons for them, are considered here. b. Judgments for fines and penalties. — These are not provable,^^'' though there is authority the other way.^*" Penalties imposed under a State statute after adjudication of a corporation in bankruptcy, for failure to file reports and the like, are not fixed liabilities absolutely owing at the time of the filing of the petition, and are not provable debts.^*^ Fines are provable, if at all, only because " a fixed liability absolutely owing." But the criminal 334. Matter of MuUlngs Clotlilng Co. (D. C, Vacuum Cleaner Co. (D. C, N. J.), 26 ^?"'-Viwn"r. ^i ^9fl^r1v?V\mT'T?Tsq' A"i- B- R. 621,- 193 Fed. 939. set PRicTe (C. C. A., 2a Cir.), .iS Am. 15. K, 189, „„„ -sr j.j £ ~\t j. n ^-n . -r 2P,-; Fed. 5S; Matter of Hr.tclicrnft (D. C, Ky.), 236. Matter of jMontague & GiUet, Inc. 41 Am. B. E. 238, 247 Fed. 1S7. (D. C, X. \.). 33 Am. B. E. 106, 213 Fed. 235. Moch V. Market Street Bank (C. C. A., 452. 33 Cir.) 6 Am. B. R^ 11, 107 Fed 897; In re 237, Compare foot-note 330, ante. Dunlap Carpet Co. (D. C, Pa.), 20 Am. B. B. „„„ ^ ^ c;i,ofF„r /n P iit^^^ \ in 4 882, 163 Fed 541; In re Coloris Mfg. Co. (D. C, 238. In re Shaffer (D C Mass.) 10 Am. Pa.), 24 Am. B. R. 609. 179 Fed. 722. B. R. 633, 124 Fed. Ill; In re Ells (D. C, Allowance of contingent claims; claim Mass.), 3 Am. B. E. 564, 98 Fed. 967. See for salary due after bankruptcy. — ^In the also Evans v. Lincoln Co... 10 Am. B. E. absence of statutory language expressly di- 401, 204 Pa. St. 448, 54 Atl. 331. Compare recting the allowance of contingent claims, Matter of Mullings Clothing Co. (C. C. A., the holder thereof will not be permitted in Sd Cir.), 38 Am. B. R. 189, 338 Fed. 58. bankruptcy proceedings to share in the dis- 239. In re Sutherland, 3 N. B. R. 314, Fed. tribution of the assets with those creditors Cas. 13,639; People v. Spaulding, 10 Paige whose claims were absolute at the time of 284, affd. 4 How. 21; In re Moore (D. C., the filing of the petition. Thus, where one Ky.), 6 Am. B. E. 590, 111 Fed. 145; In re was employed by a bankrupt under an Southern Steel Co. (D. C, Ala.), 35 Am. B. executory contract, which at the time of the R. 358. 183 Fed. 498; Matter of Francisco filing of ah involuntary petition had a num- (D. C, N. Y.), 41 Am. B. E. 87, 345 Fed. 316. ber of months to run and had been paid up 24». 1° re Alderson (D. C, W. Va.), 3 Am. to that date, a claim for salary for the lJ-,lttiZ if ^fa?e ^o°l.'r^fgI?n\\ I Itt month following the tilmg 01 the petition, rupt for fines upon indictments Is a dlscharge- during which time claimant was unemployed. able judgment. This does not seem to be good cannot be proven under section 63 of the '^^^^_ ^^^^^^ „, York Silk Mfg Co (D C bankruptcy dct of 1898. In re American Pa.), 26 Am. B. K. 650, 188 Fed. 735. 980 Debts Which Mat Be Peoved. [§ 63-a. does not "owe" a fine; it is not a debt, but a punishment. Further, if provable, they are, under § 17, dischargeable. The courts will hardly impute to Congress an intention thus to grant amnesty to criminals whose punish- ment consists of a fine.^^ The opposite rule doubtless applies when the judgment is for a penalty or forfeiture. c. Alimony due or to accrue.— "Were Audubon v. Schufeldt^'* national in its scope, alimony, whether in arrears or to accrue, would not be a provable debt. As it is, there may still be some doubt in those States where it, when decreed by a court, is a debt merely.^** That it is a duty measured up in dollars is the almost universal view, a reason alone sufficient to take it out of the meaning of § 63, Further, alimony to accrue is never a fixed liability, being always subject to change by the court that decrees it. Still further, it is n9t a judgment in the ordinary sense, the method of collection being far different. It is true that in this view, the amendment of 1903, exempting alimony from the effect of a discharge.^*^ is superfluous. Now, however, alimony, whether due at the time of bankruptcy or accrued or to accrue thereafter, is not a provable debt.^*® d. Rent to accrue.— The law of 1867 contained a clause which limited the proof of "rent or any other debt falling due at fixed and stated periods" to the moment of bankruptcy.^*^ Under it, it was often held that rent to accrue was not provable.^** Though there is no such clause in the present law, the great weight of authority is that rent to accrue is not even a con- tingent claim,^*^ and is, therefore, not capable of proof. ^^'^ The reasons given are various, but that asserting that the adjudication amounts to a breach of the lease has already been challenged and may be doubted.^^^ The only "fixed liability" under the lease is the rent due at the time of filing the petition.^^^ Rent to accrue is not a fixed liability absolutely owing, but is a 242. See 1 K B. 48, 57. 136 Fed. 359; In re Eubel (D. C, Wis.), 21 Am. 243. 181 U. S. 575, 5 Am. B. E. 829, 45 L. ^- ?• 5"?' ^™,^e£- ^}^^ ■ ^"^ ^^ ^°^^ & Appel (C. Vfl innq 21 Sun rt 7q'> '^- ^- ^^ ^ir.), 24 Am. B. E. SSS, ISl Fed. 667; oA ■^' ■ ^^' *'*-.^^5; , , , In re Sapinsky & Sons (D. C, Ky.), 30 Am. B. 244. For instance, m Kentucky, see In re E. 416, 206 Fed. 523; Colman Co. v Wlthoft (C Houston (D. a, Ky.), Z Am. B. R. 107, 94 C A., 9tli Cii-.), 28 Am. B. E. 328, 105 Fed. 250. Fed. 119. Apparently contra. In re Goldstein (Eef., Pa.), 2 Sm Sep BaTilrr Act S "1 7.!i (91 •*-™- ^- ^- ^^'^- Compare Matter of Mulli!:gs Ato. oee xsanKr. aqt,, s i(-a (li). Clotli"-."' Co (C C \ 2d Ci'- ) 38 Vn: B E 246. See under Section Seventeen of this 1S9, 2C3 Fed. 58. foilowir? d"ic'trire' in In re work; Wetmore v. Markoe, 196 U. S. 68, Eotli r. Appel (C. C. A., 2d Cir.). 2i Am. B. E. 13 Am. B. E. 1, 49 L. Ed. 390, 25 Sup. Ct. 588, 1£1 red, eCT, 1-.-'- i-ildirg that it was rot 172 .1.7-!:'- 'lo to a rr.rn y.-r-:i pr'cr to bnnkruptry 247. Act of 1867, § 19, E. S., § 5071.. L™e7''^'-°° '■™' '^'==='^"'^ *"' terminating a 248. In re May, Fed. Cas. 9,325;' In re 251. Comrare In re Jefferson (D. C, Ky.), 2 Hufnagel, Fed. Cas. 6,837; In re Croney. -A-in. D. E. 200, 03 Fed. 0-13, with In re Ells (D. Fed. Cas. 3i411. C., Mass.), 3 Am. B. E. 564, 98 Fed. 967. 249. Compare Ex parte Hougliton, Fed. ^^," '-X-JJ.udicr.tlon i:: ba::-ri:p;cy ag-ainst a noo R 70K 'T'„„*. „;f„j ,„;i-i „„ 1 • parUiership orcr.ites to ti-ancfcr by operation Cas 6,(25. Text citeci witli approval m ^j j.^ j^ ^^.^ t,^,,,^^ ^ 1„_^33 l^^,^ ^/ ^^'^ „j ^^^ Matter of Cress-McCormick Co. (Eef., Miss.), partners, and authori::e.s the lessor to avoid 25 Am. B. E. 464. the lease for a tr-insfcr "by operation of 250. In re Jefferson (D. C, Ky.), 2 Am. l.iw" without his consent, in violation of a B. E. 206, 93 J'ed. 948; In re Arnstein (D. covenant of the lease. Matter of Goorgalas C, N. Y.), 4 Am. B. R. 246, 101 Fed. 706; Brothers (D. C, Ohio), 40 Am. B. E. 168, 245 In re Collignon (Eef., N. Y.) 4 Am. B. E. J^^™- 120. . , ^ . , , , ^ nnn T Er 1 1 (T-> Vi -\j- i 'v ^ . t. ti A lease Is not terminated ipso faoto by an ad- 250; In re Maliler (D. C, Mieli.), 5 Am. B. E. judication of bankruptcy. In re Pennewell (C. 453, 105 Fed. 428; Atkins v. Wilcox (C. C. C. A., 6th dr.), 9 A:u. B. E. 400, 119 Fed. 139; A., 5th Cir.), 5 Am. B. E. 313, 105 Fed. Watson v. Merrill (C. C. A., «th Cir.), 14 Am, 595; In re Ells (D. C, Mass.), 3 Am. B. E. B. E. 453, 136 Fed. 330; In re Adams (D. C, 564, 98 Fed. 967; In re Hays, etc., Co. (D. Conn.), 14 Am. B. E. 23, 134 Fed. 142. C, Ky.), 9 Am. B. E. 144, U7 Fed. 879; ,„^?- ^^^T^",^ ^2lV^ '«'?'"'li^;.*^;' ^„-^' In re Winfield Mfg. Co. (D. C, Pa.), 15 ^^s Slief' 6o1' ' ^^- ^* '""•''• " Am. B. E. 24, 137 Bed. 984; Watson v. Mer- Rent aeerumB subsequent to bankruptcy riil (C. C. A., 8th Cir.), 14 Am. B. E. 453, and damages for breach.— In the case of § 63-a.J Eent to Acceue. 981 mere possible future demand contingent upon uncertain events,^^* and there may be a change in the relation of the parties by consent or breach at any time.^^* It does rest upon a contract,^"" and, therefore, could be liquidated, were it not for the fact that " its very existence depends on a contingency," ^® no claim of which character can or ever has been capable of liquidation and proof.^"'' It has been held that notes given by a bankrupt for rent accruing subsequent to adjudication are without consideration, since the rent or debt for which they were given cannot possibly come into existence, and such notes cannot, therefore, be proved against the estate of the bankrupt lessee. ^^^ And any other arrangement whereby the bankrupt became liable for future rent, although made between the bankrupt and a person other than the land- lord to secure reimbursement of rent to be paid by such person, does not Matter of Sterne & Levi (Ref., Tex.), 26 Am. B. R. 535, it was held that rents which a bankrupt has agreed to pay subsequent to the filing of a petition do not consti- tute the basis of a claim provable in bank- ruptcy, because not a " fixed liability — abso- lutely owing" at the time of the filing of the petition ; and that damages for the breach of a bankrupt's contract to pay rent in the future may not be made the basis of a prov- able claim. (Citing text with approval.) And see Ellis v. Rafferty (C. C. A., 3d Cir.), 29 Am. B. R. 192, 199 Fed. 80. 253. Rent to accrue contingent upon un- certain events. — In the case of Matter of Roth & Appel (C. C. A., 2d Cir.), 24 Am. B. R. 5»8, 181 Fed. 667, the court said: " Rent is a sura stipulated to be paid for the use and enjoyment of land. The occu- pation of the land is the consideration for the rent. If the right to occupy terminate, the obligation to pay ceases. Consequently, a covenant to pay rent creates no debt un- til the time stipulated for the payment ar- rives. The lessee may be evicted by title paramount or by acts of the lessor. The destruction or disrepair of the premises may, according to certain statutory provi- sions, justify the lessee in abandoning them. The lessee may quit the premises with the lessor's consent. The lessee may assign his term with the approval of the lessor so as to relieve himself from further obligation upon the lease. In all these cases the lessee is discharged from his covenant to pay rent. The time for payment never arrives. The rent never becomes due. It is not a case of delitum in praesenti soVoendum in futuro. On the contrary, the obligation upon the rent covenant is altogether contingent. Citing Watson V. Merrill (C. C. A., 8th Cir.), 14 Am. B. R. 453, 136 Fed. 362; Coke on Little- ton, 29i2-b; Wood V. Partridge, 11 Mass. 492; Bordman v. Osborn, 23 Pick. (Masa.) 299. It follows from' these principles that rent accruing after the filing of a petition in bankruptcy against the lessee is not provable against his bankrupt estate as a fixed li- ability . . . absolutely owing at the time of the filing of the petition, within the meaning of § 63-a (1) of the bankruptcy act of 1808. It is not a fixed liability, but is contingent in its nature. It is not abso- lutely owing at the time of the bankruptcy, but is a mere possible future demand. Both itj existence and amount are contingent upon uncertain events." Citing Atkins v. Wil- cox (C. iC. A., 5th Cir.), 5 Am. B. R. 313, 106 Fed. 595; also In re Rubel (D. C, Wis.), 21 Am. B. R. 566, 166 Fed. 131; In re Mahler (D. C, Mich.), 5 Am. B. R. 453, 106 Fed. 428; In re Hays, etc., Co. (D. C, Kj.), 9 Am. B. R. 144, 117 Fed. 879: In re Arnstein (D. C, N". Y.), 4 Am.. B. R. 246, 101 Fed. 706; In re Jefferson (D. C, Ky.), 2 Am. B. R. 206, 93 'Fed. 948 ; In re Inman & Co. (D. C, Ga.), 22 Am'. B. R. 624, 171 Fed. 185. A claim under a mining lease for royal- ties to become due in the future, which is contingent upon the continuance of the lease, and by the terms of the lease itself cease to be due in the event of strikes, car shortage, etc., is not provable against the estate in bankruptcy of the lessee. In re Gallagher Coal Co. (D. C, Ala.), 29 Am. B. R. 766, 205 Fed. 183. Rent is contingent after an assignment for benefit of creditors under which the lessors have the right to enter upon the premises and terminate the lease, or at their election to demand d'ajnages. Cotting v. Hooper, Lewis & Co., 34 Am. B. R. 23, 107 N. E. 931. 254. Matter of Cress-MoCormick Co. (Ref., Miss.), 25 Am. B. R. 464; In re Calon's Mfg. Co. (D. C, Pa.), 24 Am. B. R. 609. 179 Fed. 722. 255. Bankr. Act, § 63-a (4). 256. Deane v. Caldwell, 127 Mass. 242. 257. Compare In re Mahler (D. C, Mich.), 5 Am. B. R. 453, 105 Fed. 428. 258. In re Curtis (Sup. Ct., La.), 9 Am. B. R. 286, 33 So. 125. It was held upon rehearing in this case that the indorser on notes given for such rent was liable thereon upon the theory that although such notes were not provable against the bankrupt's estate, the consideration was not affected by the bankruptcy of the lessee, the non- provability of the notes being based upon the contingent nature of the claim. 982 Debts Which Mat Be Proved. [§ 63-a. modify the contingent character of the claim and make it provable.^^® Where a receiver in bankruptcy continues in occupation of leased premises, from the filing of the petition until the tenant's adjudication as a bankrupt, it has been held that the landlord may prove for rent down to the time of the adjudication, as for a debt founded upon an express contract.''*'' It has been held that a covenant in a lease, making the rent for the entire period fall due upon a breach by the lease, creates a fixed liability within the meaning of § 63-a (1).^^ It has also been held that where a lease gives a lien for the rent upon property on the premises and such lien is recognized by a jState statute, a claim for rent accruing after the bankruptcy of the tenant is prov- able against the particular property, but not against the general estate of tbf bankrupt. ^^ But it has also been held that a provision in a lease, author.izinf; the landlord to re-enter upon the bankruptcy of the tenant, and permitting tht landlord to recover the difference between the rent reserved and tb-^ Tent collected by the landlord from other sources, does not enable the landlord tc prove a claim for rent accruing subsequent to the bankruptcy of the tenant.^** If the trustee elects to assume the lease and sell the same and the landlord acquiesces, the trustee steps into the bankrupt's shoes, and the question here discussed will not arise.^** The trustee, however, usually retains possession %69. Claim tor contribution hy Joint lessee. — . Bankrupt and claimant were jointly liable on a lease which had not expired at the time of banlt- rupt's adjudication. They assumed as between themselves a several liability for one-half the rental reserved in the lease, and, before bank- ruptcy intervened, entered into an agreement that claimant should procure, if possible, a rescission of the lease for which it might pay a sum not to exceed $100 per month for each month of the unexpired term and the bankrupt would pay claimant one-half the sum so paid, or agreed to be paid, by it for such rescission. After bankrupt's adjudication upon a voluntary petition, claimant paid the next month's rent and thereafter paid the lessors a certain sum and secured a cancellation of the lease. Held, that a claim for one-half of the sums so paid by claimant was not provable, since bankrupt's liability therefor at the time when the petition was filed was not due and owing, but contin- gent. Colman Co. v. WIthoft (C. C. A., 9th Cir.), 28 Am. C. E. 328, 195 Fed. 250. 860. Matter of Hinckel Brewing Co. (D. C, N. Y.), 10 Am. B. R. 484, 123 Fed. 942. But see, contra. In re Adams (D. C, Mass.), 12 Am. B. R. 368, 130 Fed. 381. 861. Matter of Pittsburg Drug Co. (D. C, Pa.), ZO Am. B. E. 227, 234, 164 Fed. 482. See Martin v. Orgain (C. C. A., 5th Cir.), 23 Am. B. R. 454, 174 Fed. 772. Under the law of Pennsylvania where a lease provides in effect that if the lessee shall become bankrupt the amount of the rent for the unex- pired term shall become due, the landlord, on refusing to surrender of the lease has a-provable claim for the rent for the unexpired period. Eosenblum v. Uber (C. C. A., 3d dr.), 43 Am. B. R. 4S0, 250 Fed. 584. 262. In re Scrubbs (D. C, Ala.), 31 Am. B. E. 94, 205 Fed. 673; citing Martin v. Orgain (C. C. A., 5th Cir.), 23 Am. B. E. 454, 174 Fed. 772: Lontos V. Coppard (C. C. A., 5th Cir.), 40 Am. B. E. 515, 246 Fed. 803. 863. Matter of Eoth & Appel (D. C , N Y ) 22 Am. B. E. 504, 174 Fed. 64, affd. 24 Am B R. 5S8, 181 Fed. 667; In re Abrams (D C Iowa), 29 Am. B. R. 590 200 Fed. 1005; Matter of Mullings Clothing Co. (D. C, Conn ) 41 Am. B. R. 756, 252 Fed. 667. Re-entry and recovery of damages in case of bankruptcy. — ^Where a landlord's claim was founded upon a provision in his lease to bankrupt that if the tenant should petition to be or be declared bankrupt, the landlord might enter into and repossess the premises and terminate the lease, in which case the tenant agreed to pay to the land- lord, as damages, a sum which at the time of such termination represented the differ- ence between the rental value of the prem- ises and the rent and other payments therein named for the residue of the term, the claim was not provable, since there was no "fixed liability . . . absolutely due and owing at the time of filing the peti- tion" in bankruptcy, the lease being ter- minable by the entry of the landlord, which by the terms of the lease could not be made until after bankruptcy. Sloeum v. Soliday (C. C. A., 1st Cir.), 25 Am. B. R. 460, 183 Fed. 410. Claim against tenant for rent after sur- render. — ^Where before the filing of a peti- tion in bankruptcy against a tenant, a levy was made upon his personal property, and subsequently the landlord accepted a surren- der of the premises, he cannot claim against tlie bankrupt estate of the tenant for the whole of the unexpired term of the lease, although it provided that upon a levy against the tenant the whole rent for the unexpired portion of the term should become due. Mat- ter of Heilbron Brothers (D. C, Pa.), 35 Am. B. R. 568, 226 Fed. 803. 264. Matter of Sherwoods, Inc. (C. C. A., 2d Cir.), 31 Am. B. R. 769, 310 Fed. 754; In re Sapinsky & Sons (I>. C, Ky.), 30 Am. B. R. 416, 206 Fed. 523. Where a bankrupt's trustee elects to give up the lease and the landlord's agent re- enters, but agrees to permit the occupancy 63-a.J Debts Outlawed. 983 for a brief period, paying oa a quantum meruit basis meanwhile."^' The principles applicable to rent due for the occupancy of real property do not apply to the same extent in the case of a lease of personal property, where by the terms of the lease the whole amoTint becomes due in case of a default ; in such a case the lessor may prove his claim for the whole amount due as a fixed liability.^'* €. Debts outlawed by a statute of limitations. — Such debts are not provable. The limitation period depends upon the law of the State in which the action could be brought. There was some conflict on this question under the law of 1867, high authority holding that the provability of such a debt turned on whether the statute of limitations urged against it went merely to the remedy or actually destroyed the obligation. ^®'^ But the weight of authority under that law was the other way.^** The cases under the law of 1898 are to the same effect.^® The reason for this doctrine seems to be one of abstract equity. Strictly, an outlawed debt is within the terms of § 63-a (1) and, therefore, provable. Eut, since such a debt could not have been asserted before bank- ruptcy against the objection of the debtor, the law prevents its proof against the other creditors and the consequent reduction of their pro rata by an interloper whose remedy has been lost by his own laches.^'"' An insolvent person, intending to go through bankruptcy,* may make an acknowledgment of an existing indebtedness, the right to recover which is barred by the statute of limitations, but against which the statute has not been pleaded, so as to of the premises pending the determination of a controversy as to the ownership of cer- tain personal property located on the prem- ises, the lease is nevertheless terminated, and the estate is not liable for the rent. In re Desmond & Co. (D. C, Ala.), 28 Am. B. E. 456, 198 Fed. 581. Effect of landlord's right to re-enter. — Where bankrupt held under a lease author- izing the landlord to re-enter upon default in the payment of rent, and providing that bankrupt should surrender the premises upon breach of the covenant to pay rent, and it appeared that bankrupt had de- faulted in payment of rent before bank- ruptcy intervened, a claim for rent accru- ing after the filing of the bankruptcy peti- tion is not a. debt due and owing to the landlord when the petition was filed, and therefore is not provable in the bankruptcy proceedings of the lessee. In re Abrams (D. C, Iowa), 29 Am. B. K. 590, 200 Fed. 1005. Re-entry by landlord; effect on claim. — Where, after a tenant's receiver in bank- ruptcy had sold personal property which was upon premises leased by a bankrupt for one year, allowing the purchaser a reason- able time within which to remove the goods, the landlord, acting under a provision, in the lease, instituted ejectment proceedings against the purchaser, wherein he declared that the lease had absolutely ceased and determined, and he was put in possession of the premises under a writ issued in such ejectment proceedings, his claim' for rent for the unexpired term of the lease will be dis- allowed. South Side Trust Co. v. Watson (C. C. A., 3d Clr.), 29 Am. B. E. 446, 200 Fed. 50; Followed in Matter of Lasker Co. Inc. (C. C. A., 3d Cir.), 42 Am. B. E. 234, 251 Fed. 53. 265. Matter of Frazin & Oppenlieim (C. C. A., 2d Cir.), 24 Am. B. E. 903, 183 Fed. 28. Eey- nolds v. Hourigan (C. C. A., 3d Cir.), 43 Am. B. E. 75, 254 Fed. 690. See discussion under Section Seventy of this worl£, subtitle "Trustee vested witii title of bankrupt." 866. Matter of Caswell-Massey Co. (D. C, N. Y.), 31 Am. B. E. 426, 208 Fed. 571; Matter of Miller Bros. Grocery Co. (D. C, Ohio), 31 Am. B. E. 430, 208 Fed. 573. In botli cases contracts were under considera- tion whereby store apparatus for carrying parcels and cash was leased and in which it was provided that in case of default in a monthly payment the whole amount be- comes due. It appeared that such apparatus when removed was substantially lessened in value. See also In re Merwin & Willoughby Co. (D. C, N. Y.), 30 Am. B. R 485, 206 Fed. 116. 267. In re Eay, Fed. Cas. 11,589; In re Shepard, Fed. Cas. 12,753. 268. In re Kingsley, Fed. Cas. 7,819; In re Hardin, Fed. Cas. 6,048; In re Cornwall, Fed. Cas. 3,250; In re Reed, Fed. Cas. 11,- 635; In re Noeson, Fed. Gas. 10,288. 269. In re Lipman (D. C, N- Y.), 2 Am. B. R. 46, 94 Fed. 353; In re Resler (D. C, Minn.), 2 Am. B. K. 602, 95 Fed. 804; In re Watkinson (D. C, Pa.), 16 Am. B. E. 245, 143 Fed. 602; In re Putman (D. C., Cal.). 27 Am. B. R. 923, 193 Fed. 464. 270. In re Currier (D. C, N. Y.), 27 Am. B. R. 597, 192 Fed. 695. citing Collier on Bankruptcy (8th ed.), 722; Prop's Triistes V. Pace, (Ct. of App., Ky.), 33 Am. B. R. 834, 172 S. W. 925. 984 Debts Which Mat Be Peovbd. [§ 63-a. take the indebtedness out of the operation of the statute, and permit it to become the basis of a provable claim in bankruptcy."^ It seems, too, that bankruptcy stops the running of the time and that a debt may be proven within the statutory year, provided the period of limitation expired after the bankruptcy."^ However, under the present bankruptcy act an adjudication in bankruptcy does not suspend the running of the general statute of limita- tions as to provable claims for the reason that such adjudication does not put the creditor under a legal disability, but, on the contrary, permits him to proceed in the absence of a stay issued by the court.^''^ The statute of limitations of the State of the bankrupt's residence, and in which he was adjudged a bankrupt, governs the rights of the creditors in the administration of the bankrupt's estate."* Any creditor of the bankrupt may interpose the statute of limitations as a def eaise against the allowance of a claim."^ _ It is the duty of a trustee to plead the statute wherever an outlawed claim is preisented.^™ The payment of dividends on a claim by a trustee in bankruptcy is not an acknowledgment of a debt by the debtor and a promise to pay it.^''^^ f. Commissions of trustee. — A claim for commissions and expenses incurred by a trustee, named in a deed of trust executed by a bankrupt, in the sale of chattels thereunder prior to bankruptcy, is not provable under this section."^ g. Cross-references. — The liaMlity of an estate in bankruptcy to pay a gen- eral assignee or receiver for his services and disbursements, or his attorney, or a sheriff proceeding on an execution or attachment, as well as the priorities sometimes claimed by them, is considered under section sixty-four. 271. Matter of Blankenship (D. C, Cal.), it was made, in so far as his own personal 33 Am. B. E. 756, 220 Fed. 395, wherein the attitude was concerned, he was not changing court said : " The claim is made by the his position either for the worse or otherwise, trustee, acting for the creditors, that the In this view of the case, it seems to me that renewal or rehabilitation of a debt, under his own conduct cannot Ije defined as in fraud such circumstances, operates in fraud of the of the bankruptcy act, and that, for that bankruptcy act, and constitutes such a pref- reason, the trustee of his estate should not be erence as would sufiice to render it void permitted thus to characterize it. The case is and of no effect. It is true it would seem, much different, in my judgment, from one in at first blush, as if the deliberate acknowledg- which, for instance, an insolvent person, after ment of ' an outlawed debt, under such cir- having defeated a claim, because of his plea cumstances, for the mere purpose of making of the statute, should thereafter, and in con- it provable in bankruptcy, would be a fraud templation of bankruptcy, attempt to r«- upon the rights of other creditors, whose habilitate, the claim, merely that the owner /. r! J ^ V 1, ii J i,„ 4-v.„ *„..„„ thereof might participate as against other law- claims had not been outlawed by the force ,„! creditors." See also Matter of Salmon (C. of the statute, and in this regard in fraud C. A., 2d Cir.), 41 Am. B. E. 45, 249 Fed. 300. of the general object of the bankruptcy act. 2'». In re Eldridge, Fed. Cas. 4,331. Contra: This, however would be. because of the as- ""'i^.^.^^ZT^'' Tlfm^'fic^''^: (Snp. Ct.. sumption that in the doing ot the thing m- okla.), 32 Am. B. E. 551, 141 Pac. 448; Ameri- veighed against, the bankrupt had thereby can Woolen Co. v. Samuelsohn (N. Y. Ct. of rendered a claim otherwise unenforceable, en- App.), 43 Am. B, E. 530, 123 N. S. 154. forceable against him. Such, however, could ,„?,'*;p^*r'S'i?'°|i^«*^iL P^n ^°°'^^, <^?; 'L^'it ,, , ^. ... J. J.1 J. J.1 T. 1 J. son ich Have Priority. [§ 64-a. Allegations in a petition relating to an alleged priority are not to be taken as prima facie true, for the purpose of establishing such priority, in the absence of evidence for or against the fact,^^ the burden being upon creditors claiming preference to bring themselves, by the evidence, within the statute creating the preference.^^ A priority debt duly proved and allowed should not be ordered paid until it appears that there will be enough assets to pay in full all like debts of the same and higher classes. II. PAYMENT OF TAXES. a. In general. — Subsection a requires the court to order the trustee to pay all taxes " legally due and owing by the bankrupt to the United States, State, county, district or municipality in advance of the payment of dividends to creditors." The present law is somewhat broader than its predecessor, which required payment in full only of taxes due the United States or the State. The subsection is explicit and needs little explanation. The words "taxes legally due and owing by the bankrupt " and " in advance of the payment of dividends to creditors" should be noted. ^* In spite of them, the tendency has been to construe subsection a as putting taxes in a different and really liigher class than the debts enumerated in subsection h ; this is probably the law. b. Construction and effect. — Construed strictly, the words of this subsection lead to the result that taxes must be paid in any event. The right of priority exists even if the property on which taxes were assessed never came into the possession of the trustee,^* and the fact that the whole amount received from the sale of a bankrupt's property will be taken up in the payment of taxes, while it may be unjust to general creditors, constitutes no legal reason for the disallowance of the amount due.^° The court will not favor any evasion of this law by giving a too liberal construction to its words.*® It has been 31. In re Jones (D. C, Mich.), 18 Am. B. E. All taxes to l>e paid. — In the case of City of 206, 151 Fed. 108. • Chattauooga v. Hill (C. C. A., 6th Cir.), 15 Am. 32. In re Crown Point Brush Co. (D. C, N. B. K. 195, 139 Fed. 600, Judge Lurton, in re- Y.), 29 Am. B. E. 638, 200 Fed. 882. (erring to § 64-a, said: "Congress evidently 33. Bights cf third person liable for taxes. — meant that the sovereign should neither be post- The fact that a person other than the banls- poned nor delayed in the collection of taxes, and rupt may also be liable for the payment of therefore provided that the trustee sliould pay taxes by contract or by statute is not sufficient all taxes due and owing by the bankrupt in ad- to. entitle such other person to priority of pay- vance of dividends. The law means that the ment. Matter of Harris Steam Engine Co. (D. trustee shall do what the bankrupt might have C, E. I.), 34 Am. B. E. 835, 225 Fed. 609. done and what good citizenship required him to The word "dividend," as used in this section do. The opinions of the courts are not agreed does not apply to payments made to secured about this matter, and tliere are holdings which creditors or to those having priority. Bird v. limit this direction to pay 'all taxes due and City of Eichmond (C. C. A., 4th Cir.), 39 Am. owing by the bankrupt' to such taxes as con- B. R. 1, 240 Fed. 545. stitute a lien upon the bankrupt's estate in The term "creditor" is limited by the deflni- the hands of the trustee and remit the sovereign tion of that term by section 1 (9), which pro- to the enforcement of any lien which it may Tides that "creditors shall include anyone who have against the property which the trustee re- owns a demand provable in bankruptcy." Mat- linquished to the lien creditors." ^'\°*„S'^S''l'"i,ol^- ^- ^■' ''"' ^'''•'' *° ^^- ^- 35- Matter of Bushnell (D. C, Conn.), 33 E. 1, 263 Fed. 883. k -p -p An one TPo/I fiR-t Where a bankrupt assigns its interest in „A ™i^' ./^/.™- T ^^ ^, , . ^i ^ several contracts by which it had sold orchards 36. The manifest intent of the law la that, and agreed to cultivate them and pay the taxes, while the estate is in the hands of the and agrees in case of failure of any of the pur- trustee, his euatody ahall not constitute a chasers to complete their contracts to deed such , . , .•' ,, n j.. c ». „„ tracts to whom the assignee may select, the title barrier to prevent the collection of taxes remains in the bankrupt and taxes are owing which -would be collectible under the law if by him within the meaning of section 64-a, and the property had remained in the posser- are payable by bis trustee although the st^ aio„ ^nd control of the bankrupt himself, law provides tliat taxes snail be assessed against t *-» i • /t-» ,-. tttt i * '■ .. » t» the iwner in possession. Matter of Wenatchee I" ^'^ Conhaim (D. C, Wash.), 4 Am. B. Orchard Co. (D. C, Wash.), 32 Am. B. E. 369, ^- ^S, 100 Fed. 268. See also Matter of 212 Fed. 787. United Five & Ten Cent Store (D. C, N. Y.), 34. City of Waco v. Bryan (C. C. A., 5th Cir.), 40 Am. B. E. 146, 243 Fed. 1005. 11 Am. B. E. 481. 127 Fed. 79. 4 64-a.J Payment of Taxes. 993 teld that State taxes are not given priority over " the actual and necessary cost, of preserving the eaitate subsequent to the filing of the petition/' ^' but there is also authority for the opposite conclusion.^' The costs and expenses of administering the bankrupt's estate are entitled to priority of payment over claims for taxes.^^ An unsecured claim for taxes, given no superior right by the State laws, is not entitled to priority in payment over a landlord's lien for rent protected by section 67d of the Bankruptcy Act.^^* c. Federal courts to determine questions. — Subsection a provides expressly that " in case any question arises as to the amount or legality of any such tax, the same shall be heard and determined by the cou.it." This authorizes the court to inquire as to whether the tax is a valid claim. The question as to whether or not a charge is a tax and entitled to preference under this subsection is one to be decided by the federal court in its administration of the bankrupt act ;*" although the decisions of the courts of the States where a7. Taxes not prior to cost of preserving nestate. — ^In the case of State of New Jersey -T. Lovell (C. C. A., 3d Cir.), 24 Am. B. E. 563, 179 Fed. 331, affg. 23 Am. B. R. 401, 175 Fed. 835, Judge Buffington said: "Now, while the relative order in which subdivi- sions 'a' and 'b' are placed is not happy, ■and indeed tends to mislead, yet the general intent of the section is clear. In subdivi- sion 'b' we find the general scheme of awarding priority in advance of dividend creditors. That subdivision makes provi- sion for paying such costs, fees, and liens as are therein provided, and if there are no outstanding taxes the fund is then paid "to creditors. But before paying creditors, subdivision 'a' intervenes and makes pro- vision for what, if omitted, has often proved a hardship, if not indeed an abuse in the settlement of decedent and insolvent es- tates, viz., delay in payment of taxes. Tax collectors whose power to distrain lapsed when the estate passed into the custody of the law, or who were left to come in as general creditors, were subjected to trying delays. Obviously subdivision 'a' meant that this delay should not occur, and there- fore provided that, 'in advance of pay- ment of dividends to creditors,' 'the court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, State, county, district or municipality,' aud, to prevent delay from questions concern- ing such taxes. It provided, 'in case any ques- tion arises as to the amount or legality of any such tax the same shall be heard and de- termined by the court.' And yet in case the court had to take testimony, or order a referee to determine the legality of such tax, the ad- judged tax would, under the construction here contended for, absorb the whole fund and leave unpaid the agency by which its payment was effected. Now, whether the 'creditors' referred to in the phrase, 'in advance of the payment of dividends to creditors,' places the payment of taxes ahead of dividend creditors alone, or places it also ahead of those creditors who, un- der subdivisions 4 and 5 of clause 'b,' are paid in full, is a question not before us. It suffices to say that on the question that is before us, namely, whether the taxes of a State are under clarse 'a,' given priority over 'the actual and necccsary cost of preserving the estate subse- quent to the filing of the petition,' we are clear they are not." 38. In re Prince & Walter (D. C, Pa.), 12 Am. B. R. 675, 131 Fed. 546; In re Weissman (D. C, Conn.), 24 Am. B. H. 150, 178 Fed. 115. 39. Matter of Jaeobson (C. C. A., 7th Cir.), 45 Am. B. E. 1, 263 Fed. 883 ; Polk County v. Burns (C. C. A., 8th Cir.), 40 Am. B. R. 727, 247 Fed. 399; Matter of Hessler Foundry Mfg. Co. (D. C, N. Y.), 45 Am. B. R. 382, — Fed. — . Com- pare In re Prince & Walter (D. C, Pa.), 12 Am. B. E. 675, 131 Fed. 546; In re Weiss (D. C, N. Y.), 20 Am. B. R. 247, 159 Fed. 295, decided be- fore the decision of the United States Supreme Court In the case of Guarantee Title & Trust Co. V. Title Guarantee & Surety Co. 224 U. S. 152, 27 Am. B. R. 873. 39a. City of Richmond v. Bird (U. S. Sup. Ct.), 43 Am. B. R. 260, 39 Sup. Ct. 186. atfg. 39 Am. B. R. 1, 240 Fed. 545; Polk County v. Burns (C. C. A., 8th Cir.), 40 Am. B. E. 727, 247 Fed. 399. 40. Matter of United Five & Ten Cent Store (D. C, N. Y.), 40 Am. B. R. 146. 242 Fed. 1005; In re Lange Co. (D. C, Iowa), 29 Am. B. R. 478, 159 Fed. 586. In New Jersey v. Anderson, 203 U. S. 483, 17 Am. B. R. 64, 68, 51 L. Ed. 284, 27 Sup. Ct. 137, the court said: "The Bank- ruptcy Act as a Federal statute, the ultimate interpretation of which is in the Federal courts. It Is doubtless true . . . that, if the high- est court of the State should decide that a given statute Imposed no tax within the mean- ing of the law as interpreted by It, a Federal court. In passing upon the Bankruptcy Act, would not compel the State to accept a pref- erence frc:i the bankrupt's estate upon a differ- ent view cf the lr.-.v. Conceding that the doc- trine that the meaning of a statute is a State question, c::cept where rights, the subject of ad- judication in the Federal courts, have accrued hofore its construction by the State court, or the question of contract within the protection of the Federal Constitution is Involved, still a State court, while entitled to great considera- tion, cannot conclusively decide that to be a tax within the meaning of a Federal law, pro- viding for the payment of taxes, which Is not so in fact. The section (64-a) Itself declares that, in cases of disputes as to the amount or legality of any such tax, they shall be heard and determined by the court. The State court may construe a statute and define Its mean- ing, but whether its construction creates a tax, within the meaning of a Federal statute giving a preference to taxes, is a Federal question, of ultimate decision in this court." Determination of amount and legrallty of tax. — Under the provisions of S 64-a, any question as to the amount or legality of a tax shall be heard and determined by the 994 Debts Which Have Peioeity. L§ Ci-a. the tax is payable should be given v^ell-nigh controlling force.*^ The court is not bound by the action of the taxing authority, but may decide the question as to amount or legality itself f^ and the right is not limited by the act to such questions as the bankrupt might have raised against the tax at the date of the bankruptcy proceedings.*^ The priority accorded to any tax legally due and owing is qualified by leaving it open to the trustee to question or inquire into not only the legality of the tax, but also its amount, even if otherwise legal.** If the taxes are legal and binding they must be paid, although long overdue.*^ d. Taxes not debts and need not be proved. — Taxes are not, in a strict sense, debts,*^ although they are within the meaning of a definition of a debt as bankruptcy court. lu re Otto Freund Arnold Yeast CO. (D. C, N. i'.), 2i Am. B. H. 4u8, 178 Fed. 305. In this case it appeared that a per- sonal property tax, assessed against a bank- rupt corporation on the tax lists of a city, be- op.me a lien at a time when the corporation was hopelessly insolvent and shortly before the pe- tition in bankruptcy was filed and its adjudi- cation as a bankrupt. It was held that, al- though the statutory legality of the tax from the standpoint of regularity could not be raised, that under § 64-a a claim for the taxes against the estate of the bankrupt corporation should be disallowed on the grounds that the property supposed to be taxed did not actually exist. Claim for income taxes. — A referee has power to re-examine a claim filed by the United States for income taxes, and it is not necessary for the trustee to pay the claim and then to file a claim for refunding in order to test the validity of the claim, for it is the purpose of the Bankruptcy Act to have estates wound up promptly. Matter of Williams Oil Corp. (D. C, Ky.), 45 Am. B. E. 278, 265 Fed. 401. 41. First Nat. Bank v. Aultman (Eef., Ohio), 12 Am. B. E. 12, citing In re Ott (D. C, Iowa), 2 Am. B. E, 637, 647, 95 Fed. 274; In re Camp (D. C, Ga.), 1 Am. B. E. 165, 91 Fed. 745. 42. State of New Jersey v. Anderson, 203 TJ. S. 483, 17 Am. B. E. 64, 51 L. Ed. 284, 27 Sup. 137 ; Matter of Selwyn Importing Co. (Eef., N. Y.), IS Am. B. E. 190; Matter of HefCron Co. (D. C, N. Y.), 33 Am. B. E. 443, 216 Fed. 642; Matter of Fisher Corporation (D. C, N. Y.), 36 Am. B. E. 509, 229 Fed 316 ; Matter of Felipe Enmirez Quinopes (D. C, Porto Eico), 39 Am. B. E. 320, 9 P. E. Fed. 414; Matter of Simcox (D. C, N. Y.). 40 Am. B. E. 195, 243 Fed. 479. The case of New Jersey v. Anderson, 203 TJ. S. 483, 17 Am. B. E. 64, 51 L. ed. 284, 27 Sup. Ct. 137, determines the meaning of § 64-a, and approves of the disallowance of such part of a tax as may have been assessed on non-taxable or non-existing property, even if regularly assessed and beyond dispute under the State law. The Supreme court says: " Coming to the specific objections to the claim for the year 1902, the claim was pre- sented upon the basis of $40,000,000 of out- standing capital stock, when in fact there was only $10,000,000 of such stock; the assessment by the State board being upon the former sum and made upon the failure of the corporation to report. But we do not think the finding of the State board is conclusive. The tax is to be as- sessed upon copital actually outstanding. It may well be doubted whether the board h.nd power to tax any other stock. But, be that as It may, % 64-a specifically provides that, in case any question arises as to the amount of legality of taxes, the same shall be heard and determined by the court, with a view to ascer- taining the amount really due. We do not think it was the intention of Congress to conclude the bankruptcy courts by the findings of boards ef this character, and that the claim should have been upon the basis of the capital actu- ally outstanding." Beduction of taxes. — Although the bankruptcy court may have authority to reduce taxes as- sessed against the personal property of al- leged bankrupts it should not be permitted where the bankrupts have not filed a claim or statement with tue taxing authorities as re- quired by the statute of the State. Matter of Perlmutter (D. C, N. J.), 42 Am. B. E. 725, 256 Fed. 860. 43. Matter of Fisher Corporation (D. C, Mass.), 36 Am. B. E. 509, 229 Fed. 316. 44. Matter of Selv,-yu Importing Co. (Eef., N. Y.), 18 Am. B. E. 190. In this case the referee said: "I do not think the trustee is confined to equitable remedies which may be provided by statutes of the State. He is clothed by § 64-a with independent equitable power to question the amount of the tax, irrespective of the State remedies." Estoppel of bankrupt and trustee to deny validity of assessment. — Whore there ia no competent evidence from which it may be found that the assessed valuation of a bank- rupt's property was unjust .or illegal, both the bankrupt and his trustee are estopped by the former's own statements, aa to the nature, title and value of his property. Mat- ter of Bushnell (D. C, Conn.), 33 Am. B. E. 47, 215 Fed. 651. 45. In re Weisaman (D. C, Conn.), 34 Am. B. R. 150, 178 Fed. 115, holding that taxes which were collectible from the bank- rupt prior to adjudication are entitled to priority even though the tax collectors have been guilty of gross laches in allowing the taxes to remain tmpaid for a period of twelve years and the payment of such taxes would take a large part, if not all, of the money which would otherwise be available for payment of dividends on the general claims. 46. A tax is not strictly a debt. — It lacks the nature of a debt in that, though for a sum certain, it is not founded upon any agreement or assent of the person or per- sons against whom it is asaesaed, but ia a burden for the public purposes imposed in invitum. Aa an obligation or duty created by statute to pay money, however, it is quasi-contractual, although there may be difficulty as to the remedy for its enforce- ment in a given case. In re United Button Co. (D. C, Del.), 15 Am. B. R. 390 400, 140 Fed. 495 ; Lane Co. v. Oregxm, 7 'WalL (U. S.), 71; State of New Jersey v. Ander- ,§ 64-a.J Payment of Taxes. 995 contained in § 1 (9), (11).*'^ But they are not, in any event, to be proved like other debts; this subsection makes it the duty of the trustee to pay them whether they are proved or not.** e. Payment out of proceeds of sale.— But it has been held that if the tax is by law made a lien or charge on the bankrupt's property, the same equitable principle which denies to the individual whose debt is fully secured the right to share in the general fund applies to the tax claimant,*® and if the property subject to the tax is sold the tax should be paid out of the proceeds before any part thereof is distributed to general creditors.^* This is especially true ! son, 203 U. S. 483, 17 Am. B. E. 63, 69, 51 L. Ba. 284, 27 Sup. Ct. 137; Matter of Felipe Eamirez Quinones (D. C, Porto Eico), 39 Am. B. E. 320, 9 P. E. Fed. 414. The annual license fee or franchise tax, required by tbe statute of New Jersey to be paid by corporations upon tbelr out- standing capital stocls, for the privilege of existence and the continued right to exer- cise their franchises is a "tax" within the meaning of § 64'a and not a debt. State of New Jersey v. Anderson, 203 U. S. 483, 17 Am. B. E. 63, 51 L. Ed. ■284, 27 Sup. Ct 137 47. In re Fisher & Co. (D. C, N. J.), 17 Am. B. E. 404, 411, 148 Fed. 907. 48. Stanard v. Dayton (C. C. A., 8th Cir.), 33 Am. B. E. 682, 220 Fed. 441, affd. 241 U. S. 588, 37 Am. B. E. 259, 60 L. Ed. 1190, 36 Sup. Ct. 695; In re Prince & Walter (D. C, Pa.), 12 Am. B. E. 679, 131 Fed. 546; In re HaiTey (D. C., Pa.), 10 Am. B. E. 567, 122 Fed. 745; Hecox v. County of Teller (C. C. A., 8th Cir.), 28 Am. B. E. 525, 198 Fed. 634; In re Cleanfast Hosiery Co. (Eef., N. Y.), 4 Am'. B. E. 702. Proof of debt for taxes not required. — In re Fisher & Co. (D. C, N. J.), 17 Am. B. E. 404, 412, 148 Fed. 907, the court said: " Of course, a tax ia provable in bankruptcy. It thus appears that taxes legally due and owing by the bankrupt must be paid before distribution to creditors, and the injunction of § 64 is that the court ' shall order ' the trustee to pay 'them. It seems to be the duty of the court to require such payment, even though no claim for the same shall have been presented in the manner or within the time prescribed by the bankruptcy act for the filing of claims. It is true that § 64 does not, in express words, refer to taxes assessed or becoming due after the institution of bankruptcy proceedings. But it is settled law that the bankrupt's estate is taxable while it is in the hands of the bankrupt's trustees." In Swarts v. Hammer (C. C. A., 8th Cir.), 9 Am; B. E. 691, 120 Fed. 256, 56 C. C. A. 92, affd. 194 U. S. 441, 11 Am. B. E. 708, 48 L. Ed. 1060, 24 Sup. Ct. 695, it was held that a Federal court will always order and direct the payment of taxes duly assessed on property in the possession of its officers, and treat the same as a preferred claim against the. estate or fund which is in proc- ess of administration. The mandatory provision of section 64-a as to the payment of taxes recognizes a com- ity that should not require the assertion by the State of its claim for taxes in all cases to warrant the order for their payment; but a suggestion that taxes are owing by one interested in the estate should be sufficient. Matter of Wenatchee Orchard Co. (D. C, Wash.), 32 Am. B. E. 369, 213 Fed. 787. Redemption of lands sold for taxes. — Tax sales, made after adjudication of .bankruptcy of property belonging to the bankrupt estate may be avoided, but purchasers will be en- titled to reimbursement for the amount paid at such sales and subsequent taxes paid by them, together with interest thereon as pro- vided by the laws of Colorado on redemption from tax sales of lands, out of the general fund, regardless of the amount which the property may bring at bankruptcy sale. Stanard v. Dayton (C. C. A., 8th Cir.), 38 Am. B. E. 682, 220 Fed. 441, affd. 241 U. S. 5SS, 37 Am. B. E. 259: 49. See also Am. B. E. Dig. § 608. But see In re Stalker (D. C, N. Y.), 10 Am: B. E. 709, 123 Fed. 961, holding that, where land of a bankrupt, of less value than 'both a mortgage and tmpaid taxes, is soldi to third parties upon a foreclosure of the mortgage, subject to the taxes, the munic- ipality is not entitled to priority of paymeni of the taxes. 50. In re Harvey (D. C, Pa.), 10 Am. B. E. 567, 1'22 Fed. 745; In re Oxley (D. C, Wash.), 30 Am. B. E. 406, 204 Fed. 826; In re Clark Coal & Coke Co. (D. C, Pa.), 22 Am. B. E. 843, 173 Fed. 668, holding that, where the real estate of a bankrupt is by order of the court, sold free and dis- charged of all liens, the amounts due for county taxes at the time of the sale are en- titled to due priority of payment from the proceeds of sale. Priority of taxes over mortgage debt. — Where a mortgagor, after neglecting to pay general and local taxes assessed against the mortgaged property and after the property had been sold under tax liens, was adjudged a Ijankrupt and his trustee in bankruptcy sold the property free and clear of all liens, including taxes, and held the fund instead of the property, which fund was insufficient to pay both tne taxes and the mortgage debt, the payment of the taxes should be given priority under section 64 of the Bankruptcy Act. Delahunt v. County of Oklahoma (C. C. A., 8th Cir.), 36 Am. B. E. 157, 226 Fed. 31. 996 Debts Which Have Pkioeitt. [§ 64-a. "when the payment would inure solely to the benefit of a secured creditor."^ The weight of authority seems, however, to sustain the view that the taxes, whether a lien or not, are to be paid before any distribution is to be made to creditors.®^ The taxes and assessments against lands are not merely charges upon the tracts sold, but also against the general estate as well.®* If the greater part of the bankrupt's property upon which the tax was assessed is covered by a mortgage, the sale of which did not satisfy the lien of the mortgage, the tax must nevertheless be paid from the proceeds of the remaining estate of the bankrupt.^* Where real property which is subject to a tax lien is sold divested of that lien, under an order of the court, the purchaser acquires a clear title and the claim for taxes has priority over the claims of general creditors against the other assets in the hands of the trustee.®^ The right to priority of payment out of the bankrupt's estate exists although the property is sold at a tax sale prior to the bankrupt's adjudication and bid in by the county treasurer because no other bid was received, owing to existing incum- brances against the property. ®® Where real property subject to an unpaid tax is in custody of the court of bankruptcy it may not be sold for such tax without leave of the coiirt.®^ f. Taxes entitled to priority. — (1) In geneeal.®^^ — The word "tax" is not used in a restricted or narrow sen^e, but is intended to include all obligations imposed by the State and general governments under their restrictive taxation or police powers for governmental or public purposes. That a tax so imposed may not be a general property tax does not deprive it of the character of a tax. Many taxes are imposed under the name of license fees, franchise taxes or taxes for special purposes under some other name, and are, therefore, 51. In re Veitch (D. C, Conn.), 4 Am. A., 6th dr.), 15 Am. B. R. 195, 139 Fed. B. R. 112, 101 Fed. 251. 600. 52. In re Hollenfeltz (D. C, Iowa), 2 Am. 55. In re Prince & Walter (D. C, Pa.), B. R. 499, '94 Fed. 629; In re Hillberg (Ref., 12 Am. B. R. 675, 131 Fed. 546. But see Pa.), 6 Am. B. R. 714. In re Oxley (D. C., Wash.), 30 Am. B. R. Payment by trustee where property is 406, 204 Fed. 826, holding that where after sold. — When goods have been sold by the taxes had been lawfully assessed against the trustee and the vendees resist payment of property of a l)ankrupt, eight-ninths of such the taxes thereon, under a State revenue property was taken under mortgage fore- law, on the ground that the taxes accrued closure, leaving only enough to pay the costs before the sale to them, the trustee will not and expenses of administration, the payment be ordered to pay such taxes upon their of such taxltes will not be decreed to the ex- petition, but will be ordered to have the goods elusion of the costs of administration, but assessed at a fair valuation in his name as an effort should he made to secure the pay- trustee and pay the amount which can be ment of the taxes from the mortgaged prop- legally assessed thereon. In re Conhaim erty, the lien of the county not having been (D. C, Wash.), 4 Am. B. R. 58, 100 Fed. lost by the foreclosure. 268. The relinquishment of the property upon Taxes on exempt property. — The trustee which the taxes were levied, to the holder must, at the request of the bankrupt, pay of an incumbrance thereon, with the consent the taxes legally owing by such bankrupt of the bankruptcy court in a proceeding to even though assessed against property which the county was not a party, does not which is set off as exempt and though the destroy the county's right to a preferential said taxes are a lien upon and enforceable payment. Hecox v. County of Teller (C. C. against the exempt property, and their pay- A., 8th Cir.), 28 Am: B. R. 525, 198 Fed. ment would exhaust the fund otherwise going 634. to the general creditors. In re Tilden (D. C, 56. Hecox v. County of Teller (C. C. A., nXIr lLf\J^\ ^'aT'b'VbM ^""' ^" " 8th Cir.), 28 Am. B. R. 525, 198 Fed. 634. ''ss'Dlvton v^'^s'tanard ■2?i U. S 'SSS, 37 Am. 57. Dayton v. Stanard. 241 U. S. 588, 37 B E 2S0, 60 L. Bd. 1190, 36 Sup. Ct. 695; Mat- Am. B. R. 259, 60 L. Ed. 1190, 36 Sup. Ct. ter of Clark Eealty Co. (C. C. A., 7th Cir.), 42 §95. Am. B. E. 403, 253 Fed. 938. ,- 1 1 t, -r. -r.. S4 Chattanooga, City of, v. Hill (C. C. 58. See also Am. B. R. Dig., § 860. 64-a.J Payment or Taxes. 997 special taxes, but they are nevertheless taxes imposed for a public purpose no matter what the name under which they are levied or imposed and are clearly within the meaning of the term "tax" as used in this section. ^^ Generally speaking a tax is a pecuniary burden laid upon individuals or property for the purpose of supporting government.®" And in this sense it includes duties imposed by federal law upon goods imported by the bankrupt.®^ A tax imposed upon retail dealers in cigarettes in addition to the other taxes is within this section.®^ A claim against a defaulting tax collector is not a debt for " taxes." "^ The liability of an employer of labor to pay assessments to a iState under a Workmen's Compensation Act is not a tax within the meaning of this section,®*" nor is an award under such- a statute against a bankrupt for personal injuries to an employee a "tax" entitled to priority.^ (2) Local assessment; watek eents.®* — An assessment levied for a local improvement is a tax entitled to priority of payment.*® In some jurisdictions it has been held that the word " taxes " includes water rents due to a munici- pality,®^ and in other jurisdictions the courts have reached the opposite conclusion.'* (3) License fees, franchise and cobpoeation taxes.®® — An annual license fee or franchise tax, required to-be paid by a corporation as a condition of its continued existence and based upon the amount of its capital stock issued and outstanding, is a tax within the meaning of this section/'* and is 59. In re Lange Co. (D. C., lowah 20 Am. eSa. Matter of Farrell (D. C, Wash.), 32 B. R. 478, 159 Fed. 586. See In re Wyoming Valley Ice Co. (D. C, Pa.), 21 Am. B. E. 1, 165 Fed. 789. Character of tar, — The bankruptcy act does not r.:ake any distinction as to the character of the tax which is imposed. A license fee or franchise tax imposed by the State is recognized by the Federal courts as a tax. First Nat. Bank v. Aultman (Eef., O^iio), 12 Am. B. E. 12, 14. 60. New Jersey v. Anderson, 203 U. S. 483, 492, 17 Am. B. E. 63, 51 L. Ed. 284, 27 Sup. Ct. 137. Tax defined. — The term "taxes," within the meaning of this section, includes only such taxes as are required to be paid into a co;nmon fund for the support of the govern- ment, national, state, or municipal, and such a fund as will relieve the general taxpayer from a payment of an unfair proportion of the expenses in the operation of the govern- ment, or a tax which would be by operation of law a lien upon the bankrupt estate. Matter of Farrell (D. C, Waish.), 32 Am. B. R. 212, 211 Fed. 212. 61. Matter of .Eosenthal Bros. (D. C, N. Y.), 38 Am. B. E. 1, 235 Fed. 315. But see contra, Matter of Pedlow & Co. (Eef., N. i.), 32 Am. B. E. 808, holding that duties due to the United States on importations are not entitled to priority as they are not taxes within the meaning of the bankruptcy act. 62. In re Lange Co. (D. C, Iowa), 20 Am. B. E. 478, 150 Fed. 586. See also Am. ti. E. Dig. § 863. 63. In re Waller (D. C, Md.), 15 Am. B. E. 753, 142 Fed. 883. As to taxes payable by tax collector on his own property, see In re Porterfield (D. C, W. Va.), 15 Am. B. E. 11, 138 Fed. 102. Am. B. E. 212, 211 Fed. 212. 64. Matter of Rockaway Soda Water 'Manu- facturing Co. (D. C, N. Y. ) , 36 Am. B. E. 640. 85. See ?lso Am. B. E. Dig. § 863. 66. In re Stalker (D. C, N. Y.), 10 Am. B. E. 709, 123 Fed. 961. 67. In ro Industrial Coal Storage & Ice Co. (D. C, Pa.), 20 Am. B. E. 904, 163 Fed. 390. See also dictum in Matter of Hills (C. C. A., 2d Clr.), 34 Am. B. E. 43, 221 Fed. 260. 68. Matter of Park Brew. Co. (Eef., K. I.), 35 Am. B. R. 652. Covenant of lessee. — The failure of a lessee to comply with a covenant in his lease to pay water rents or charges has been held not to give the lessor or the municipality a claim to priority of payment out of the funds of the estate of the bankrupt lessee. In re Broom (D. C, N. Y.), 10 Am. B. E. 427, 123 Fed. 639. See In re Parker, Fed. Cas. No. 10;719. Meter charge. — ^Where the charge for water is for the amount used" 8'S indicated by meter, and not an assessment against the premises, it is not a tax but merely a debt tp the municipality, and is not entitled to the priority given to taxes. Matter of Hills (C. C. A., 2dr Cir.), 34 Am. B. E. 43, 221 Fed. 260. 69. See also Am. B. E. Dig. § 863. 70. State of New. Jersey v. Lovell (C. O. A., 3d Cir.), 24 Am. B. E. 562, 179 Fed. 321; New Jersey v. Anderson, 203 U. S. 483, 17 Am. -B. R. 64, 51 L. Ed. 284, 27 Sup. Ct. 137, revg. 14 Am. B. E. 604. 137 Fed. 858, and superseding In re . Danville Eolling Mill Co. (D. C, Pa.), 10 Am. B. R. 327, 121 Fed. 432; Matter of Mutual Mercantile Agency (Eef., N. Y.), 8 Am. B. R. 435. 998 Debts Which Have Pbioeity. [§ 64-a. payable as of the date of the entry of the tax lien in the proper office, where such entry is required;''^ but a sum exacted by a State for the privilege of increasing the capital stock of a corporation is not a debt entitled to priority upon the corporation subsequently becoming bankrupt, but is a provable debt entitled to a pro rata distribution with other general creditors. '^^ Taxes assessed against a partnership must be paid from the estate of an individual partner where he is individually liable under the State law.''* The fact that a claim is called a tax does not make it so;'^* as where by a State statute a corporation is required to- collect of its bondholders a State tax on a mortgage securing its bonds, the corporation is merely a collecting agency, and the tax is not that of the corporation entitled to priority of payment upon its being adjudicated a bankrupt.^" So, when a State statute speaks of a license to sell liquors as a " tax," that does not make it a tax. It is merely a charge in the nature of a license and not entitled to priority.''® g. Bight to subrogation upon payment of taxes. — Where a purchaser of land upon which taxes were unpaid paid a judgment for such taxes, he is not subrogated to the rights of the municipality and cannot claim priority of payment upon the grantor of the lands being adjudged a bankrupt. Such judgment becomes in the hands of the person paying it an unsecured claim and is entitled to no priority.''^ The benefit of priority is available only to the municipality. State or United States and may not be extended to any other creditor.''* So, where an owner of premises has leased them under a lease which requires the lessee to pay the taxes, he may not claim priority on account of city taxes paid by him after the bankrupt's failure to pay such taxes because of his bankruptcy.^' A purchaser at a tax sa-C is entitled to sub- rogation to a municipality's right to priority of payment of taxes from the assets of the bankrupt.*" Franchise tax may be re-assessed by the Matter of Gracey (D. C, Pa.), SO Am. B. S. court. Matter of Simcox, Inc. (D. C, >f. Y.), 463, 241 Fed. 981. 40 Am. B. E. 195, 243 Fed. 479. Payment of taxes by mortgagee. — In the 71. In re Clark Coal & Coke Co. (D. C, case of In re Barr Pumping Engine Co. Pa.), 22 Am. B. E. 843, 173 Fed. 858. (Eef., Pa.), 11 Am. B. E. SIS', the referee, 72. Matter of York Silk Mfg. Co. (D. C, after referring to several English cases, said: Pa.), 26 Am. B. E. 650, 188 Fed. 735; affd. "If, as the English cases lay down, the nn- 27 Am. B. E. 525, 192 Fed. 81. secured creditors of the bankrupt, standing 73. In re Green (D. C, la.), 8 Am. B. E. in hia shoes, have no equity to be protected, 553, 116 Fed. 118. But a claim for personal and if the question, therefore, practically taxes due the city of New York from a mem- arises between the bankrupt and a mortgagee, ber of a firm cannot be enforced out of firm who, having been compelled to pay taxes, assets until all firm creditors have been would have the right to claim a priority paid in full. See Matter of Platau (Eef., as against the bankrupt estate, the conclusion N. Y.), 21 Am. B. E. 352. is irrestible that these taxes should be paid 74. In re Cosmopolitan Power Co. (C. C. from the fund applicable to the payment of A., 7th Cir.), 14 Am. B. E. 604, 137 Fed. 858. the general creditors." revd. on other grounds, 203 U. S. 483, 17 78. Matter of Harris Steam Engine Co. Am. B. E. 63, 51 L. Ed. 284, 27 Sup. Ct. 137. (D. C, E. I.), 34 Am. B. E. 835, 225 Fed. 75. In re Wyoming Valley Ice Co. (D. C, 609; and see In re Broom (D. C, K. Y.), Pa.), 16 Am. B. E. 594, 145 Fed. 267; Com- 10 Am. B. E. 427, 123 Fed. 639; In re Veitch monwealth of Pennsylvania V. York Silk Mfg. (D. C, Conn.), 4 Am. B. E. 112, 101 Fed. Co. (C. C. A., 3d Cir.), 27 Am. B. E. 525, 251; In re HoUenfeltz (D. C, la.), 3 Am. 192 Fed. 81. B. E. 499, 94 Fed. 629. 76. In re Ott (D. C, la.), 2 Am. B. E. 637, 79. Matter of Harris Steam Engine Co. (D. 95 Fed. 274. C, E. I.), 34 Am. B. E. 835, 225 Fed. 609. 77. Cooper Grocery Co. v. Bryan (C. C. A., 80. Matter of Clark Eealty Co (C C A., 5th Cir.), 11 Am. B. E. 734, 127 Fed. S15, 7th Cir.), 42 Am, B. E. 403, 253 Fed. 938. citing City of Waco v. Bryan (C. C. A,, .'^t'l Toni-iare In re Brinker (D. C NY) 12... Cir.), 11 Am, B. E. 481, 127 Fed. D, Tej also Am.'B. E. 122, 128 Fed. CO-1. ' ' '' § 64-a.] Payment of Taxes. 999 h. Taxes accrued since proceedings were instituted. — Taxes upon property in the hands of the trustee, accrued since the proceedings were instituted, do not fall within the strict letter of the law, but the bankruptcy act does not withdraw the estates of bankrupts from the reach of the taxing power and thty are subject, in consequence, to the payment of taxes imposed while in the hands of trustees.*^ The tax assessed prior to adjudication is " legally due and owing " on the day of assessment, although not payable until after adjudi- cation.^^ An income tax is not payable by receivers or trustees who merely mar- shal and distribute the assets of the bankrupt among his creditors,'^^ but, it seems, that if the business of the bankrupt is continued by his trustee or receiver it is subject to the payment of an income tax, if the profit received brings it within, the Income Tax Aot.^^'' i. Interest on taxes and penalties. — It should be noted that this section does not provide for the payment of interest on taxes,*^ but it has been held that taxes which the trustee is required to pay carry interest until payment is actually made or tendered, and that the reasons why ordinary claims of creditors are not permitted to draw interest subsequent to adjudication have no application in the case of public taxes.^* A penalty imposed for a failure to pay a State franchise tax has been held not to be a part of the original tax, and is not, therefore, entitled to priority,*^ but the courts are not in accord as to this proposition.*® j. Illustrative cases.— Other cases in point on the payment of taxes under the present and the former law will be found in the foot-note.*' 81. In re Prince (D. C, Pa.), 12 Am. B. E. 675, 131 Fed. 546; Swarts v. Hammer (C. C. A., 8th Cir.), 9 Am. B. E. 691, 120 Fed. 256, affd. 194 U. S. 411, 11 Am. B. E. 708, 48 L. Ed. 1060, 24 Sup. Ct. 695; City of Waco v. Bryan (C. C. A., 5th Clr.), 11 Am. B. E. 481, 127 Fed. 79; In re Sims (D. C, Ga.), 9 Am. B. R. 162, 118 Fed. 356; In re Keller (D. C, Iowa), 6 Am. B. E. 334, 357, 109 Fed. 131; In re Conhaim (D. C, Wash.), 4 Am. B. E. 59, 100 Fed. 268; Stan- ard V. Dayton (C. C. A., 8th Cir.), 33 Am. B. R. 682, 220 Fed. 441, affd. 241 U. S. 588, 37 Am. B. E. 259; In re Fisher & Co. (D. C, N. J.), 17 Am. B. E. 404, 412, 148 Fed. 907. See also Am. B. E. Dig. S 585. The tmstee staonld pay "all taxes owing by the bankrupt." This includes the original tax and all other sums accrued thereon under the revenue laws of the State up to the time the payment is actually made or tendered. Matter of Kallals (D. C, N. Dak.), 17 Am. B. E. 414, 147 Fed. 276. It is settled law that the bank- rupt's estate is taxable while it is in the hands of the bankrupt's trustee. As to sale of prop- erty upon which taxes have been assessed since the bankruptcy, see In re Crowell (D. C, Mass.), 29 Am. B. E. 308, 199 Fed. 659. 88. In re Flynn (D. C, Mass.), 13 Am. B. E. 720, 134 Fed. 145; New Jersey v.- Anderson, 203 U. S. 483, 17 Am. B. E. 64, 51 L. Ed. 284, 27 Sup. Ct. 137, revg. 14 Am. B. K. 604, 137 Fed. 858, holding that a franchise tax assessed after adjudication upon a return made by the corporation before adjudication was "legally due and owing" and collectible. See Matter of Sherwood, Inc. (C. C. A., 2d Cir.), 31 Am. B. E. 769, 210 Fed. 754. The fact that property may change hands after the date of the assessment does not make any difference. Matter of Felipe Eamirez Quinones (D. C, Porto Elco), 39 Am. B..E. 320, 9 P. E. Fed. 414. 82a. Matter of Heller, Hirsh & Co. (C. C. A., 2d Cir.), 43 Am. B. E. 525, 258 Fed. 208. 82b. Matter of Heller, Hirsh & Co. (C. C. A., 2d Cir.), 43 Am. B. E. 525, 258 Fed. 208. 83. In re Fisher & Co. (D. C, N. J.), 17 Am B. E. 404, 413, 148 Fed. 907. 84. Matter of Kallak (D. C, N. Dak.), 17 Am. B. E. 414, 147 Fed. 276; Matter of Schuyler & Co. (Eef., N. T.), 21 Am. B. E. 428; Stanard v. Dayton (C. C. A., 8th Cir.), 33 Am. B. E. 682, 220 Fed. 441, affd. 241 U. S. 588, 37 Am. B. R. 259; Matter of Ashland Emery & Corundum Co. (D. C, Mass.), 36 Am. B. E. 194, 229 Fed. 829; Matter of Felipe Eamirez Quinones (D. C, Port Eico), 39 Am. B. E. 320, 9 P. R. Fed. 414; Matter of Clark Eealty Co. (C. C. A., 7th Cir.), 42 Am. B. R. 403, 253 Fed. 938. "There are two reasons wliy ordinary claims of creditors are not permitted to draw interest subsequent to the adjudication ; first, it is im- portant that the proportionate interest of the several creditors in the estate be ascertained and fixed. If interest were to accrue, however, after the adjudication the amount of the sev- eral claims would vary from time to time, ac- cording to their respective rates of interest and the proportionate share of the several credi- tors would be subject to constant readjustment. The second reason is the convenience of ad- ministration. ... In the case of public taxes, neither of these reasons has any applica- tion because they do not share the estate with the claims of private creditors. On the con- trary, § 64-a expressly provides that before any- thing shall be paid to the creditors by way of dividends, all taxes owing by the bankrupt shall be fully discharged." Matter of Kallak (D. C, N. Dak.), 17 Am. B. R. 414, 147 Fed, 276. 85. Matter of Ashland Co. (D. C, Mass.), 36 Am. B. R. 194, 229 Fed. 829. 86. Penalties entitled to priority. — Stanard v. Dayton (C. C. A., 8th Cir.f, 33 Am. B. R. 682, 220 Fed. 441; Matter of Kallak (D. C, N. Dak.), 17 Am. B. R. 414, 147 Fed. 276; Matter of Schuyler (Ref., N. Y.), 21 Am. B. E. 428; Mat- ter of Scheldt Bros. (D. C, Ohio), 23 Am. B. E. 778, 177 Fed. 599. 87. In re Force (Ref., Mass.), 4 Am. B. E. 114; In re Cleanfast Hosiery Co. (Eef., N. Y.), 4 Am. B. E. 702; In re Keller (D. C, Iowa), 6 Am. B. E. 351, 109 Fed. 131; 1000 Debts Which Have Peioeity. [§ 64-b, (1). III. PRESERVING ESTATE; FILING FEES, a. Cost of preserving estate. — (1) In geneeal.** — iSubdivision 1 of sub- section b provides as the first statutory priority that there shall be paid " the actual and necessary cost of preserving the estate subsequent to filing the petition." The words of this subdivision are broad and have a corresponding elasticity of application. They give priority to the ( 1 ) actual and ( 2 ) necessary cost (3) of preserving the estate (4) subsequent to filing the petition. This has been thought to include the costs and disbursements of receivers in bankruptcy and other officers pending the adjudication and appointment of trustees.** But these are sufficiently within § 62. Hence, the reference here seems rather to the expenses of parties, not officers, in preserving the estate.*" The impossibility of phrasing any rule whereby to determine when priority will be decreed is apparent. Nor, it seems, is it material what has been paid, ao long as the court finds that the disbursement was not necessary.*^ Where property is sold in admiralty to enforce maritime liens, with the consent of the bankruptcy court, the costs incurred in bankruptcy in the preservation of the property, together with the costs of administration, are entitled to priority of payment from the proceeds of the sale.*^ But if the general fund of a bank- rupt transportation company is sufficient to pay all expenses of administration, the cost of the operation of the vessels owned by the corporation should not be charged against the proceeds of the sale of a single vessel, sold to satisfy liens 'against it.** Claims for rent due for the occupation of the premises during the settlement of the bankrupt estate should be paid as part of the expense of maintaining the estate.** Likewise, claims of watchmen employed by express authority of the court to care for the bankrupt's stock are entitled to priority.*^ But costs in an attachment suit which 'was dissolved under § 67-f and was of no benefit to the bankrupt estate should not be allowed under this siubdivision.*° Wor should an allowance be made for services of counsel rendered without authority of the court, in advising the bankrupt re- garding his business during the period between the filing of the petition and the adjudication of bankruptcy. ^''^ Debts created in conserving the estate, which was wrongfully concealed by the bankrupt, are entitled to priori ty.^^^ (2) Expenses of ceeditoes its' EECovEEi]srG peopeety.^' — ^The doctrine Matter of Wenatchee Orchard Co. (D. C, of Estate of Kinnane Co. (C. C. A., 6th Cir.), 39 Wash.), 32 Am. B. E. 369, 212 Fed. 787; V. S. Am. B. E. 593, 242 Fed. 769. v. Herron, 20 Wall. 251; In re Moller, Fed. Cas. 91. In re Allen (D. C, Cal.), 3 Am. B. E. 38, 9,700; In re Brand, Fed. Cas. 1,809; In re 96 Fed. 51. Ambler, Fed. Cas. 271. 92. In re Hughes (D. C, N. J.), 22 Am. B. 88. See also Am. B. E. Dig. 866. E. 303, 170 Fed. 809. 89. Paine v. Archer (C. C. A., 9th Cir.), 37 93. Matter of New England Transp. Co. (D. Am. B. E. 454, 233 Fed. 259. C, Ct.), 34 Am. B. Xl. 323, 220 Fed. 203. Certificates Issued by a receiver with the con- 94. In re Youdelman-Walsh Foundry Co. (D. sent of the court to raise money necessary to C, N. Y.), 21 Am. n. E. 509, 166 Ted. 381; In re care for and preserve the bankrupt estate are Hersey (D. C, Iowa), 22 Am. E. E. 860, 171 Fed. entitled to priority of payment from the pro- 1,001. ceeds of the sale of such property. In re Alaska Premises used by receiver or trustee. — Where Fishing & Developing Co. (D. C, Wash.), 21 a receiver or trustee in bankruptcy actually oc- Am. B. E. 685, 167 Fed. 875; Matter of Veler (C. cupies the leased premises, rent for such occu- C. A., 6th Cir.), 41 Am. B. E. 736, 249 Fed. 633. pancy and use is payable by the receiver or Claim of assignee for benefit of creditors. — trustee and will be considered a preferred claim Galbraith v. Vallely (C. C. A., 8th Cir.), 44 Am. in favor of the landlord, not because of any re- B. E. 523, 261 Fed. 670. servation of rent mentioned in the lease, bu 90. In re Burke (Eef., Ohio), 6 Am. B. E. 502. because the use of the premises was considered Compare also, generally, cases cited sub-titles necessary to the preservation of the estate, and "Cost of Administration," "Fees of General As- the amount paid by the receiver or trustee will signees," and "SherifE's Fees," post, under this be allowed as part of the cost of administration, section. Matter of MuUings Clothing Co. (D. C, Conn.), The expense of opposiner an oifer of coiuposi- 37 Am. B. R. 166, 230 Fed. 681. tion is not "on actual and necessary cost of pre- Amount of rent. — See Gardner v. Gleason (C. serving the estate" within this section. Matter C. A., 1st Cir.), 43 Am. B. R. 644, 259 Fed. 755; § 64-b, (2).J Filing Fees. 1001 ^^TT r^ — ■ that the expense of preserving the estate is entitled to priority was, prior to the amendatory act of 1903, carried to the extent of decreeing costs out of the estate to creditors who before the bankruptcy had obtained a lien, by means of which all the creditors were equally benefited.^* There was doubt, however, whether this was the law. The amendatory act of 1903 has removed the doubt by the words added to subdivision (2). This subdivision impliedly recognizes the right of a creditor to institute proceedings to recover, for the benefit of the estate of the bankrupt, property transferred by him, either before or after filing of the petition.^** It will be observed that the act makes no distinction as to the character of the transfer, whether it be one involving actual fraud, an intent to hinder, delay, or defraud the creditors of the bankrupt, which the law declares to be null and void, or a constructive fraud. So, then, it makes no difference whether the transfer be one of actual or of constructive and technical fraud, so far as the interest and rights of creditors are con- cerned.®® Now, to entitle a creditor to an allowance for expenses and priority of payment, the applicant must show that he has (1) at his expense (2) recovered for the benefit of the bankruptcy estate (3) property which the (4) bankrupt had transferred or concealed. '^''** If the creditor shows this, he is entitled to his " reasonable expenses " in so doing. It is immaterial whether the transfer or concealment was before or after the petition. ISTor is it thought that the word " recovered " will be construed strictly ; it should be enough if any active agency, which was either the moving cause or without- which recovery would have been unlikely or impossible, is shown. ■^'^^ b. Filing fees, in involuntary cases. — Subdivision 2 of subsection h requires the payment of filing fees paid by creditors in involuntary cases. This sub- division should be read in connection with § 3-e and General Order XXXIV. The three together fix the rights of the respective parties to costs and disburse- ments on creditors' petitions for involuntary bankruptcy. Such a creditor is entitled, not only to a return of his filing fee, but also his other disburse- ments, as for service of process ;^*'^ the latter, however, as cost of administra- tion, rather than under this subdivision. A priority of this kind may be claimed by a verified account filed with the trustee; but the same should not be paid until allowed by the referee. This priority is akin to, but not the Matter of Crawford Plummer Co. (D. C, Mass.). lOO. Tor definitions of these words see Bankr. 42 Am. B. E. 92, 253 Fed. 76. Act, S 1. 96. Matter of Mitcliell (C. C. A., 2d Cir.), 32 Bigrhts In distribution of money recorered. — Am B. E 391, 212 Fed. 932, holding that such See Matter of Butcher & Marshall (D. C, Mass.), claims' are entitled to priority over attorney's 45 Am. B. E. 300, 266 Fed. 239. fees and that a trustee is personally liable for An allowance by a state court to a receiver their payment when he uses all the assets to for services rendered in the preservation of the pay subordinate claims. estate during the four months preceding bank- 96 Matter of Kood (Eef., Minn.), 34 Am. B. ruptcy is entitled to priority In payment after g 2V3 f^® property has been transferred to the trus- "flfia Matter of Klnnane Co. (C. C. A., 6th dr.), tee in bankruptcy. Paine v. Archer (C. C. A., 39 Am B. E. 593, 242 Fed. 769. 9th CIr.), 37 Am. B. E. 454, 233 Fed. 259. 86b. Matter of GfEricht & Lacher (D. C, Tex.), 101. Where attorneys for unsecured creditors 43 Am B. E. 345, 260 Fed. 682. of a bankrupt performed valuable services prior 97 See also Am. B. E. Dig. § 867. to the appointment of a trustee by conducting 98* In re Lesser (C. C. A., 2d Cir.), 5 Am. B. an examination of the officers of the bankrupt B 320 100 Fed 433, revd. on another point in which inured to the benefit of all the general Metcal'f V Barker 187 U. S. 165, 9 Am. B. E. 36, creditors and tended to recover property which 47 L Ed 122 23 Sup. Ct. 67. Compare also In had been fraudulently transferred, they are re Little 'Elver Lumber Co. (D. C, Ark.), 3 Am. entitled to compensation from the estate under B E 68' 101 Fed 558; In re Groves, 2 N. B. section 64-b (2) of the bankruptcy act, as N Ben 466 amended in 1903, by which It is provided that '98a Matte'r of Vadner (D. C Nev.), 42 Am. where property of the bankrupt has been re- R r' 465 259 Fed 614 citing Collier on Bank- covered for the benefit of the estate, the t,;„t„,T Mifh ori ^ 'mm reasonable expenses for such recovery shall be 99 Frost V Latham' & Co. (C. C. Ala.), 25 entitled to priority of payment, but after the Am ' B E 313 181 Fed. 866. employment of counsel by the trustee, no al- 1002 Debts Which Have Peioeity. [§ 64-b, (3). same as, that for indenmity deposits required by General Order X.^*** On. the analogy of these provisions, money advanced by the attorney or friend of a voluntary bankrupt to pay the filing fee is often ordered paid in full out of the estate when collected in;^"** but such an advancement is strictly a "cost of administration." IV. COST OF ADMINISTRATION. a. In general. ^"^ — Subdivision 3 makes next in order of priority the pay- ment of the "cost of administration." This phrase includes the priorities mentioned in the preceding subdivision. A similar idea is expressed in "the actual and necessary expenses incurred by officers in the administration of estates" in § 62. It may include the referees' fees for allowing claims, fixed by § 40, as amended by the act of 1903, and disbursements of the bank- rupt in notifying creditors of an application for his discharge. ^"^ The expenses of a referee, including a reasonable allowance for clerk hire, fall within this subdivision.-^*" And so also does the reasonable value of the use by a trustee of leased premises formerly occupied by the bankrupt.-^"® It may also include a great variety of disbursements made necessary in the administration of the estate,"*^ but not costs awarded in proceedings not a part of the bankruptcy proceeding.^"* It is impossible to phrase any fixed rule. Compensation for g-ei'vices of accountants, acting without authority of the court, will not be allowed."" b. Witness fees and mileage. — These are expressly given priority. They would have it were the law silent. Their amount is fixed by the Revised Statutes."^ c. Attorney's fees."^ — Costs of administration under subdivision (3) include " on© reasonable attorney's fee." This subject is considered in detail under § 62. The allowance must be (1) in one item, (2) reasonable, and (3) for professional services actually rendered. It seems that the basis of compensa- tion is not payment for all services which the bankrupt may request of his attorney, but for the services to the bankrupt in involuntary oases, while per- forming the duties devolved upon the bankrupt by the bankruptcy law,"^ and will not include services rendered prior to the institution of bankruptcy proceed- ings.-^^^ The services rendered must be such as aid in the settlement of the estate, and will not include services rendered in securing an exemption for the lowance can be made out of the estate for 67; In re Neely (D. C, N. Y.), 5 Am. B. R. 836, services performed by such attorneys In aid of 108 Fed. 371. such counsel. In re Medina Quarry Co. (D. C, 110. Matter of Marks (Eef., Ga.), 22 Am. B. N. Y.), 25 Am. B. E. 405, 182 Fed. 508, revd. on E. 54, holding that items of expense incurred other grounds, 27 Am. B. E. 466, 191 Fed. 815. by accountants for "entertainment" and un- 102. In re Silverman (D. C., N. Y.), 3 Am. B. usual hotel bills and Pullman fares are npt E. 227, 97 Fed. 325. properly chargeable against the estate of a 103. Compare In re Matthews (D. C, Iowa), bankrupt, and will be disallowed. 8 Am. B. E. 265, 97 Fed. 772; also In re Burke in. U. S. E. S., § 848. See also under Section (Eef., Ohio), 6 Am. B. E. 502. Twenty-one of this work, ante. 104. See Whlaton v. Smith, Fed. Cas. 17,523. 112. See also Am. B. E. Dig. § 870 and cross- 105. See also Am. B. E, Dig. § 869. references thereunder. rT22^?45 Fe^^ffi^" S?e Gene?af Drier T' ^' "3- ^he "one reasonable attorney's fee" must ,J, tJ /.?.«h„ ?W r w v» \ I 1^ R Ti 1)6 allowed for services actually rendered to the ^l^^-ioi iZ% iw ^ • ^^' bankrupt in performing the duties required by "^lOB^lIfe Abrams (D. C, Iowa), 29 Am. B. 'i\l^- ..W^^i'^ri- S' re " Lewil' ^^''0^"^^*^ ?o,rm'°c'''0hiT-39^1m'"B Tm "' """■* * ^''-Am'' b'V f32.''?SI 'Fe^d.' 850rin ifAndeTsVn Gold (D. c, OMo), sv Am. u. K. bm. ^r> r q ravt i. Am R E fiin ^(f^ FpA 854- 108a. Matter of Offricht & Lacher (D. C, Tex.), i°- ^Vprrill fD C Vt > 4 Am BE 625 103 43 Am. 3. E. 345, 260 Fed. 682. Wofl 7B1 100. For exceptions to this rule, see In re ^ ^" ''^'■■ Lesser (C. C. A., 2d dr.), 5 Am. B. E. 320, 100 The "duties" referred to in the lest sentence Fed 433, revd. on other grounds in 187 U. S. of the above text are those imposed by section 165, » Am. B. E. 36, 47 L. Ed. 122, 23 Sup. Ct. 7 of the Bankruptcy Act. Whltla & Nelson T. '§ 64-b, (3).] Attorneys' Fees. 1003 bankrupt/^* nor services rendered in State and city courts at the instance of the bankrupt,-'-'^ nor services rendered in resisting the claim of a receiver appointed by the State court prior to adjudication/-"^^ ncr services rendered as the result of claims made by the bankrupt and his wife in the proceedings.-^-^** And the bank- ruptcy act does not contemplate that estates shall be burdened with the expense of furnishing an attorney for the bankrupt e\'ery time he appears before the ref- eree. -^^ Where partnership bankrupts have different attorneys but one allowance can be made.^^* An attorney who uselessly flics a second involuntary petition, and subsequently demurs to the petition previously filed by another attorney, and such petition is amended, and an adjudication had thereon, is not entitled to an allowance of a fee for services."^ The attorney's fee should be kept down to what it was intended by the act to represent, and that is simply the necessary professional assistance required by the bankrupt to meet the demands of the act upon him. Thus, clerical work performed by an attorney in posting the bankrupt's books and in making extra copies of schedules cannot be charged for as professional services.-^^" It should affirmatively appear that the services were reasonably necessary and rendered in good faith, ^^^ although the prevail- ing opinion seems to be that the attorney for petitioning creditors in an involuntary proceeding is entitled as a matter of right to a reasonable fee, the amount to be determined upon evidence of the services performed and their value.^^^ An application to confirm a composition made by an involun- tary bankrupt is no part of the administration of the estate, and the fees and disbursements of the bankrupt's attorney cannot be allowed as costs of admin- istration.^^* Compensation may be allowed to the bankrupts' attorneys for BcvC (C. C. A., Otli dr.), C2 Am. E. E. 469, 213 Fed. 587. 113a. Matter of Luber (D. C, Pa.), 44 Am. B. E. 292, 261 Fed. 221 ; Matter of Munford (D. C, N. Car.), 43 Am. B. E. 218, 255 Fed. 108. 114. In re O'Hara (D. C, Pa.), 21 Am. B. E. 5C3, 166 Fed. 384; Matter of Bohrman (D. C, Ga.), 34 Am. B. E. 801, 224 Fed. 287. 115. Musica v. Prentice (C. C. A., 5tli Cir.), 31 Am. B. E. 687, 211 Fed. 326, affg. 30 Am. B. E. 555, 205 Fed. 413. 116. WhilL-i ft Nelsoi! t. Boyd (C. C. A., 9tli Cir.), 32 Am. B. E. 4G9, 213 Fed. 587. 106a. Matter of Munford (D. C, N. Car.), 43 Am. B. E. 218, 255 Fed. 108. llTi. Whitla & Nelson v. Boyd (C. C. A., 9th Cir.), 32 Am. B. R. 469, 213 Fed. 587. 118. See In re Eschwege (Eef., N. T.), 8 Am. B. R. 282. 119. Frank t. Dickey (C. C. A., Sth dr.), 15 Am. B. E. 155, 139 Fed. 744. 120. In re ConiicU & Sons (D. C, Pa.), 9 Am. B. E. 474, 120 Fed. 846. 121. In re Carr (D. C, N. Car.), 9 Am. B. E. 58, 117 Fed. 572, holding that the allowance to an attorney tinder section e4-b being discretion- ary, the attorney must disclose his dealings with his client that the court may act intelli- gently. Test is whether services are necessarily ren- dered. — ^In re Eosenthal & Lehman (D. C, Mo.), 9 Am. B. E. 626, 628, 120 Fed. 848, the court sr.id: "It goes without saying that. If the ser- Tlces of counsel are secured, or, when secured, are eniployed for the purpose of securing the bankrupt from the consequences of his own wrongful conduct, or for the purpose of sup- pressing the truth or otherwise thwarting the operation of the act, no compensation can reasonably be allowed by the court to be paid out of the assets of the estate. The test, in my opinion. Is whether the employment is neces- sarily made, and the services necessarily ren- dered in good faith for the real purpose of so administering the act In a given case as to ac- complish the r>-rpo3e of its enactn-.p-t." Services to secure preferential payments. — Where an attorney for the petitioning cred- itors, who were in sympathy with the bank- rupt and assisted in the wrongful transfer of its property, subsequently represented creditors -who had received preferential pay- ments and who sought to establish invalid claims against the estate, he is not entitled to an allowance for fees out cf the estate. In re Medina Quarry Co. (D. C, N. Y.), 25 Am. B. R. iCa, 1S2 Fed. 508, revd. on other grounds 27 Am. B. R. 466, 191 Fed. 815. 122. Smith v. Ckioper (C. C. A., 5th Cir.), 9 Am. B. R. 755. 120 Fed. 230; In re Curtis (C. C. A., 7th Cir.), 4 Am. B. R. 17, 100 Fed. 784; In re Goldville Mfg. Co. (D. C, S. Car.), 10 Am. B. R. 552, 118 Fed. 892; In re Lang (D. C, Tex.), 11 Am. B. R. 794, 127 Fed. 755. 123. Comp;r;E£tion. of attorney for bank- rupt in contest over confirmation of composi- tion. — In re Fogarty (C. C. A., 8th Cir.), 26 Am. B. R. 568, 187 Fed. 773, the court said: "If, because the professional services in this ease were rendered in the bankruptcy court — in the administration of the bank- ruptcy law— the attorney's fees are there- fore costs of administration within the meaning of section 64, nevertheless such fees are not payable from the estate unless the services were rendered to the bankrupt while he was in the performance of some duty prescribed by the act. No duty was laid upon him to try to settle the case and get back his property. That was a privilege. 1004 Debts Which Have Prioeitt. [§ 64-b, (3). services rendered at a trial in which, although adjudication finally resulted, a successful resistance was made to important and serious charges alleged in the petition of the petitioning creditors.^-* No attorney's fee will be allowed, under this section, except upon notice to parties interested, and upon petition by, or recommendation of, parties mentioned in the statute. ^^" Where the attorney for a bankrupt advanced the filing fee for a voluntary petition and made other disbursements for printing notices to creditors, etc., on behalf of the bankrupt, the same should be allowed out of the estate as a "cost of administration." ^^^ Claims of attorneys for the receiver of a corporation appointed by a iState court are not entitled to priority, where the corporation subsequently becomes bankrupt.'^' Though but three kinds of legal services in bankruptcy cases are enumerated in this subsection, services not coming within the words must still be paid for and are entitled to priority, if within the meaning of "cost of administration." But an attorney's priority is not superior to that of a horia fide lienor. ^^^ Claims of attorneys for services not a duty. If it be said that an application lor a discharge is likewise merely a priv- ilege, that the bankrupt's costs in connee- (;ion with the hearing upon his application ■ilor a discharge are payable from the estate, i;hat the confirmation of a composition is liquivalent to a discharge, and that there- I'ore his costs in connection with the prose- i;ution of his composition offer should also be payable from the estate, we think the following considerations are a sufficient answer. Attendance in the one case is made by the letter of the statute the bank- rupt's duty; in the other, not. Though a confirmed composition has the effect of a discharge, and though confirmation may be .opposed on grounds that would prevent a discharge, the first question for the judge is whether the composition is for the best interests of the creditors, and this question has nothing to do with the right to a dis- .;harge. This question might be clearly de- lierminable without the attendance of the bankrupt. Upon the judge is laid the duty of becoming 'satisfied' that the composi- tion offer is fair. If questions should arise which the judge thought might not be rightly solved without the attendance of the bankrupt and his attorney to aid in de- termining what was for the best interests of the creditors, it is possible that under section 7-a(2) he might make a 'lawful order' requiring the attendance of the bank- rupt and his attorney at the expense of the estate. But the issue here is whether the bankrupt can recover from the estate the fees and disbursements of his attorney in endeavoring to force a dismissal of the case and a restoration of the seized property, when neither the letter of the statute nor an order of the court imposed upon the bankrupt the obligation to make such a contest. Our interpretation of the sections herein referred to, in connection with the spirit of the act as an entirety, is against the bankrupt's contention." See also Muttcv of Estate of Kinnane Co. (C. C. A., 6th Cir.), Sa Am. B. R. 593, 242 Fed. 769; Matter of Munford (D. C, N. Car.), 43 Am. B. R. 218, 255 Fed. 108. 124. Successful defense to charges. — In the case of Matter of Perlhefter (Eef., N. Y.), 25 Am. B. E. 5E6, the referee said: "It seems to me essentially eaultable that a bankrupt should be allowed to defend himself against charges made under section 3 of the Bankruptcy Act, defining acts in bankruptcy, and that the ex- pense of successful defense be allowed out of his estate under section 64-b (3) of the Act, es- pecially if such charges, if established, could be pleaded as objections to his discharge within section 14-b of the Bankruptcy Act (I refer par- ticularly to subdivision 4), or should be ger- mane to any such obieetions, although at the same time the trial should result in an adjudi- cation on other charges established at the trial." 125. In re Young (D. C, N. Car.), 16 Am. B. E. 106, 142 Fed. 891. 126. Matter of Carpenter (Eef., N. Y.), 25 Am. B. E. 161, citing Collier on Bankruptcy (Sth ed.), p. 736. 127. Compensation of attorneys for receiver of corporation appointed hy State court. — Where a fee has been allowed attorneys by a State court for services rendered the receiver of a corporation in that court and ordered to be paid by such receiver out of any funds avail- able for that purpose, and prior to the making of such order, the corporation has become bank- rupt and its assets have passed under the juris- diction of the bankruptcy court, such fee Is not a priority claim constituting a lien on the as- sets of the bankrupt corporation. Such claim is allowable only upon eaultable considerations for services from which the estate In bank- ruptcy has derived benefit, and to the extent only that they were beneficial in fact. In re Standard Puller's Earth Co. (D. C, Ala.), 26 Am. B. E. 562, 186 Fed. 57S. Fed. 379. „ „ 12S. In re Prick (Eef., Ohio), 1 Am. B. E. 719; Liddon v. Smith (C. C. A., Sth dr.). Priority over receiver's certificates. — An at- torney's fee for services rendered the bank- rupt under the Bankruptcy Act must be de- ducted from the proceeds of the sale of unen- cumbered property before applying them to the certificates of a receiver, appointed by the State court, prior to bankruptcy, upon the ground of insolvency. Smith v. Shenandoah Valley Nat. Eank (C. C. A., 4th Cir.), 40 Am. B. E. 314, 246 § 64-b, (4).] Payment of Wages. 1005 essential to the proper administration of the bankrupt's estate rank second only to labor claims.^® V. PAYMENT OF WAGES.iso a. In general. — Subdivision 4 specifies the wages which are to have priority in payment. The amendment of 1906 added "traveling or city salesmen" to workmen, clerks and servants, who alone were preferred under the original act. Under this subdivision the rule as to a conflict between the bankruptcy law and a State statute concerning wage priorities should be noted.^^^ An analogous but different priority to the wage-earner is probably given by every State law. Still, such statutes apply in certain circumstances, as where they give priority for letbor over even an existing mortgage, ^^^ or where, in case of insolvency, a lien is given. ^*^ But such claims are not usually prior to valid vested liens. ^^* Since the claim of a clerk for his wages earned within three months of his bankruptcy with his employer is a priority fixed by the bank- ruptcy act and not a lien under the laws of the State,^^^ it is immaterial whether under the laws of the .State the claim is or is not superior to a home- stead right. ^®® A laborer may be entitled to priority of payment hereunder although he has not perfected his lien under a State statute. ^^'^ Proof of claim for wages must state facts which show the claim to be entitled to preference or priority of payment. It is not sufficient to say in the claim that the debt therein mentioned is " preferred " or a " preferred claim." ^^* b. Construction and effect. — The term "wages" should be construed in a broad and general sense, as meaning compensation for services rendered. Any 14 Am. B. R. 204, 135 Fed. 43. Contra: In re Duncan (Eef., Tex.), 2 Am. B. E. 321. Compare also In re Tebo (D. C, W. Va.), 4 Am B. R. 235, 101 Fed. 419. 129. In re Erie Lumber Co. (I>. C, G-a.), 17 Am. B. R. 689, 700, 150 Fed. 817. 130. See also Am. B. R. Dig. §§ 871-873. 131. See under this section, post, subtitle " Conflicting and Overlapping State Priori- ties." 132. In re Matthews (D. C,. Ark.) 6 Am. B. R. 96, 109 Fed. 603. In Kentucky wage-earners have no lien upon and are not entitled to priority of payment out of the proceeds of mortgaged property sold by .the trustee in bankruptcy of the mortgagor. In re Mulhauser (C. C. A., Ky.), 10 Am: B. E. 231, 121 Fed. 629, followed in Matter of Meis (Ref., Ky.), 18 Am. B. R. 104. 133. In Ohio it has been held to be the purpose of the statute in regard to labor claims, when the property of the employer shall be placed by assignment or receiver- ship beyond the reach of those who may have assisted in its creation by thedr labor to the extent of claims which have accrued three months prior thereto, to fasten upon it a charge which shall yield in priority of payment only to taxes and costs of adWiin- istering the trust, and that this charge is tantamount to a specific lien in favor of this class of creditors. The mere fact that a petition in bankruptcy has been filed within four months of the appointment of a receiver of the insolvent debtor does not aflFect such a lien, which is not in any proper sense a lien created by a suit ot proceed- ing at law or in equity. In re Coe, Pow- ers & Co. (C. C. A., 6th Cir.), 6 Am. B. R. 1, 109 Fed. 550. 134. In re Cramond (D. C, N. Y.), 17 Am. B. R. 22, 145 Fed. 966; In re Proud- foot (D. C, W. Va.), 23 Am. B. R. 106 173 Fed. 733; In re Tebo (D. C, W. Va.). 4 Am. B. R. 235, 101 Fed. 419, is thus not a reliable authority. See discussion under this section, ante, subtitle " Priorities versui Liens." 135. In re Erie Lumber Co. (D. C, Ga.). 17 Am. B. R. 689, 699, 150 Fed. 817, quot- ing Collier on Bankruptcy ( 5th Ed. ) , p. 504. 136. Matter of Strickland (Ref., Ga.), 20 Am. B. R. 923. 137. In re Cramond (D. C, N. Y.), 17 Am. B. R. 22 145 Fed. 966; In re Burton Mfg. Co. (D. C, la.), 14 Am. B. R. 218, 134 Fed. 157. 138. SufSciency of proof of claim entitled to priority as a wage claim. — Where a proof of claim states merely that it is for " wages due deponent as clerk and manager and is a preferred claim," and it does not appear in such claim or by proof of any kind that such wages were earned in the employ of bankrupt within three months before the commencement of bankruptcy proceedings, it is not sufficient. In re Dunn (D. C, N. Y.), 25 Am. B. E. 103, 181 Fed. 701. 1006 Debts 'v,aijcn Have Peioeity. [§ 64:-b, (4). other construction would lead to glaring inconsistencies and manifest injus- tice/^* The services referred to are those rendered by one occupying the relation of servant to his employer as master; including only persons who work, labor or serve in a more or less subordinate position."** The statute indicates that such a construction should be made, for it specifies "wages due to workmen, clerks or servants," excluding the notion that one who renders professional services as an attorney or physician is entitled to priority under such provision.-^*^ Under such construction a person who renders services as an incident of a contract providing for payment in some other way than on a time basis would not be entitled to the privilege of priority. ^*^ Commissions on sales of traveling salesmen constitute wages within the meaning of this provision,"* but a partnership, composed of several members, selling the product of a corporation on a commission, is not a workman or laborer, and its commissions may not be considered as "wages.""* The fact that a claim- ant's compensation was more than $1,500 per year does not of itself disentitle him to priority. ^*^ The intent and purpose of the clause is to protect laborers to the fullest possible extent, giving them priority over all other creditors."* The priority given to claims for wages is not lost by the entry of judgment on the claim before the institution of bankruptcy proceedings."' One claiming priority under this section has the burden of showing that he is within one of the designated classes."'^ c. Assignee of claim for wages.i*^ — j^-^^ assignee of a claim for wages is entitled to priority of payment although the assignment was made prior to the commencement of the bankruptcy proceedings."^ But such priority is lost by the assignee's acceptance of the debtor's note and dne bill, the transaction 139. In re New England Thread Co. (C. C. A., who are dependent upon their wages, and who, 1st Cir.), 20 Am. B. E. 47, 158 Fed. 7SS. having lost their employment by the bank- Wages loaned to employer. — Where stockhold- ruptcy, would be in need of such protection. ers in a bankrupt partnership association con- Blessing t. Blauchard (C. C. A., 9th dr.), 35 sented that a portion of their wages be with- Am. B. E. 135, 213 Fed. 35. held by and loaned to the company, they are 147. Matter of Haskell (D. C, N. T,), 36 Am. not entitled to priority for such sums upon the B. E. 428, 228 Fed. 819. ground that they are labor clnims. Matter of 147a. Matter of Quackenbush (D. C, N. J".), 43 Caledonia Coal Co. (D. C, Mich.), 43 Am. B. Am. B. E. 699, 259 Fed. 599. E. 93, 254 Fed. 742. 148. See also Am. B. E. Dig. § 885. 140. Matter of Gay & Sturgis (D. C, Mass.), i49_ Matter of Butcher (D. C, Wash.), 32 Am. tTi. ?3 im'.'°B' ^E^"6f9,''i5'iTe'd^t9S.^' <°- '■ \'': 'f'' ^f ^^.'- '''■ ,,^<,„^,,,, , 3^,, ^04 liz Matter' of Footville Condensed Milk Co. S"I?- C*- 1J«' l^''!'^/"^.*''''^ '7'JLP"J'/"T o? t1,'; (D. C, Wis.), 38 Am. B. E. 472, 237 Fed. 136. ta^hed to the debt and not to the person of the 143. In re New England Thread Co. (C. C. f ^'^''"^^P ^J^^'"™ f'^.^r *w* v„ 1 Ts Am A., 1st Cir.), 20 Am. B. E. 47, 158 Fed. 788; In ^ Puller & Bennett (DC , W Va.) IS Am. In re Pink (D. C, Pa.), 20 Am. B. E. 897, 163 BR. 443, lo2 Fed. 538. The act of 1«)8 pro- Ped I'S Tiding for priority m payment of wages earned 144. Mktter of Crawford Woolen Co, (D. C, within three months of the flling of the petition W Va ) 34 Am B E 223 218 Fed 951 '^5' workmen, clerks, or servants, not to exceed 145. ii'atter of Schultz '& Guthrie (D. C, $300 to each claimant, causes such priority to Mass.), 37 Am. B. E. 604, 235 Fed. 9OT; Matter attach to the character of claim earned by the of American Finance & Securities Co. (Eef., N. designated class and within the period fixed, J.), 38 Am. B. E. 479. Contra; In re Becker and not to tlie character of the claimant who (Eef., N. Y.), 31 Am. B. E. 596. o,ffers to prove such claim, and such prioritT 146. Judgment founded upon claims for labor <= a™s do not lose their status as such by af!^ ar^ entitled to priority over the claims of all signment before the flUng of the petition to other creditors and to payment In full. In re another than the workman, clerk, or servant Blackstaff Engineering Co. (D. C, Ga.), 29 Am. who earned them. Matter of Harmon (U. (-., B. E. 663, 200 Fed. 1,019, citing In re Erie W. Va.), 11 Am. B. E. 64, 128 Fed. 170. Lumber Co. (D. C, Ga.), 17 Am. B. E. 689, 150 Borrowine money to pay wages.— In tlie Fed 817, and Guarantee Title & Trust Co. v. r tt m. , o t„ nZ. „ t„„„ HTfrr Ho Title Guaranty & Surety Co., 224 U. S. 152, 27 case of. United Surety Co. v. Iowa Mfg. Oo. Am. B. E. 873, 56 L. Ed. 706, 32 Sup. Ct. 457. (C. C. A., 8th CHr.), 24 Am. B. R. 726, 179 Purpose of section.— Priority of payment of j.^ 55 ^j^ p^y^t g^id: "In this case there wages under section e4b(4) of the Bankrunt'-y ' . i « j.i. 1 • j „„ Act was intended for the benefit only of those was no assignment of the claims and none § 64-b, (4).j Payment of Wages. lOOY operating as a novation.^'" Orders drawn upon a company by a bankrupt, and given to his employees, payable in trade, do not, upon payment, constitute an assignment of wages so as to entitle the drawee to priority.^®' Where checks are given to laborers for wages earned prior to the employer's bank- ruptcy, the person who cashes such checks becomes an assignee of the claims represented by such checks and is entitled to priority. ^^^ If the claim be assigned after being proved, the assignee is subrogated to the priority of the assignor. ^^* A surety may be entitled, through the doctrine of subrogation, to preference in payment of claims which it has discharged. ^^ But the mere fact that one pays off a debt at the instance of the debtor or lends money to was intended by the parties. The transac- tion consisted simply in the Abadde Com- pany [insolvent] borrowing money from the surety company to pay a debt which, as between the borrower and the lender, was alone owned by the former, and instead of buying the claims from the laborers, and thereby securing some equitable right as against the principal debtor, the surety company took what it conceived to be ample security for the loan, turned over the money to the borrower, and with it the latter paid and extinguished its own debt to the la- borers. Their claims, therefore, were not at the time bankruptcy proceedings were instituted against the borrower 'wages due the workmen ' within the meaning of the sec- tion '64-b(4) of the Bankruptcy Act. Neither were they assigned claims of that kind entitling the assignee to stajid in the shoes of the laborers." Priority personal under prior decisions. — This priority has been held to be personal and where an assignment of the wages took place prior to the filing of the petition no priority was allowed. In re Westlund (D. C, Minn.), 3 Am. B. R. 646, 99 Fed. 399. Thus, where, prior to the bankruptcy of a corporation, its employees assign their claims for wages to secure one who advanced the money for their wages, the assignee is not entitled to priority of payment. In re St. Louis Ice, etc., Co. (D. C, :io.), 17 Am. B. E. 194, 147 Fed. 792. (But where the assignment took place after the bankruptcy proceedings were commenced it was held; that the claims for wages are entitled to priority in the hands of the assignee. In re Campbell (D. C, Wis.), 4 Am. B. R. 535, 102 Fed. 686. 150. In re Fuller & Bennett (D. C, W. Va.), 18 Am. B. E. 443, 152 Fed. 53«. 151. Stewart & Co. v. McLeod (C. C. A., 5th Cir.), 34 Am. B. E. 414, 222 Fed. 253. Goods purchased by orders of bankrupt. — Where a merchant supplied goods to work- men in the employ of the bankrupt, upon orders; of the bankrupt, received as a portion of their wages, and' for the amount of such orders remaining unpaid, filed a claim in their own name and asserted a laborers' lien upon the bankrupt's property under a Tennessee statute, and where there had been no assignment of the labor claims to the merchant pro tanto by consent or knowledge of the laborers themselves, but simply a supposition between the toankrupi and claimant that claimant should stand precisely in the shoes of the laborers, in the absence of evidence that the laborers intended to sell and agreed that the lien should be kept alive for the leneflt of the purchaser, payment and not an assignment will be presumed. Browder & Co. v. Hill (C. C. A., 6th Cir.), 14 Am. B. E. 619, 136 Fed. 821. See also Bell v. Arledge (C. C. A., 5th Cir.), 27 Am. B. E. 773, 192 Fed. 837. 152. Matter of Stultz Brothers (D. C, N. Y.), 34 Am. B. E. 783, 226 Fed. 989. Time checks. — ^Where bankrupts were log- gers and failed to pay their men and the owners of the logs paid oS the liens to pre- vent threatened foreclosure and sale, and the time checks representing each man's claim being turned over to the owners of the logs upon such payment, the transaction amounted to an assignment in fact of such claim and not to a payment and extinguish- ment, and such claims were entitled to the same right to priority of payment in the hands of such owners as in the hands of the workmen. Matter of Langley & Alderson (Eef., Wis.), 24 Am. B. E. 69. Where a bankrupt corporation issued daily time checks to its laborers which were neither dated nor negotiable and a mercantile firm gave merchandise for the checks under an agreement by the bankrupt to pay the same, less 10 per cent., and the checks were not assigned to the mercantile firm and the laborers had no agreement with it, such firm is not entitled to priority in payment of such checks under section 64-b (4) of the Bank- ruptcy Act, especially ^where the evidence is insuflScient to establish that the checks were for lalbor performed wifhin three months prior to bankruptcy. Matter of McUowin Lumber Co. (D. C, Ala.), 35 Am. B. E. 57, 223 Fed. 553, quoting text with approval. 153. Subrogation. — In re North Carolina Car Co. (D. C., N. Oar.), 11 Am. B. R. 488, 127 Fed. 178'; Matter of Langley & Aider- son (Eef., Wis.), 24 Am. B. E. 69. 154. Right to be subrogated to priority claims. — ^A surety on the bond of a munic- ipal contractor, one of the conditions of which was that the wages of workmen should be paid, who, after the bankruptcy obtains an assignment of claims for wages and pays them, is entitled to subrogation to the rights 1008 Debts Which Have Peioeity. [§ 64-b, (4). pay off such debt does not entitle him to subrogation to the liens of the cred- itors so paid off.^^" d. When services performed. — The labor must have been performed within three months of the filing of the petition, although a different and longer period be prescribed by a State statute. ^^® The claim of an infant for wages, earned more than three months before the commencement of bankruptcy pro- ceedings, is not entitled to priority.'-^'' The holding that, if performed there- after M^ithout actual notice of the bankruptcy, the right to priority exists, seems erroneous ;-^^^ though perhaps such a disbursement could be allowed as an expense of administration. If a labor claim is reduced to judgment within the four months' period, priority may still be asserted if the claimant waives his judgment, but all such rights are lost where the judgment was without the four months' period.^°® The claim must be for wages actually earned within the prescribed time, and a judgment for a breach of a contract of employment based upon an unlawful discharge of the employee is not entitled to priority. ^^^ The claim of a teamster should be limited to his personal services.^^^ The words "wages due" include wages owing at the date of bank- of its assignor and to their right of priority in payment. Matter of Dutcher (D. C, Wash.). 32 Am. B. R. 545, 213 Fed. 908. 155. Brower & Co. v. Hill (C. C. A., 6th Cir.), 14 Am. B. R. 619, 136 Fed. 821. 156. Priority confined to wages earned within three months of bankruptcy. — In re Rouse (C. C. A., 7th Cir.), 1 Am. B. R. 234, 91 Fed. 96, revg. s. c, 1 Am. B. R. 231, 91 Fed. 514, and holding that, where a company suspended business on August 31, 1898, owing wages to many workmen, and said company wasi involuntarily adjudged bankrupt on November 1, 1898, that the workmen, etc., were limited as to their priorities, to the wages earned within three months prior to the filing of the petition in bankruptcy, and they could not under sec- tion 67-b(5), which allows the same priori- ties in bankruptcy as are allowed by State laiws, be allowed, as prior claims, wages earned more than three months prior to the filing of the bankruptcy petition, not- withstanding there were two statutes of the State of their residence, one allowing prior- ity in the payment of wages for three months prior to the suspension of business by the employer, and another allowing priority in the payment of any sum earned as wages, no matter at what period. Where a State statute provides that in all distributions of assets under general assign- ments for the benefit of creditors, the wages or salaries actually owing to the employees of the assignor for services rendered within one year prior to the execution' of the as- signment shall be preferred before any other debts, and such an assignment is made within four months prior to the filing of the peti- tion in bankruptcy against the assignor, the priority of a wage claim against the bankrupt estate is confined to wages earned within three months before the commencement of the bankruptcy proceedings. Matter of Slomka (C. C. A., 2d Cir.), 9 Am. B. R. 635, 122 Fed. 630, revg. 9 Am. B. R. 124. 157. In re Huntenberg (D. C, N. Y.), 18 Am. B. R. 697, 153 Fed. 768. 158. In re Gerson (Ref., Pa.), 1 Am. B. R. 251. 159. In re Anson (D. C, Cal.), 4 Am: B. R. 231, 101 Fed. 698; Matter of Pedlow & 'Do. (Ref., N. Y.), 32 Am. B. R. 808. 160. Damages for breach of contract. — Matter of Lewis County (Ref., R. I.), 12 Am. B. R. 279, holding that, where a sales- man employed under a yearly contract is wrongfully discharged after seven weeks of work, sues at once and recovers judgment for breach of such contract, the amount re- covered is not wages; hence upon the bank- ruptcy of the employer within a year, the salesman is not entitled to payment in full for the proportionate part of his judgment, which three months bears to the unexpired period of his term of siervice. Where a contract of employment at a fixed salary for a definite time expressly provides that in case the employer, a corporation, should be dissolved before the expiration of the contract, it might at the option of the corporation be declared null and void, and before the expiration of the contract the employer makes a written admission of its inability to pay its debts and its willingness to be adjudged bankrupt upon that ground, the employee is not entitled to prove a claim for damages for an alleged breach of the contract of employment. In re Sweetser (C. C. A., 2d Cir.), 15 Am. B. R. 650, 142 Fed. 131. 161. If the claim is for services of team- ster with wagon and team, he may have priority only for his personal services. Mat- ter of Winton Lumber & Mfg. Co. ( Ref., Ky. ) , 17 Am. B. R. 117. In Pennsylvania, the earnings of horses and teams, not being preferr^ under the § 64-b, (4).j Peesons Entitled to Peiokity. 1009 ruptcy, even though, by contract between the wage-earner and the bankrupt, payment is to be deferred to a date later than the date of bankruptcy."^ Payments on account of wages due, made by a bankrupt to certain of his employees within three months of the filing of a petition in bankruptcy, will not be held to reduce the amount of wages earned by them during that period, where the bankrupt was indebted to such employees for services rendered prior thereto to a greater extent than the payments made, and in making such pay- ments gave no direction for their application.^^ e. Persons entitled to priority.i^* — (1) Woekmen, cleeks oe seevants. — The question as to who is entitled to priority for wages is not, it seems, con- trolled by the statutory definition of " wage-earner." ^*^ The words are used in their popular sense, and should be construed to mean just what they are popularly understood to mean;-^^® that is, only those who work, labor or serve in a more or less subordinate capacity. ■^^'^ Dictionaries should be consulted, as well as cases. The phrase " operative, clerk, or house-servant," in the law of 1867, is thought to be practically equivalent. Oases construing these words will be found in the foot-note.^®® Priority, being given to persons performing; services of a certain character, depends upon the character of the services rather than upon the particular mode of employment.-^^* A bookkeeper, employed by a bankrupt at a regular salary payable monthly, is a clerk within the meaning of this subdivision."" Under the present law, the following have been held not entitled to priority under this subsection: a contractor,"^ a State law, are not preferred under section 64Jb(5) of the bankruptcy act, and it being impossible to individuate claimant's earnings and the earningsi of his team, no portion of the claim will be allowed. S^pruks v. Lacka- wanna Dairy Co. (B. C, Pa.), 26 Am. B. K. 554, 189 Fed. 287. 1G2. Wages due; deferred payment. — In re Gladding (D. C, R. I.), 9 Am. B. E. 700, 120 Fed. 709, holding that, where a clerk of the bankrupt took two weeks' vacation in accordance with a notice posted in the store and which provided that " it is understood and agreed that employees taking vacations agree that if for any reason employment is severed voluntarily or otherwise before Janu- ary 1, 1903, the vacation pay will be for- feited," and the employer becomes a bankrupt in October, 1902, such provision must not be converted into an agreement which would deprive the clerk of his ordinary legal status as a creditor. 163. In re Van Wert Machine Co. (D. C, Mass. ) , 26 Am. B. E. 597, 186 Fed. 607. 164. See also Am. B. E. Dig. §S 872, 873. 165. Wages, definition. — ^In re Scanlon (D. C, Ky.), 3 Am. B. R. 202, 97 Fed. 26; In re Gurewitz (C. C. A., 2d Cir.), 10 Am. B. E. 350. 121 Fed. 982; Blessing v. Blanoh- ard (C. C. A., 9th Cir.), 35 Am. B. E. 135, 213 Fed. 35. The term "wages," as used in this section, has received a very liberal construction. It includes commissions) or other methods of payment. In re Eoebuck Weather Strip & Wire Screen Co. (D. C, N. Y.), 24 Am. B. E. 532, 180 Fed. 497. The term " wage-earner," as defined in § 1 (27) of the act does not appear in this sub- 64 section, and the definition does not in any- way tend to assist in construing the language here used. American Finance & Securities Co. (Ref., N. J.), 38 Am. B. E. 479. 166. In re Eose (Eef., Ohio), 1 Am. B. E. 68. 167. Matter of Gay and Sturgis (D-. C, Mass.), 36 Am. B. E. 350. The word "servant," as used in section 64b (4) of the bankruptcy act, giving priority to wages due, should be held to mean a re- stricted class of subordinate helpers who work for wages, but who are not salesmen, workmen, or clerks. It does not include the manager of a business, although he may also have rendered services as a, salesman. Bless- ing V. Blanchard (C. C. A., 9th Cir.), 35 Am. B. E. 135, 213 Fed. 36. 168. In re Pevear, Fed. Cas. 11,053; In re Brie EoUing Mill Co., 1 Fed. 585; In rf Waites & Co., 39 Fed. 264. 169. In re New England Thread Co. ( D. C. E. I.), 18 Am. B. E. 840, 154 Fed. 742 1 Matter of iSnow Wire Works (Eef., N. Y.). 34 Am. B. E. 152. 170. Bookkeeper. — In re Baumblatt (D. C, Pa.), 19 Am. B. E. 500, 153 Fed. 485; Bell V. Arledge (C. C. A., 5th Cir.), 27 Am. B. E. 773, 192 Fed. 837. Under the act of 1867, Judge Lowell de- cided that the word included " a person em- ployed for temporary service in adjusting the books and accounts of a bankrupt." Ex parte Eoekett, Fed. Cas.. 11,977. 171. Contractor distinguishea from work- man. — ^Where one rendered services to another under an express contract, and the relation established between the parties wa» 101.0 Debts "Which Have Pbioeitt. [§ 64-b, (4). general buyer from jobbers/''^ a manager of a branch broker's office/'^ an actress,^''* a teamster/''" a blacksmith shoeing horses and repairing tools in his own sliop/'"' a firm, selling the product of a corporation on a commission/" a person engaged merely in an incidental agency/'* a vendor of a business under an agreement by which he is to receive a certain yearly salary as. consideration for the transfer and his services for three years. •^''**^ and a corporation man- 3ggj,iT9 Q,j, officer.^*" But if an oflicer of a corporation performs services which are not connected with his office, he is entitled to priority of payment for such services.^*^ It has been held that the superintendent of a factory, employed one of contract involviug tbe employnieut of capital of the alleged laborer, aud tlie use of his machinery, factory, and the services of his own employees, it was held that the party furuishiag such capital, factory, and services of his employees was not a workman, clerk, or servant, within the meaning of subdivision 4, even thougli he also in connection with the performance of his contract, rendered some manual service. In re Eose (Eef., Ohio), 1 Am. B. R. 68. See also Matter of Moore (D. C, Ohio), 45 Am. B. E. 388, — Fed. — . 172. A general buyer from jobbers, receiving his pay wholly from the persons for whom he purchases, is not a "workman, clerk or ser- vant" within the meaning of subdivision 4. Matter of Smith (Eef., E. I.), 11 Am. B. B. 646. 173. A manager of a branch broker's of- fice is neither a workman, servant, or clerk. •In re Brown (D. C, N. Y.), 22 Am. B. K. 496, 171 Fed. 281. Nior is a manager of a branch store who incidentally sella goods and performs clerical work. In re Green- berger (D. C, N. Y.), 30 Am. B. E. 117, 203 Fed. 583; Blessing v. Blanchard (C C. A., 9th Cir.), 35 Am. B. R. 136, 213 ,Fed. 35. 174. An actress, under contract to receive $5,000 for a four weeks' engagement, is not a " workman " or " servant " within the meaning of this section. Matter of All Star Feature Corporation (D. C, N. Y.), 36 Am. B. E. 655, 231 Fed. 251. 175. A teamster is neither a work-man, clerk, or servant, within the meaning of sub- division 4 of the act. Spruks v. Lackawanna Dairy Co. (D. C, Pa.), 26 Am. B. E. 554, 189 Fed 287; Spruks v. Lackawanna Dairy Co. (D. C, Pa.), 2« Am.. B. E. 554, 189 Fed. 287. One employed to deliver milk at bankrupt's premises with his team, at a fixed price per month, is neither a workman, clerk, or serv- ant within the meaning of subdivision 4 so as to give his claim priorty. Spruks v. Lacka- wanna Dairy Co. (D. C, Pa.), 26 Am. B. E. 554, 189 Fed. 287. 176. The claim of a. blacksmith, proprietor of a shop, for the services of himself and men in shoeing horses belonging to a bank- rupt corporation and in doing other work, is not entitled to priority. Weaver v. Hugill Shoe & Supply Co. (Eef., Ohio), 16 Am. B. E. 516. 177. Matter of Crawford Woolen Co. (D. C, W. Va.), 34 Am. B. E. 223, 218 Fed. 951. 178. An incidental agency, with no obligation to serve, does not create a claim entitled to priority under subdivisiop 4. In r" Mayer (D. C, Wis.), 4 Am. B. E. 110, 101 Fpd. 227. 178a. Matter of Quackenbnsh, ,Tr. (D. C, N. J.), 43 Am. B. B. 699, 259 Fed. 599. 179. General manager. — A general manager of a bankrupt corporation, having authority to hire and discharge men, and to superintend tLo salesmen who himself worked as a salesman, is not entitled to priority under section 64-b(4) nor under a statute of California, giving priority to "miners, mechanics, salesmen, clerks, servants, laborers or other persons for work done or service rendered." Blessing v. Blanch- ard (C. C. A., 9th Cir,), 35 Am. B. E. 135, £13 Fed. 35. A general manager and president of a corporation, who, with his wlfe^ owned all but one share of the stock, and who managed the corporation, hired and discharged all employees, and attended to all financial ar- rangements, and whose salary was fixed by the board of directors, consisting of himself, his wife and his attorney, is not a servant of the corporation entitled to priority under this section. Keyes v. Davis {C. C. A., 9th Cir. ) , 36 Am: B. E. 884, 231 Fed. 686. A claimant, who entered the employ of the bankrupt as an accountant, but after a short time actually acted as manager, is not a workman, clerk or servant. Matter of Snow Wire Works (Eef., N. Y.), 34 Am. B. E. 152. A shop foreman, who was also the treas- urer and a director of his employer, and spent an appreciable part of his time in the latter position, is not entitled to priority therefor. Matter of Boston French Eange Co. (D. C, Mass.), 37 Am. B. E. 508, 235 Fed. 916. 180. In re Grubbs-Wiley Co. (D. C, Mo.), 2 Am. B. E. 442, 96 Fed. 183; In re Carolina Cooperage Co. (D. C, N. Car.), 3 Am. B. E. 154, 96 Fed. 950; Matter of Metropolitan Jewelry Co. (D. €., N. Y.), 31 Am. B. E. 752, 216 Fed. 385; Arnold v. Knapp _( W. Va., Sup. Ct.), 34 Am. B. E. 432, 84 S. E. 895; Matter of Eagle Ice. etc., Co. (D. C, Pa.), 39 Am. B. E. 184, 241 Fed. 393. Director. — A shop foreman, who was also the treasurer and a director of his employer, and who spent an appreciable part of his time in the latter position, is not entitled to prior- ity therefor. Matter of Boston French Eange Co. (D. C, Mass.), 37 Am. B. E. 508, 235 Fed. 916. 181. In re Swain Co. (D. C, Cal.), 38 Am. B. E. 66, 194 Fed. 749, in which it was held that the claim made by one who acted as director and secretary of the bankrupt res- taurant corporation for wages for services rendered as steward of bankrupt's restaurant, and in no other capacity, is entitled to prior- ity of payment; Matter of Capital Paint Co, (D, C Cal.), 38 Am. B. E. 1S8; In re Crown Point Brush Co, (D, C, N, Y.), 29 Am, B, E. 638, 2(X) Fed, 882; Blessing v. 64-b, (4). J Pebsons Entitled to Prioeity. 1011 to have charge of the factory and superintend the making of paints, is not a workman or servant, although he performs more or less manual labor.^^^ On the other hand, it has been held that the superintendent of an automobile shop, V7ho does the same kind of work as the men under him and is subject to the control and direction of the general manager, is a workman, even though he has authority to hire and discharge the men in his department. ^^^ The earnings of a professional man, employed primarily because of his ability to advise helpfully, do not constitute "wages" and the man himself is not a "workman, clerk or servant." ^^ But a clerk selling goods in a store^^^ is entitled to priority, and so is a laborer " working by the piece." ^^ So also as to musicians employed by the bankrupt to play in a roof garden ;^*^ and it has been held that a manager of a store may apply a payment of wages Inade to him within the three months' period upon wages due before such period, and that he is entitled to priority in the payment of the balance of his elaim.^^ Blanchard (C. C. A., 9th Cir.), 35 Am. B. R. 135, 213 Fed. 35; Keyes v. Davie (C. C. A., 9th Cir.), 36 Am. B. B. »84, 231 Fed. 688; Matter of American Finance & Secur- ities Co. (Ref., N. J.), 38 Am. B. R. 479; Matter of Capital Paint Co. (D. C., Gal.), 38 Am. B. R. 188. 182. Matter of Continental Paint Co. (D. C, N. Y.), 34 Am. B. R. 282, 220 Fed. 189. 183. Blessing V. Blanchard (C. C. A., 9th Cir.), 35 Am. B. R. 135, 213 Fed. 35. 184. Mining engineer. — ^A claim by a min- ing engineer, employed hy the hankrupt at a, salary of $4,000 per annum, payable monthly, to advise and assist the superin- tendent, is not entitled to priority. Matter of Gay and Sturgis (D. C, Mass.), 36 Am. B. R. 350. 185. A person selling goods in a store is a clerk within the meaning of subdivision 4 and is entitled to priority, but where a per- son so entitled to priority allows his debtor to retain a portion of his wages under an arrangement to create a fund with which to pay the expenses of a college education, his lien as a wage-earner does not extend to the balance of his wages thus retained. In re Flick (D. C, Ohio), 5 Am. B. R. 465, 105 Fed. 503. See also In re King Co. (D. C, Mass.), 7 Am. B. R. 619, 113 Fed. 120. 186. " Piece worker." — In the case of In re Guarewitz (C. C. A., 2d Cir.), 10 Am. B. R. 350, 121 Fed. 982, the court holding that the claim of a " piece worker " is entitled to priority, said : " It surely could not have been the purpose of Congress to make the method of computation a criterion of priority. . . . In order to secure priority under this subdivision [subd. 4], the creditor must establish the following facts: First, that he was a workman, clerk, or servant of the bankrupt. Second, that he earned wages within three months prior to the commence- ment of the proceedings. There is nothing ambiguous ^hout the use of the word ' wages ' in this connection. It means the agreed com- pensation for services rendered by the work- n^en, clerks or servants of the bankrupt, those who hf.ve served him in a subordinate or menial capacity and who are supposed to be dependent upon their earnings for their pres- ent suDport. Whether their employer has agreed to pay them' by the hour, the day, the week, the month, or by the ' job ' or piece, is wholly immaterial." In Pennsylvania a workman has been held to be one who works for others at manual labor, skilled or unskilled, and the reward of his labor is wages, and it is none the less such because it is paid for by the piece. But it is not wages where payment is by the job nor where it is proiitsi on the labor of others, even though the person himself takes part in the work. In re Deutschle & Co. (]>. C, Pa.), 25 Am. B. R. 343, 182 Fed. 430. In this case the establishment of the bankrupts was a sash, door and blind factory, and the claimants, under contract with the bankrupts, had charge of two of the factory departments. The men under them were their own, hired and discharged by them, and claimants were paid for the work which their men turned out at so mucli a piece, and were answerable for it. This worlt was done at the factory of the bankrupts with the aid of materials and machinery which the bankrupts furnished, the claim- ants furnishing the required labor. The hours of the men were regulated by the shop whistle and, for the sake of convenience, their wages were taken care of by the banlcrupts for the claimants on pay day. It was held that claimants were not " workmen," nor were their earnings "wages" within the meaning of section 64-(b (4) of the bank- ruptcy act. 187. Musicians hired at regular wages by a bankrupt to play on his roof garden are " servants " within the meaning of subdivi- sion 4. In re Calwell (D. C, Ark.), 21 Am. B. R. 236, 164 Fed. 515. 188. In re Andrews (Ref., N. Car.) , 19 Am: B. R. 441; Matter of Mclntyre Bros. (Ref., Miss.), 21 Am. B. R. 58«. But in the absence of specific application to other debts, such payments are to be applied to wages earned during the three months' period. In re Flick (D. C, Ohio), 5 Am. B. R. 465, 105 Fed. 503. 1012 Debts Which Have Pkioeity. [§ 64-b, (4). The priority does not exist in favor of an officer of a corporation, who occupies the position of a manager or assistant manager of the corporation's business, although incidentally he keeps the books and performs other services ordinarily performed by a clerk or laborer. ^^^ Every laborer who actually labors under the authority of the court for the preservation or enhancement of the fund or property in custodia legis is entitled to an equitable lien equivalent in effect to that of a bona fide purchaser without notice.^*" (2) Traveling oe city salesman. — The amendment of 1906 has included within the preference the wages earned by a traveling or city salesman, thus nullifying contrary authorities under the former law.^®^ This amendment is not retroactive, and a claim for such wages filed in a bankruptcy proceeding instituted before said amendment is not entitled to priority.^^^ A traveling salesman, as commonly understood, may be defined as a man who travels about the country soliciting orders for goods, which orders are sent to his employer for approval. This is the primary service for which he is employed, and it measures the full extent of his responsibility. ^^^ The fact that a claimant, in addition to procuring orders for the bankrupt's goods, supervised their being placed in position, does not take him from the classification of a salesman, his principal business being to procure orders. ^^* Likewise, the fact that a 189. In re Crown Point Brush Co. (D. C, N. Y.), 29 Am. B. R. 638, 200 Fed. 882. 190. Labor under authority of court. — "Thus, to express it otherwise, a laborer, who toy order of the court is employed on property in the hands of the court, as to the existent values in hand, will be paid by the court for the value of his services rendered to that property to which the liens of the creditors attach, and for the benefit of which his services were rendered." In re Erie Lum- ber Co. (D. a, Ga.), 17 Am. B. B. 680, 700, 150 Fed. 817. 191. In re Scanlon (D. C, Ky.), 3 Am. B. R. 202, 97 Fed. 26; In re Greenewald (D. C, Pa. ) , 3 Am. B. R. 696, 90 Fed. 705. 192. In re Photo Engraving Co. (D. C, N. Y.), 19 Am. B. E. 94, 155 Fed. 684. 193. Traveling salesman, definition. — In re New England Thread Co. (C. C. A., 1st Cir.), 20 Am. B. R. 47, 158 Fed. 788. In this case the court said : " He is not employed or authorized to fix prices. He cannot pass upon the credit or standing of customers. He does not collect accounts. He is not respon- sible for the quality, condition, or delivery of the goods. He makes no persona, con- tracts, and he has no other interest in the sales than his compensation for those which are approved his employer. But, hile the field of service and responsibility of traveling salesmen is limited, the agreements which they make with their employers vary greatly in such details as the form of compensation, the extent of territory, and in many other particulars. A traveling salesman may be paid a fixed sum per day, week or month, or a yearly salary, or a commission on the amount of goods sold, or both a fixed sum in the form of wages or salary, and, in nddition thereto, a commission on the amount of goods sold when the sales exceed a certain amount. The territory assigned to him may be con'fined to a single city or State, or it may cover many cities or States. Commonly, the employer pays the salesman's expenses, but sometimes, especially if he works for a commission, he pays his own expenses. Sometimes the employer has a list of cus- tomers, and the salesman receives a commis- sion upon all orders sent in by those custom- ers. Sometimes he is alloted a certain ter- ritory, and he receives a commission upon all sales which are sent in from that terri- tory. In some cases the employer may direct the routes he is to travel, and in other oases the salesman chooses his own routes. Some- times the salesman sends the orders directly to his employer, and sometimes the customers themselves send in the orders to the em- ployer. We do not think any of these details takes a man out of the category of traveling salesman." See also In re Fink (D. C, Pa.), 20 Am. B. R. 897, 163 Fed. 135. 194. In re Roebuck Weather Strip & Wire Screen Co. (D. C, N. Y.), 24 Am. B. R. 532, 180 Fed. 497. In this case a claim was filed against the estate of a bankrupt under a. contract between the bankrupt and the claim- ant by which_ it was agreed that the claimant should solicit orders for weather strips, ■ superintend the placing of the same by work- men whom the claimant should select, subject to the approval of the bankrupt, and that bankrupt should pay the wages of the work- men, furnish the material, and out of the price should retain the cost of labor and material and an additional amount of 15 per cent, of the price, turning the balance over to the claimant as his compensation. Claimant claimed priority for comnensatinn due pursuant to said contract under sub- division 4. It was held that the claimant was a wage-earner and not a principal with § 64-b, (5).] Peioeity Under State Laws. 1013 traTeling salesman had charge of a local office, does not deprive him of priority, where his office management was merely incidental to his work as salesman.^** A corporation or partnership engaged in selling merchandise for manufacturers, is not a traveling or city salesman within the meaning of this seetion.^'^ VI. DEBTS ENTITLED TO PRIORITY UNDER STATE LAWS.WT a. In general. — Subdivision 5 requires the payment of " debts owing to any person who by the laws of the Stales or the United States is entitled to priority." Here the practitioner should again bear in mind the rule as to liens, previously stated.-''^ b. Liens under State laws and bankrupt act. — Where a priority is sought under a State statute it must be determined under the laws of that State.-^^^ If the State law gives a lien and it continues after bankruptcy, the priority exists in effect though not in name; the property becomes charged with the lien, and § 64, strictly speaking, does not apply.^'^* In this connection, too, § 67 on liens avoided by the adjudication should be consulted. It must be remembered, too, that this subdivision has no application where the State statute gives priority to a class already given priority by the bankruptcy law; the bankrupt act not only controls the State law in case of absolute conflict, but by its express regulation of these priorities excludes the State law alto- gether.^"" Subject to these exceptions, if the State law gives the priority, the same must be recognized in the bankruptcy proceedings.^"^ A state statute which gives a lien to employees and materialmen of manufacturing establishinents is not unconstitutional as discriminating against those furnish- ing money or machinery to the same establishments, but is a reasonable classi- fication.^"^ The bankruptcy act expressly recognizes the existence of State the bankrupt in its business and that the Congress, even If a lien exists under the former claim shoull be aHowed priority to the extent f.^* beg*r I^^^e^Con^s-urefs'^^^ffee "cT^^'Z of $300. Pa.), 18 Am. B. K. 500, 151 Fed. 933. Salesman for another concern selling on goi. Compare In re Fall City, etc., Co. (D. C, commissions.-Where. a traveling man for Ky).J^^Am_. B. E. f %^f J^ef ; /^/^ I^" - another concern, having an agreement with ^g,^.^ ^^g ^^^ gog. j^^ ^^ ^.^.^^ ^j, ^^ g-y j^ ^ ^^ a bankrupt company whereby he was to re- b. B. 545, 116 Fed. 110; In re Potter (D. C, Ky.), eeive 15 per cent, on monuments sold by him 16 Am. B. E. 26, 143 Fed. tul; Moore v. Greene to he paid him when the monument was set ^^^^i,tii.t'lt%%s':ilTr- Eo.%'%.^t^t up and paid for, makes an agreement for the gg j^^ g. B. 470, 231 Fed. 535 ; Matter of sale of a monument about ten months before Woulfe & Co. (C. C. A., 5th Clr.), 39 Am. B. E. the bankruptcy proceeding but the monument 91, 239 Fed. 128. If the state statute gives no is not deHvered and paid for until the month jien^to^a__ --fy^^col^e^te^d T'lflm°,' t^^rounlV prior to the bankruptcy proceedings, he is a jg ^g^ entitled to priority of payment out of traveling salesman. In re National Marble his bankrupt estate. In re Waller (D. C, Md.), & Granite Co. (D. C, Ga.), 31 Am. B. R. 80, 15 Am. B. E. 753, 142 Fed 883; In re Iroquois ,„R !?:■, iai I . /. Machine Co. (D. C, E. I.), 22 Am. B. R. 183, ,iUt> JJea. isa. ,,„„■. o, a„ n 166 Fed. 629, holding tbat where an attachment 195. Matter of Gay (D. C, Mass.), 33 Am. B. ^^^^ ^ debtor's property Is dissolved by his R.' 898, 188 Fed. 39_. adjudication as a bankrupt, the attaching cred- 196. Matter of HerMnstein Bros. Eef., N Y.), ^^'^, ^^^^^^ j^,. po^jg ^f tj,e attachment is a f 4"?- .^- ?• *'??'T?^f<^ro?9 ^»Ti°l<. * ' debt entitled to priority. As to a lien of N. Y.) 40 Am. B. E. 431, 252 Fed 183. garnishment, see Matter of Culpepper (Eef., 197. See also Am. B. E. Dig. §§ 874-881. ^^^. 3^ j^^' g jj ^^2 198. See discussion under this section, ante, priority among liens.— Where a statute gives subtitle "Pnoities versus l.iens. „ .„ „ „ to materialmen and mechanics a Uen on moneys 199. In re Byrne (D. C, Iowa), 3 Am. B B. ^ ^^ ^ principal contractor on a public build- 268, 97 Fed. 762. Text cited in In je United the fact that some of the lienors com- States Lumber Co. (D. C, Wash.), 30 Am. a. E. ^g^ped actions to enforce said liens prior to 682, 206 Fed. 236. ^, „. ., „ „„„, _„ ,r, others does not give them a priority of pay- 199a. Matter of North Star Ice & Coal Co. (D. ^^^^ ^^^ ^^ the principal fund. Lowe & Co. C, Tenn.), 42 Am. »• «■ 76, 252 Fed. 301. ^ ^^^^^ S„ ^t.), 39 Am. B. R. 774, 164, aoo. In re Lewis (D. C ^ass ), 4 Am. B. K. ^^^^ 61, 99 Fed 935 ; Matter of Slomka (C C A 2d ^ ^ ^^^^^ p^ ^ Lueders & Co. (C. Clr.), 9 Am. B. E. 63o, 122 Fed. 630, In re ^^^ ^^^ 3^ ^^ 3 ^ g^ 221 Fed. 829. Crown Point Brush Co. (DC., N. Y.), 29 Am. Kentucky Statutes, I 2,487. B. E. 638, 200 Fed. 882, quoting text. A state statute cannot override the act of 1014 Debts Which Have Feioeity. [§ 64-b, (5). statutes, and makes them the basis for allowing priority of payment to certain classes of claims. ^"^ The priority should be clearly evidenced by some statutory provision, or by a judicial rule so definitely established as to have the force of a statute.^"* It seems that a creditor will be allowed the same priority under the bankruptcy act which he would have had, had not the latter act superseded the State laws governing the distribution of estates of insolvent 203. In re Crow (D. C, Ky.), 7 Am. B. K. 545, 116 Fed. 110, 112, approved in In re Bennett (C. C. A., 6th Cir.), 18 Am'. B. R. 320, 153 Fed. 673. 204. In re Potter (D. C, Ky.), 16 Am. B. E. 226, 143 Fed. 407. See also Vldal, Peti- tioner ( C. C. A., Ist Cir. ) , 36 Am. B. E. 783 ; Gandia & Sluibbe v. Cadierno (C. C. A., 1st Cir.), 36 Am. B. R. 789. Money due from a guardian to his ward, on a settlement of his accounts in a probate court of Kentucky, is entitled to priority from the estate of the guardian in bank- ruptcy, the statutes of Kentucky providing that in a distribution of insolvent estates, whether on a voluntary or involuntary as- signment, or the death of the insolvent, debts due as a guardian shall be paid in full before any payment shall he made to gen- eral creditors. (Ky. St., 1903, § 74.) In re Grow (D. C, Ky.), 7 Am. B. R. 545, 116 Fed. 110. But see under the Michigan stat- ute, In re Jones (D. C, Mich.), 18 Am. B. R. 206, 151 Fed. 108. Costs incurred in an action against the bankrupt prior to bankruptcy, which would constitute a preferred claim under the in- solvency laws of Rhode Island, are entitled to priority against the estate in bank- ruptcy. In re Daniels (D. C, R. I.), 6 Am: B. R. 699, 110 Fed. 745. A claim for materials supplied to a cor- poration, being entitled to priority under the laws of Kentucky, has been held to be entitled to priority under the bankruptcy act, although a technical lien had not ripened, at the date of the corporation's adjudication in bankruptcy. In re Bennett, Trustee, etc. (C. C. A., 6th Cir.), 18 Am. B. R. 320, 153 Fed. 673, affg. 18 Am. B. E. 847. Such lien does not exist for manufactured goods sold to a manufacturer and jobber, engaged in manufacturing the same goods, and also in selling such goods manufactured by others. In re Starks-Ullman Saddlery Co. (C. C. A., 6th Cir.), 22 Am. B. R. 506, 171 Fed. 834. See also In re Floyd & Behr Co. (D. C, Ky.), 29 Am. B. R. 149, 200 Fed. 1,016. Such Hen Is enperlor to the Hen of a pledge of running accounts receivable. Fels v. Lueders & Co. (C. C. A., 6th Cir.), 40 Am. B. R. 851, 246 Fed. 436. Priority of unrecorded mortgragre. — In Ken- tucky under a statute providing that no mort- gage shall be valid as against creditors until acknowledged or proved according to law and lodged for record, a mortgage acknowledged in 1905, but not recorded until within four months of the mortgagor's adjudication in 1906, Is not a valid lien as against creditors whose claims vrere created while the mortgage was with- held from record, and the mortgagee Is not entitled to priority of payment over such creditors, but in the distribution of the as- sets should share pro rata with the gen- eral creditors. Matter of Doran ( D. C, Ky. ) , 17 Am. B. E. 79fl, 148 Fed. 327. See also In re Clark Coal & Coke Co. (D. C, Pa.), 23 Am. B. R. 273, 173 Fed. 658. The re- cording act of Kentucky is ineflFective unless an attachment has been sued out by a cred- itor claiming its benefits; hence an unre- corded mortgage on real estate has priority over the general creditors of a bankrupt where no creditor has attached the land prior to bankruptcy. Matter of Brown (D. C, Ky.), 35 Am. B. R. 826, 228 Fed. 533. Community property. — In New Mexico, a husband has only a community interest in property acquired by himself or wife dur- ing the marriage, and upon the bankruptcy of the husband, community creditors are entitled to priority of payment as to com- munity property. In re Chavez (C. C. A., 8th Cir.), 17 Am. B. .R. 641, 149 Fed. 73. Priority of debts owing hy foreign corpo- ration to residents of State out of property in the State, sustained and applied. See In re Standard Oak Veneer Co. (D. C, Tenn.), 22 Am. B. R. 883, 173 Fed. 103. Priority of mortgage executed prior to four months' period. — Where a real estate mortgage was executed by a bankrupt more than four months prior to the filing of a petition against him for adjudication, it constitutes a valid mortgage against all creditors except such as may have acquired a lien prior to its proper record and is en- titled to priority under subdivision 5, unless void under the State law as made with in- tent to hinder, delay and defraud creditors. Bean v. Orr (C. C. A. 5th Cir.), 25 Am. B. R. 400, 182 Fed. 599, revg. In re Tysor- Cheatham Mercantile Co. (D. C, Ga.), 24 Am. B. R. 434, 178 Fed. 733; Rouse v. Ot- tenwess & Huxtell (C. C. A., 6th Cir.), 31 Am. B. R. 115, 208 'Fed. 881. Claim by wife for wages. — Under the statutes and law of Alabama, a wife on the bankruptcy of her husband is entitled to a prior claim for wages due under a contract for services in her husband's store. Matter of Davidson (D. C, Ala.), 37 Am. B. R. 480, 233 Fed. 462. Wages or salary under Washington stat- ute. — The secretary, general manager, and superintendent of a lumber company, whose duties include employing workers, directing sales, overseeing the work, and repairing and adjusting machinery, is not a laborer, within the meaning of Remington & Ballin- ger's Code of Washington, §§ 1149, 1150, § 64-b, (5).j Peioeity Undee State Laws. 1015 debtors.^*® Thus, a landlord's claim for rent in arrears, being entitled to priority under the State law, is within this subsection.^"^ And a mechanic's and 1153, and his claim for salary is not entitled to priority. (See Am. B. R. Digest, § 881.) Wintermote v. MacLafferty (C. C. A., 9th Cir. ) , 37 Am. B. R. 425, 233 Fed. 95. Priority of labor claims under Ohio code. — Claims for services rendered the bankrupt allowed as preferred claims under section 6339 of the Ohio General Code ■ and section 64:-b(5) of the bankruptcy act. Emerson V. Castor (C. C. A., eth Cir.), 37 Am. B. R. 719. Fraudulent moitgage. — A mortgage, with- held from record until shortly before the date of bankruptcy of the mortgagor for the purpose of bolstering the credit of the mort- gagor, and defrauding his creditors, should not be allowed priority. Fourth Nat'l Bank V. Willingham (C. C. A., 5th Cir.), 32 Am. B. R. 159, 213 Fed. 219. Caption of mortgage wrong. — ^A mortgage executed by a bankrupt in good faith, at- tested in compliance with the law of Georgia, and, through a mistake, bearing a caption for the wrong county, but recorded in the proper county, is valid and entitles the mortgagee to priority of payment. Matter of Williams (D. C, Ga.), 35 Am. B. E. 459 224 Fed. 984. Customers of bankrupt stockbrokers who have traced their stock specifically and hold the same free and clear, are in a preferred class, and if the equity of a loan to the (bankrupt for wliich the stock had been pledged is insufficient, the deficiency must be borne by the other customers provided they held their stocks on a margin. Matter of Pierson, Jr. & Co. (D. C, N. Y.) , 35 Am. B. E. 213, 225 Fed. 889. 205. In re Jones (D. C, Mich.), 18 Am. B. R. 206, 151 Fed. 108; In re Chandron & Peyton (D. C, Md.), 24 Am. B. R. 811, 815, 180 Fed. 841, citing Collier on Bankruptcy (7th Ed._), p. 742. 206.. Lien for rent. — ^Matter of Pittsburg Drug Co. (D. C, Pa.), 20 Am. B. E. 227, 164 Fed. 482; In re Sapinsky & Sons (D. C, Ky.), 30 Am. B. R. 416, 206 Fed. 523; Matter of Mt. Winans Lumber Co. (D. C, Md.), 36 Am. B. R. 263, 228 Fed. 831. Upon the adjudication of a tenant in a jurisdiction where the landlord has by stat- ute a preferred lien upon the tenant's chat- tels on the leased premises, the landlord's claim for the rent due at the adjudication is entitled to priority of payment from the proceeds of a sale of said chattels. In re Bishop (D. C, S. Car.), 18 Am. B. R. 635, 153 Fed. 304. A claim for future accruing rent will not be given effect under sections 67-d and 64-b of the bankruptcy act, by virtue of article 3251 of the Revised Statutes of Texas which provides that the lessor should have a lien for rent due or to become due on the prop- erty of the tenant in the building for the period of the current contract year, " it being intended by the term ' current con- tract year ' to embrace a period of twelve months, reckoning from the beginning of the lease or rental contract," the " cur- rent contract year " mentioned in the stat- ute having expired on the date the petition was filed. Matter of Sterne & Levi (Ref., Tex.), 26 Am. B. H. 535. Where a landlord on refusing to accept the surrender of a. lease has a provable claim against tlie estate for the un- expired term, be comes in as a general creditor and is not entitled to priority for subsequent rent. Eosenblum v. Uber (C. C. A., 3d Cir.), 43 Am. B. E. 480, 250 Fed. 584. Under the Iowa statute (Code, § 2992), enact- ing that a landlord shall have a lien for his rent upon any personal property of the ten- ant used or kept on the leased premises, for one year after a year's rent, or the rent for a shorter period, falls due the lien of a landlord, as between him and a tenant, is given priority in all cases. In re Hersey (D. C, la.), 22 Am. B. E. 860, 171 Fed. 998. Under the Pennsylvania statute, a landlord it entitled to priority of payment not exceeding the rent for one year, and this preference will be recognized by a court of bankruptcy. In re West Side Paper Co. (D. C, Pa.), 20 Am. B. E. 289, 293, 150 Ted. 241; Ludlow v. Pi:gh (C. C. A., 3d Cir.), 32 Am. B. E. 43j, 213 Fed. 450, affg. Matter of ICeith-Gara Co. (D. C, Pa.), 29 Am. B. E. 466, 203 Fed. 585; Longstreth v. Pennock, 87 U. S. 575, 22 L. Ed. 451; Eosenblum v. Uber (C. C. A., 3d Cir.), 43 Am. B. E. 480, 250 Fed. 5f'4; Matter of Delaney (D. C, Pa.), 41 Am. B. E. 601, 251 Fed. 425. Contra. Matter of Stem (D. C, Pa.), 41 .■i.m. B. E. 712. But where a landlord makes no objection to a sale in a bulk of bankrupt tenant's stock and lease, and accepts the purchaser as a tenant, the landlord's claim Tor priority of payment, from the proceeds of the sale, for a balance of rent which had accrued before the'flling of the petition in bankruptcy Is properly disallowed. Vollmer v. McFadgen (C. C. A., 3d Cir.), 20 Am. B. E. 540, 161 Fed. 914, affg. 19 Am. B. E. 481; Matter of Quality Shoe Shop (D. C, Pa.), 34 Am. B. E. 196, 212 Fed. 321. See also Matter of West (D. C, Pa.), 42 Am. B. E. 341, 253 Fed. 963. The landlord's lien is prior to the claim of execution creditors to the proceeds of the sal« of goods of the tenant, although they were un- der levy by the sheriff at the time of the filing of the petition in bankruptcy. Matter of Ger- row (D. C, Pa.), 37 Am. B. E. 14, 233 Fed. 841. Georgia code. — The general lien of a landlord under the Georgia Code is not created by the levy of a distress warrant but arises out of the relation of landlord and tenant, and hence, his claim for rent is entitled to priority upon the bankruptcy of the tenant over the levy of a distress warrant. Matter of City Drug Store (D. C, Ga.), 35 Am. B. E. 335, 224 Fed. 132. Under the Georgia Code mortgage lien holders with duly recorded mortgages are entitled to priority over the landlord's general lien for rent, with long-after-issued distress warrant. Prectorius v. Anderson (C. C. A., 5th Cir.), 38 Am. B. E. 93. Priority over wage earners. — Where, just prior to adjudication of bankruptcy, the land lord distrained for rent in arrears, priority will be given over wage earners, where the 1016 Debts Which Have Peioeity. [§ 64-b, (5). lien is valid as against the trustee althougli notice of the lien was filed after the adjudication in bankruptcy; the State statute must be recognized which gives the creditor a specified time after the materials were furnished within which the lien may be perfected.^"'^ The repeal of a statute giving a lien for materials furnished does not affect the right of priority as to materials fur- nished before the repeal, even though the statute was repealed before adjudi- cation.^"* A collusive assignment of mechanics' liens for the benefit of the bankrupt will not be allowed.^*® While the priority of a landlord's lien, given under the State statute, is undoubtedly preserved by clause h (5) of § 64, this priority is not over all other claims whatever, but only over those that are not specified in the section as being even higher in right.^^" Where a conditional vendor has no priority over judgment creditors without notice, the order of payment provided for in subdivision 5 is not interfered with by not allowing such conditional vendor priority of payment.^^^ If a State funds are insufficient to pay both classes of creditors. Matter of Mock (D. C, Miss.), 35 Am. B. E. 9, 228 Fed. 94. New Jersey Landlord and Tenant Act. — Under this section and the New Jersey Land- lord and Tenant Act, which provides that no chattels lying upon leased premises shall be liable to be taken by any process unless before the renewal the accrued rent shall be paid, and giving the landlord the right to distrain the goods of the tenant on the demised premises for rent, a landlord, al- though he has not distrained for rent, has a prior claim for rent subject to the costs against the bankrupt tenant. Matter of Braus (D. C, N. Y.), 37 Am. B. R. 594, 23'3 Fed. 835. The landlord is merely entitled to a prefer- ence in payment out of the tenant's good's and chattels on the demised premises over other creditors, including those holding execu- tions who are not lien holders. Matter of Spies-Alper Co. (D. C, N. J.), 36 Am. B. K. 470. 231 Fed. 535. 207. Hildreth Granite Co. v. Watervliet (N. Y. App. Div.), 31 Am. B. IR. 703, 161 N. Y. App. Div. 420, 146 N. Y. Supp. 449. 208. Louisville Woolen Mills v. Johnson (C. C. A., 6th Cir.), 37 Am. B. R. 67, 228 Fed. 606. 209. Collusive assignment of mechanics' liens to sons of bankrupt for benefit of bankrupt. — iTwo sons of a bankrupt father, who clerked for him, and knew of his finan- cial extremity, a day or two before he exe- cuted an assignment for the benefit of cred- itors bought up mechanics' liens against the bankrupt's store building to the amount of $2,000, all but one of which were subject to set-offs on book accounts for material sold by the bankrupt out of the store to the original claimants, amounting to nearly $1,800, and with the money the original claimants paid the bankrupt the book ac- counts. It was not pretended that the liens were bought up by the sons to relieve their father from financial pressure, nor to pro- tect their individual interests. They did not buy at a discount, so as to make it an in- ducement, nor did they satisfactorily show that they purchased with their own money, the property of one eon being heavily mort- gaged and the other son being only a few years out of college. It was teld that in- stead of the account being used by set-off to reduce the claims to about $200, leaving that much more derivable from' the real estate by the creditors, the real estate was allowed to continue burdened with liens amounting to $2,000; that it was a collusive scheme be- tween the father and sons to enable the father to realize on the book accounts, which were thus withdrawn from the reach of creditors; and that the liens were not valid in the hands of the sons as against the creditors except the one claim against which there was no book account to set-off. In re Kyte (D. C, Pa.), 25 Am. B. R. 337, 182 Fed. 166. 210. In re Consumers' Coffee Co. (D. C, Pa.), 18 Am. B. R. 50O, 151 Fed. 933. Cost of administration. — Since the words " of estates " and " bankruptcy estates " as used in sections 62 and 64-b respectively re- lating to the payment of costs of administra- tion, refer to the unincumbered assets gen- erally as distinguished from property upon which there is a specific lien, only such costs as are necessarily incident to the preserva- tion of the particular estate, its conversion into money, and payment thereof to the lienor, are entitled to payment in preference to the landlord's lien for rent. Matter of Ranch (D. C, Va.), 36 Am. B. R. 75, 226 Fed. 982. 211. Priority of conditional vendor. — Where under the State law a conditional vendor has no priority over judgment cred- itors without notice, and since section 47-a (2), as amended in 1910, places the trustee in bankruptcy in this class, the conditional vendor has no priority and the order of pay- ment provided by section 64 is not interfered with by not allowing the conditional vendor priority of payment. In re Bazemore (I>. C, Ala.), 26 Am. B. R. 494, 189 Fed. 236: In re Calhoun Supply Co. (C. C, Ala.), 26 An. B. R. 528, 189 Fed. 537. Before the amend- ment to the bankruptcy act, the trustee's title § 6^b, (5).j Peioeity Under State Laws. loir statute gives a lien for wages or services, and the persons entitled to the lien fall within the clause as to priority of claims therefor, the extent of the lien is limited by the provisions of the bankruptcy act.^^^ c. Priority of debts due the State. — A State is a "person" within the mean- ing of this clause, and a debt due to a State which is entitled to priority under its insolvency laws is entitled to priority against the debtor's estate in bankruptcy.^^* But in the case of a debt due the State, the priority must be created by a State law of the same general character as the bankruptcy act.^" A debt due the State on a judgment for a fine is not entitled to priority.^^^ d. Conflicting or overlapping State priorities. — An interesting question which thus far has received little attention is, the effect of § 64-b (5) where the State statute gives priority to a class or for a purpose specified in the other subdivisions of § 64-b. On principle, it would seem that where the Federal statute prescribes a class as entitled to priority, as " workmen, clerks or servants," no overlapping State statute having the same purpose but defin- ing the class in different words should apply. ^^® Thus, it has been well said by Judge Lowell : " Where both a State law and the bankrupt act give priority to the same class of debts, the bankrupt act not only controls the State law in case of absolute conflict between the two, but, by its express regulation of these as against a claim under an unrecorded condi- tional sale, though the State law required record, did not prevail. Crucihle Steel Co. V. Holt (C. C. A., 6th Cir.), 23 Am. B. R. 302, 174 Fed. 127. It was to obviate this, among other things, that section 47, clause 2, subdivision a, of the act was amended by inserting the words "And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon." Under the law of Kentucky, the sale of a com'puting scale to a bankrupt upon a con- tract, which was never recorded, providing that title should remain in the vendor until the agreed price was fully paid, constitutes a sale and mortgage back to the vendor to secure the price, and the vendor has a pre- ferred claim as against the scale or its pro- ceeds under subdivision 5 of this section of the bankruptcy act. In re Lausman (D. C, Ky.), 25 Am. B. E. 186, 183 Fed. 647. 212. Matter of Crawford Woolen Co. (D. C, W. Va.), 34 Am. B. B. 223, 218 Fed. 951. 213. In re Western Implement Co. (D. C, Minn.), 32 Am. B. R. 167, 166 Fed. 576, aflfd. 171 Fed. 81, 96 C. C. A. 185. 214. State statutes requiring debts of in- solvents to be paid to State. — In the case of In re Devlin (D. C, Kan.), 24 Am. B. R. 863, 180 Fed. 170, the judge said: "It is not thought that provision of the statutes of the State which requires all debts due the State to be paid as a claim of the third class out of the estate of a deceased person is a law of isuch general nature or so related to the sub- ject in hand that it can be given weight here in determining the right of the State to priority of payment of its demands arising under the provisions of clause 5, § 64-b, of the Bankruptcy Act." This question was expressly ruled upon by the circuit court of appeals for the first circuit in Derby v. Worcester County (C. C. A., 1st Cir.), 4 Am B. K. 496, 102 Fed. 808, 42 C. C. A. 637, where Judge Putnam, delivering the opinion of the court, said : " We are unable to conceive of any pri- ority to which any one may be entitled by the laws of a State, under section 64 of the Bankruptcy Act, unless it be a priority cre- ated by insolvent laws of that character. It is true that priorities are often created by State statutes relating to the administration of estates of deceased persons, and also to pro- ceediugs for wiuding up corporations ; but such laws are uot of tliat geueral eliaraeter w_lch can be supposed to be witbiu tlie purview of tlie provisiou of the Bankruptcy Act whicli is con- cerned here. Of course statutes touching as- signments for the benefit of creditors must be classed with insolvency laws, strictly so called. It is settled that State insolvency laws are not annulled by the enactment of a bankruptcy Act, and that the only effect of such enactment Is to suspend their operation, so that they become operative again, without re-enactment when the Bankruptcy Act is repealed." Butler v. Gorley, 146 U. S. 303, 36 L. Ed. 981, 13 Sup. Ct. 84. See also State of Alabama v. Morton (C. C. A., 5th Cir.), 43 Am. B. E. 450, 256 Fed. 313; Matter of Eureka Paper Co. (D. C, N. Y.), 44 Am. B. H. 179, citing Collier on Bankruptcy (10th ed.), 911. gIS. In re Alderson (D. C, W. Va.), 3 Am. B. K. 544, 98 Fed. 588. 216. Thus, see In re Rouse (D. C, 111.), 1 Am. B. R. 231, 91 Fed. 514 ; In re Union Planing Mill, 2 N. B. N. Rep. 384; In re Shaw (D. C, Pa.), 6 Am. B. R. 501, 109 Fed. 782; Matter of Cale- donia Coal Co. (D. C, Mich.), 43 Am. B. E. 93, 254 Fed. 742. 1018 Debts Which B!ave Peioeity. [§ 6^b, (5). priorities, excludes the State law altogether." ^^'^ This distinction seemsi sometimes to have been overlooked. ^^* e. Liens. — As previously stated, mere liens are not priorities. They stand or fall as liens, as where under a statute a distress for rent creates a lien upon the property distrained, the lessor has no lien upon the property if the proceeding was instituted after the lessee was adjudicated a bankrupt, but is entitled to his rent as a preferred claim out of the proceeds of the sale of property.^^® Other cases illustrating this distinction will be found in the foot-note.^==» f. Attorney's liens. — Liens of attorneys on the proceeds of litigations insti- tuted prior to bankruptcy, have been recognized, as where an attorney fore- closed a mechanic's lien for a debtor prior to his bankruptcy, and the amount recovered was turned over to his trustee, it was held that the attorney was entitled to reasonable compensation out of the proceeds of the recovery.^^ 217. In re Lewis (D. C, Mass.), 4 Am. B. R. 51, 99 Fed. 935. See also Matter of West- ern Condensed Milk Co. (C. C. A., 9th Cir.), 44 Am. B. R. 558, 261 Fed. 63. 218. See In re Byrne (D. C, Iowa), 3 Am. B. R. 268, 97 Fed. 762; In re Lawler (D. C, Wash.), 6 Am. B. R. 184, 110 Fed. 135. 219.. In re Oramond (D. C, N. Y.)', 17 Am. B. R. 22, 145 Fed. 966; Mott v. Wissler Mining Co. (C. C. A., 4th Cir.), 14 Am. B. R. 321, 135 Fed. 697; In re Austin (D. C, Hawaii), 13 Am. B. R. 136, 2 U. S. (D. C, Hawaii), 210; In re Thackara Mfg. Co. (D. C, Pa.), 15 Am. B. R. 258, 140 Fed. 126; Matter of Federal Biscuit Co. (C. C. A., 2d Cir.), 33 Am. B. R. 273, 218 Fed. 753. Priority between purchase money lien and mechanic's lien. — See Matter of Atkinson- Keree Grocery Co. (D. C, Ga.), 40 Am. B. R. 411, 245 Fed. 481. Where property was converted by a bank- rupt prior to adjudication and mingled with the other assets, the trustee takes such assets subject to the claim of the owner of the property converted, and such owner is entitled to priority of payment from the proceeds of the sale thereof. Erie Railroad Co. V. Dial (C. C. A., 6th Cir.), 15 Am. B. R. 559, 140 Fed. 689. Equitable assisnment. — A legatee assigned his interests in the estates of his father and grandfather as security for the payment of certain notes and thereafter certain other cred- itors having attached his interest in said estates, the assignee wrote a letter approved by such legatee, to the attorney for the attaching credi- tors agreeing that after payment of his debts, costs and expenses, the assignee would pay the claims of such attaching creditors "from the money coming into (their) hands on account of" said assignor, whereupon the attachment was withdrawn. Subsequently such legatee went into bankruptcy. It was held that said as- signment was a mortgage only, and that the promise of the assignee was merely to pay over any excess which might come into Its hands, and did not operate as an equitable as- signment of the fund, nor give said attaching creditors any preference in payment out of such fund in the hands of the trustee in bankruptcy. In re Ballantine (C. C. A., 3d Cir.), 26 Am. B. K. 275, 186 Fed. 91. Lien on distrainable assets. — In re Duble (D. C, Pa.), 9 Am. B. E. 121, 117 Fed. 794; In re Ecurlioi- Cci-r.lcn c". r.ooflng Co. (D. C, Ky.), 13 Am. B. K. 585, 133 ied. 958. In Pennsylvania when the intention to so con- sider them is made clear in the contract be- tween lessor and lessee, sums by way of taxes, etc., will be considered as rent and may be distrained for by the landlord and are entitled to preference over liens by execu- tion or otherwise. In such a cnse the lessor upon filing a claim against the bankrupt lessee is entitled to priority over general creditors for the whole amount of rent due, including tax^s. McCann v. Evans (C. C. A., 3d dr.), 26 Am. B. E. 47, 185 Fed. 93. In determlningr whether a landlord is entitled to priority of payment for rent in arrears, the sole question is whether, under the State law of the State In which the property is situated, the rent is under such circumstances a preferred claim. Thus, where at the time of adjudication, the bankrupt owed rent which was then due and In arrears, and there were at the time of such adjudication distrainable goods on the premises, the landlord, not having dis- trained for rent before the filing of the bank- ruptcy petition, was not entitled to a landlord's lien under the Maryland law, and so could not have a preferred claim in bankruptcy out of the proceeds of sale of the goods by the trustee, by filing a petition with the bankruptcy court asking for preferential payment or in the al- ternative for permission to distrain on the said goods. In re Chandron & Peyton (D. C, Md.), 24 Am. B. E. 811, 180 Fed. 841. 220. In re Kerby-Dennls Co., 95 U. S. 116. 2 Am. B. E. 402; In re Lowensohn (D. C, N. Y.), 4 Am. B. E. 79, 101 Fed. 776; In re Emslie (C. C. A., 2d Cir.), 4 Am. B. E. 126, 102 Fed. 291; In re Mitchell (D. C, Del.), 8 Am. B. E. 324, 116 Fed. 87; Matter of Cole Jewelry Co. (D. C, Ga.), 40 Am. B. E. 234, 243 Fed. 790; Matter of Jackson Light & Traction Co. (D. C, Miss.), 44 Am. B. E. 222. 221. Matter of Coney Island Lumber Co. (D. C, N. Y.), 34 Am. B. E. 563, 199 Fed. 803. 222. Summers v. Abbott (C. C. A., 8th Cir.), 10 Am. B. E. 254, 122 Fed. 36 ; In re Pattee (D. C, Conn.), 16 Am. B. E. 430, 143 Fed. 994; In re Hersey (D. C, Iowa), 22 Am. B. E. S56, 171 Fed. 998; Hume v. Myers (C. C. A., 4th dr.), 39 Am. B. E. 401, 242 Fed. 827 ; Matter of Morris & Eice (D. C, Mass.), 44 Am. B. E. 146, 258 Fed. 712. Costs In an attachment, which was dissolved under § 67-f and was of no benefit to the bank- rupt estate should not be allowed as a pre- ferred claim under § (J4-b, subd. 1 or subd. 5. Matter of Eood (Eef., Minn.), 34 Am. B. E. 273 223. In re Zier & Co, (D. C, Ind.), 11 Am. B. E. 527, 127 Fed. 399; In re Allison Lumber Co. 2 C4rb, (5).j Pbiobitt Undee State Laws. 1019 g. Fees and expenses of general assignees and receivers and their attorneys. — A general assignment for the benefit of creditors is not in. itself a fraudulent act although it is an act of bankruptcy, and if such an assignment be honestly made for the purpose of applying all the assignor's property to the payment of his debts, the assignee who accepts the trust in good faith and executes it intelligently, successfully and honestly, is entitled to be paid a fair and reasonable compensation for his services and those of his attorneys, out of the assets turned over by him to the trustee in bankruptcy of his assignor.^^ But it must appear that the services rendered were an actual benefit to the estate,^^ and Aat the assignment was not jnade for the purpose of avoiding inevitable bankruptcy.^^* If the assignment be actually fraudulent, and the assignee be a party to the fraud, he has no right to priority in bankruptcy proceedings,^^^ nor, indeed, to prove a claim as a general creditor. There are rulings to the effect that if an assignee has been permitted by the court to retain possession of the property assigned from the filing of the petition in bankruptcy until the adjudication, he is entitled to compensation as a qiMsi receiver. ^^® The United States Supreme Court has disapproved the doctrine, that a general assignment for creditors, valid under a State statute, is con- structively fraudulent, and has held that a claim for services rendered by or for an assignee, which were beneficial to the estate, is entitled to priority of payment, and that a charge for preparing 'the necessary papers for the assignment is a provable debt, but that a charge for services in resisting an adjudication in bankruptcy against the assignor is not provable.^^'' There is, perhaps, a distinction between a corporation which cannot file a voluntary petition and one which can ; but the distinction may be overcome by recal- citrancy, evidencing an intent to deprive creditors of rights given tlaem by the Federal laws.^^^ The same test would doubtless determine the right of a receiver of an insolvent corporation^^® — he being technically named by the State court — to the fees allowed by the State law; though since such a receivership is now an act of bankruptcy j^^" the strict rule applicable to (D. C, Ga.), 14 Am. B. E. 78, 137 Fed. 643; Mat- 229. Compare Mauran v. Crown, etc., Co. (Sup. ter of Morris & Bice (D. C, Mass.), 44 Am. B. Ct., R. I.), 6 Am. B. B. 7.34, 50 Atl. 331, 23 B. B 146. 258 Fed 712. I. 324; Cudahy Packing Co. v. N. J. Dairy Co. 224. Matter of Congdon (D. C, Minn.), 11 Am. (N. Y. Ct. of Cli.), 43 Am. B. B. 674, 107 Atl. B. E. 219, 129 Fed. 478, affd. 15 Am. B. E. 46, 142 147. . ^ ^ ^^ . ^ ^ , , , , Fed. 102, citing Collier on Bankruptcy (4tli ed.), Claim for debts incurred by receiver of private J, 4g4 . = •- . V ,, eorporation. — Debts incurred by the receiver of 221? Tn re McCaulev 2 N R N Ren 10S9- * private corporation, not in preserving Its Stearnes v Mck (D C OhS) 4 Am BE Property but in operating and adding to It, wiU ra,''lorF;d.'9T9'^ Wilbur v° wltson^(S: C.', R Sofde?s'of "tfe 'coSt?Jn' ^aving'uen^' o'n°°i?; I.), 7 Am. B. E. 54, 111 Fed. 493; In re Chase n?'ne4 °' In re Benwood Brewlfs Co (D C 753 : Matter of Harson(Eef EI.) n ^^ >• , ^^ ^^^ compensation.- Orders L= .iiH ..^Lf ^+ J.JI^K^ authority where („, the allowance of compensation of receivers m r? T.ZT^ A,, n 9'*:?s9'^i^ni°i.'^l ^»^,^°" appointed by a court of equity are purely ad- ^ ,-,« Wltl2'„<. w^;=^- !-J!f' B® ff--,f\ mlnistrative and subject to entire disallowance 226.. Matter of Harson (Eef., E. L), 11 Am. change by either increase or decrease with B. E. 514; Matter of Gladding Co. (Bet, E. I.), the development of the administration. Hume v. a Am. B. E. 171. Myers C. C. A., 4th Cir.), 39 Am. B. E. 401, 242 227. Bandolhf v. Scruggs, 190 U. S. 533, 10 Am. Fed. 827. B. E. 1, 47 L. Ed. 1165, 23 Snp. Ct. 710; Summers The ultimate determination of the allowances .J- Abbott (C. C. A., 8th Cir.), 10 Am. B. E. to be made to a receiver in the State court for 254, 122 Fed. 36. liis services rendered prior to the Institution of A claim by an appraiser for services rendered bankruptcy proceedings is for the court of bank prior assignee for benefit of creditors should be ruptcy to determine, though in making such de- allowed as a preferred claim. Matter of termination it will take into consideration the Cooper (D. C, Mass.), 40 Am. B. E. 17, 243 action of the State court. Matter of Diamond's *^e<3- 797. Estate (C. C. A., 6th Cir.), 44 Am. B. B. 268, 259 228. See In re Lock-Stub Check Co. (Bef., N. Fed. 70. Y.), 5 Am. B. B. 106-n ; In re Peter Paul Book 2tiO. See Bankr. Act, § 3-a(4), as amended in Co. (D. C, N. Y.), 5 Am. B. B. 105, 104 Fed. 1903. 786. 1020 Debts Which Have Peioeity, [§ 64-b, (5). general assignees may apply instead. But if the fees have been actually paid to the assignee, before notice of bankruptcy or in pursuance of an order of a court, the trustee in bankruptcy cannot proceed to collect summarily; he must collect by suit.^^^ So, the right of a trustee to retain a part of the assets of an estate as compensation for services rendered and expenses incurred prior to the bankruptcy in attempting to effect a composition with the creditors, may not be determined by a summary order, but the trustee must bring a plenary suit to determine the rights of the parties.^^ What goes before does not, of course, apply where the assignment or receivership is more than four months before the bankruptcy; in such a case, the adminis- tration continues in the State court. h. Sheriff's fees. — One of the most difficult questions which has arisen under the present law is whether a sheriff has priority for his fees and dis- bursements after the property seized by him vests, clear of the lien of the execution or attachment, in the bankrupt's trustee. As a rule, a sheriff must proceed under an execution or warrant of attachment delivered to him ; in case he seizes, he must insure and safely keep the property; he may be liable in damages if he fails so to do. Yet, if the lien of his attachment or execution is avoided by a bankruptcy within four months, he is obliged to surrender to the trustee, and, it has been claimed, without right even to reclaim his disbursements.""* On the other hand, the creditor represented by the sheriff was probably seeking to obtain an advantage,"^* and the general creditors should not be compelled to pay his bill. Thus, if the lien creditor or his attorney is not financially responsible, the sheriff may fall between two stools. The equities — of the sheriff on the one hand and of the general creditors on the other — are equally strong, though the rules discussed in the two previous paragraphs do not apply, the sheriff not being a willing party to a fraud on the law as are usually a general assignee and his attorney. The question is not yet authoritatively settled. Cases under the former law quite uniformly went against the sheriff."^^ Those under the present law quite evenly balance.^® It is impossible, however, to distinguish them ; it is only possible to suggest therefrom the following tests which, when applied to a given case, may aid in determining the sheriff's right to payment in full : (1) has the sheriff a lien for his fees at the time the petition is filed; (2) if so, is it a lien that survives the bankruptcy ? In either event, the property comes to the trustee charged with such lien and the sheriff's fees, must be 231. Comingor V. Louiaville Trust Co., 184 v. Hill, Fed. Cas. 18,206; In re Fortune, U. S. 18, 7 Am. B. R. 421, 46 L. Ed. 413, 22 Fed. Cas. 4,955; In re Preston, Fed. Cas. Sup. Ct. 293. Compare In re Klein & Co. (D. 11,394; In re Jenks, Fed. Cas. 7,276; In C, N. Y.), 8 Am. B. R. 559, 116 Fed. 523. re Ward, Fed. Cas. 17,145; In re Hatje, 232. In re Hersey (D. C, Iowa), 22 Am. Fed. Cas. 6,215. Apparently contra: In re B. R. 856, 171 Fed. 998. Housberger, Fed. Cas. 6,734 ;'Platt v. Stewart, 233. In re Young (D. C, N. Y.), 2 Am. Fed. Cas. 11, 220;. In re Foster, Fed. Cas. B. R. 673, 96 Fed. 606. 4.960. Fees of a sheriff, accruing on a writ of 236. In re Lewis (D. C, Mass.), 4 Am. attachment founded on a provable ,debt B. R. 51, 99 Fed. 935; In re Beaver Coal and issued before the commencement of pro- Co. (C. C. A., 9th Cir.), 7 Am. B. R. 542, ceedings in bankruptcy, are entitled to 113 Fed. 889, aflg. s. c., 6 Am. .B. R. 404, priority 'of payment, where such priority 107 Fed. OS: In re Young (D. C, N. T.), 2 An*, is given under the Massachusetts insolvency ?■ ?• ^TS. S6 Fed. 606; In re AUen (D. C, Cal.), law\ In re Lewis (D. C, Mass.), 4 Am. B. ^.^"'m?^. Oo.1ii;i.. ri.^si Zn."^ '^7^: R. 61, 99 Fed. 935. Matter of Hessler Foundry & Mfg. Co. (ri c., 234. See, senerally, under Sections Sixty N. Y.) 43 Am. B. R. 246. For a review of the and Sixty^seven of this work. E Ts's"'" " '^ J«°°l"g« (««'■• N. Y.). 8 Am. B. 235. In re Davis, Fed. Cas. 3,616; Zeiber § 64rb, (5). J Peioeity Undee State Laws. 1021 paid. Or, if the sheriff has no lien or it is avoided 'by the bankruptcy, (3) is there any State statute that gives the sheriff a priority? If not, his claim to priority for his fees -will be disallowed. It is important to note that a sheriff's lien or priority may exist and yet the creditor's fall. In the ultimate analysis, the question turns solely on what the State law is. i. Sheriff's disbursements. — These may sometimes be paid when his fees are not. This, however, is also on the theory that he is a custodian or that his service has been beneficial to the estate, i. e., under § 64-b (1).^^ The cases under the law of 1867 are quite numerous and are still authorities.^^^ j. Other illustrative cases. — As will be noticed from the cases cited there is some confusion in the cases and they cannot always be reconeiled.^^® Special deposits in banks and trust funds in the hands of bankrupts are, under some circumstances, entitled to priority of payment; but a treasurer of a municipal corporation who, under authority of law, deposits public moneys in a bank which becomes bankrupt, is not a special depositor entitled to be first paid out of the funds of the estate.^** State statutes frequently accord to creditors maintaining actions, in behalf of all creditors, to set aside trust deeds and transfers of insolvent debtor's property, preferences by lien or otherwise upon the property affected ; in such cases the liens or priorities are to be preserved, and the creditors are entitled to priority of payment. ^^ An award by a State industrial commission against a bankrupt, for personal injuries to an employee, is not entitled to priority under this subdivision, taken in connection with a State law providing that the right of compensa- tion given shall have the same preference or lien against the assets of the employer as allowed by law for a claim for unpaid wages. ^*^ Claims of com- paaition eretitors should be paid before the claim of a person who advanced the coDaideration for the composition, v/here default was made in carrying out the agreement.^*^^ 237. Compare In re Lengert Wagon Co. 240. Priority of bank deposits^ — In re (D. C, N. y.), 6 Am. B. R. 535, 110 Fed. Smart (D. C, Ohio), 14 Am. B. E. 672, 136 927; In re Francis-Valentine Co. (C. C. A., Fed. 974. See also Deere Plow Co. v. Mc- 9th Cir.), a Am. B. R. 522, 94 Fed. 793; David (C. C. A., 8th Oir.), 14 Am. B. R. Matter of Hessler Foundry & Mfg. Co. (D. C, 653, 137 Fed. 802; In re Brunsing, ToUe & N. Y.), 43 Am. B. R. 246. Postal (D. C, Cal.), 22 Am. B. R. 129, 169 238. In re Fortune, Fed. Cas. 4,955; In re Fed. 668, holding that the special deposit or Ward, Fed. Cas. 17,145; In re Jenks, Fed. trust property must he traced into the hands Cas. 7,276; Zeiber v. Hill, Fed. Cas. 18,206; of the trustee as part of the bankrupt's In re Holmes, Fed. Cas. 6,631. estate. 239. In re Wright (D. C, Mass.), 2 Am. 241. In re Goldberg (D. C, Me.), 16 Am. B. R. 592, 95 Fed. 807; In re Goldstein B. R. 521, 144 Fed. 566; Moore v. Green (Ref., Pa.), 2 Am. B. R. 603; In re Daniels (C. C. A., 4th Cir.), 16 Am. B. R. 648, 145 (D. C, R.'l.), 6 Am. B. R. 699, 110 Fed. Fed. 480. 745; In re Matthews (D. C, Ark.), 6 Am. 242. Matter of Rockaway Soda Water B. R. 96 109 Fed. «03; In re Meyers (D. Manufacturing Co. (D. C, N. Y.), 36 Am. C, Pa.). 4 Am. B. R. 536, 102 Fed. 869; B. R. 640. Central Trust Co. v. Lueders & Co. {C. C. 242a. Matter of Bruns (C. C. A., 7th Cir.), A. 6th Cir.), 34 Am. B. R. 61, 221 Fed. 829. 43 Am. B. R. 282, 256 Fed. 840- SECTION SIXTY-FIVE. DECLARATION AND PAYMENT OF DIVTOENDS. § 65. Declaration and Payment of Dividends. — a Dividends of an equal per centum shall be declared and paid on all allowed claims, except such as have priority or are secured. h The first dividend shall be declared within thirty days after the adjudication, if the money of the estate in excess of the amount necessary to pay the debts which have priority and such claims as have not been, but probably will be, allowed, equals five per centum or more of such allowed claims. Dividends subsequent to the first shall be declared upon like terms as the first and as often as the amount shall equal ten per centum or more and upon closing the estate. Dividends may be declared oftener and in smaller proportions if the judge shall so order: Provided,' That the first dividend shall not include more than fifty per centum of the money of the estate in excess of the amount necessary to pay the debts which have priority and such claims as probably will be allowed: And provided further, That the final dividend shall not be declared within three months after the first dividend shall be declared* c The rights of creditors who have received dividends, or in whose favor final dividends have been declared, shall not be affected by the proof and allowance of claims subsequent to the date of such payment or declarations of dividends; but the creditors proving and securing the allowance of such claims shall be paid dividends equal in amount to those already received by the other creditors if the estate equals so much before such other creditors are paid any further dividends. d Whenever a person shall have been adjudged a bankrupt by a court without the United States and also by a court of bankruptcy, creditors residing within the United States shall first be paid a divi- dend equal to that received in the court without the United States by other creditors before creditors who have received a dividend in such court shall be paid any amounts. e A claimant shall not be entitled to collect from a bankrupt estate any greater amount than shall accrue pursuant to the provisions of this act. * Amendments of 1903 in italics. [1022] § 65.] Dividends Geneeally. 1023 Analogous provisions: In U. S.: As to first and subsequent dividends, Act of 1867, §§ 37, 2S, R. S., §§ 5093, 5093; Act of 1841, § M; Act of 1800, §§ 29, 30; As to filing accounts preparatory to final dividend. Act of 1867, § 27, R. S., § 5096; As to rights of creditors whose claims are allovifed after first dividend. Act of 1867, § 38, E. S., § 5097; Act of 1841, § 10. In Eng.: Act of 1883, §§ 58-63; General Rules 232-234, 273 (11) (13). b Can.: Act of 1919, § 37. Gross-references: To the law: Referees to declare dividends and to prepare and deliver dividend sheets to trustees, § 39-a(l). Payment of dividends by trustees by check or draft, § 47-a(4) ; payment within ten days after declaration, § 47-a(9). Final meeting of creditors when estate is closed, § 55. Proof and allowance of claims, § 57. Notice to creditors of deplaration and time of payment of dividends, § 58-a (5) . Unclaimed dividends to be paid into court, § 66. To the General Orders: Payment of moneys deposited by check or warrant, signed by clerk, or trustee, and countersigned by judge or referee, XIX. To thfc Forms: List of claims and dividends to be recorded by referee and by him delivered to trustee. No. 40. Notice of dividend; creditor's letter to trustee, No. 41. See also Supplementary Forms; Hagar and Alexander's Bankruptcy Forms. SYNOPSIS OF SECTION. DKCIiARATION AND PAYMENT OP DIVIDENDB. I. Dividends Generally, 1023. a. Comparative legislation, 1023. b. Cross-references, 1024. c. Declaration of dividends, 1024. n. First and Subsequent Dividends, 1024. a. Time and amount, 1024. b. Amendment of 1903, 1025. c. Creditors entitled only to what the bankruptcy law gives them, 1025. d. Garnishment of dividends in hands of trustee, 1025. e. Practice, 1027. f. Illustrative cases, 1027. m. Rights of Creditors Whose Claims are Allowed Subsequent to Payment of Dividends, 1027. a. In general, 1027. b. Final dividends, 1027. IV. Preference to Residents of the United States, 1028. I. DIVIDENDS GENERALLY. a. Comparative legislation. — The English law is and our law of 1867 was far more elaborate in their provisions on this subject. The same is true of the Canadian act. Some useful suggestions will be found in them.-^ The present tieotion differs from those of the former law chiefly in being more elastic. Dividends may now be declared at irregular intervals. The amount on hand, not the time elapsed since the bankruptcy, is the real teat; though this rule ias been somewhat modified by the proviso clauses added by the amendatory act of 1903. 1. See "Analogous Provisions," tmte. 1024 Dbclaeation and Payment of Dividends. [§ 65-a, b. b. Cross-references. — Some of the subjects treated in this connectioii in the law of 1867 are found elsewhere in the present law. Thus, of the method of declaring dividends,^ and of paying of dividends;^ also of the notice to creditors of the declaration and payment of dividends.* The meaning of " dividend " is also discussed in section one of this work ; the disposition of unclaimed dividends is fixed by § 66. c. Declaration of dividends. — Subsection a provides for the declaration and payment of dividends on all allowed claims, except such as have priority or are secured. The meaning of this clause has been much discussed. It has been held a definition of " dividends." ^ It is rather the declaration, found in all bankruptcy laws, that each creditor of the same class shall receive his pro. rata of the bankrupt's assets.® The subsection was of considerable impor- tance prior to the amendatory act of 1903 ; the cases, which are by no means uniform, are collected in the foot-note.'' The status of creditors entitled to priority and the order of payment has already been considered;* so also of secured creditors.® The former are never entitled to "dividends" in the restricted sense here employed; the latter only after they have realized on their securities or had their value otherwise determined.-^" Both classes are "creditors" as defined in § 1 (9), and for the purpose of computing com- missions under §§ 40 and 48, as amended. 11. FIRST AND SUBSEQUENT DIVIDENDS. a. Time and amount. — Subsection h -provides for the time of declaring the first dividend, and the amount thereof, and regulates all subsequent dividends. The statute seems full and clear and is thought to be mandatory. The first dividend must be declared within thirty days after the adjudica- tion, if a dividend of five per cent, can (after deducting sufficient to pay priorities) ' be paid on all claims whether allowed or not. In doing so, claims scheduled but not yet allowed' must be included. ^^ The second dividend must, subject to the proviso clauses of the amendatory act of 1903, be declared as soon as there is enough to pay 10 per cent, more; and so on until the funds of the estate are entirely distributed. This accords with the policy of ?. Eankr. Act, § 39-a (1) 3 Am. B. E. 135, 96 Fed. 800; In re Utt (C. C. 3. Bankr. Act, § 47-a (4) (9). A., 7tli Cir.), 5 Am. B. E. 3S3, 105 Fed. 754, 4. Bankr. Act, § 58-a (5). holding that sums to be paid upon secured 5. See In re Sabine (Eef., N. Y.), 1 Am. B. claims or other claims entitled to priority are 11. 322. not "dividends" upon which the trustee or Definition. — A dividend in bankruptcy has referee may receive a commission, dlsapprovinir been defined as a parcel of funds arising from In re Barber (D. C, Minn.), 3 Am. B. E. 306, the assets of the estate rightfuUy allotted to the 97 Fed. 547. creditor entitled to share In the fund, whether 8. See discussion under Section Sixty-four of In the same proportion with the' other creditors this work. or in a different proportion. In re Barber 9. See discussion under Section Fifty-seven (D. C, Minn.), 3 Am. B. K. 306, 97 Fed. 547. of this work. 6. In re Gerson (Eef., Pa.), 2 Am. B. E. 352; io_ Compare In re Little (D. C, la.), 6 ll Fld^547." *°' ^' ^''"''^' ^ ^'^' ^' ^' ^°'^' Am. B. R. 681, 110 Fed. 621. Oral promise by one creditor that claim ol 11. In re Scott (D. C, Tex.), 2 Am. B. another should be paid.— The fact that one R. 324 95 Fed. 607, holding that in de- creditor promised oraUy that the indebtedness pia.;„r, +ho first Hivirlpnil thn rpfpi-pB should of another creditor should be paid, there being " .""S *"f nrat aivioena tne reieree snoum no evidence of facts creating an estoppel on the withhold from distribution sufficient funda part of the one creditor from receiving his divl- to cover all expenses of administration and dends on an equality with the other creditor, priorities. He is required to hold back only does not entitle the other creditor to a prefer- a: • i r j 4. 1 • 4.1 j. iii ence. Moise vs. Scheibel (C. C. A., 8th dr.), sufficient funds to cover claims that will 40 Am. B. E.' 311, 245 Fed. 546. probably be allowed. This includes only 7. In re Sabine (Eef., N. Y.), 1 Am. B. B. those claims as to which he has information 322; In re Ft. Wayne Elec. Corp. (D. C, Ind.), j^ iiistifiea him in the conclusion that 1 Am. B. E. 706, 94 Fed. 109; In re CofBn (Eef., f"<'° as justmea mm m tne conclusion inai Tex.), 2 Am. B. E. 344; In re Gerson (Eef., Pa.), they will be allowed when presented. 2 Am. B. E. 352; In re Fielding (D. C, Mo.), § 65-b.J FiKST AND Subsequent Dividends. 1025 the law in hastening distribution. This policy is further emphasized by the provision that the judge, but not the referee, may declare dividends oftener and in smaller proportions. In all other cases, the referee declares the dividend ^^ and orders it paid. The assignee (trustee) formerly did this; in England, the trustee does yet. But dividends can be declared only at meetings of creditors. b. Amendment of 1903. — Since the amendatory act, the practice of declar- ing first and final dividend in small estates at one time is no longer possible.'^* Since this amendment, if any dividends are declared, there must be two, the second at least three months after the first. The first proviso, added by the amendatory act, is a further limitation. Not more than 50 per cent, of the cash on hand, in excess of money to be reserved or paid on priority debts and that held out for claimants who have not yet proven, can be disbursed in a first dividend. The meaning is not exactly clear. The purpose, however, is patent enough: to give creditors a longer time to prove and additional notice of their right to dividends.^* The change is a mild reversal of the policy of the original law toward rapidity in administration. c. Creditors entitled only to what the bankruptcy law gives them. — Sub- section e is the corollary of subsection a. It prevents a creditor from collect- ing from the bankrupt estate any greater amount than accrues under the provisions of the bankruptcy law. General creditors are entitled each to his pro rata, but no more; secured creditors to their security and a pro rata of the balance, but no more. An apparent exception is that interest is some- times paid on allowed claims; but this is only in case such claims have been paid in full, and there are assets still undistributed.-'^ If anything then remains it is returned to the bankrupt. The estate of a debtor of a bankrupt is not precluded, by reason of the debtor's fraudulent conduct in taking and concealing conveyances of real estate from the bankrupt, which were sub- sequently set aside as fraudulent in a suit by bankrupt's trustee, from par- ticipating in the distribution of the proceeds arising from the sale of such real estate, as to a debt in no way involved in the fraudulent conveyances, incurred before they were made, and admitted to be just and unpaid.^* Where bankrupt stockbrokers dispose of securities belonging to several of their customers, deposit the proceeds in one of their general bank accounts, draw out such moneys and convert the same to their own use, and subse- quently make other deposits, such deposits must be considered as a general restoration in which all the defrauded customers should share ratably." Where a State law provides for the deposit of bonds with a State officer for the protection of creditors from whom moneys are received by the depositor of such bonds, they may be held by the trustee of the bankrupt for the benefit of those creditors who live within the State.^* d. Garnishment of dividends in hands of trustee. — Although dividends in the hands of a trustee in bankruptcy are not, as a matter of right, subject to 12. Bankr. Act, § 39-a (1). having special relations to each other, see 13. See In re Smith (Ref., N. Y.), 2 Am. In re Paris Modes Co. (C. C. A., 2d Cir.), B. R. 648. 28 Am. B. R. 470, 106 Fed. 357. 14. It perhaps minimizes certain evils, 16. In re Hurst (D. C, W. Va.), 26 Am. which grew out of a liberal construction of B. R. 781, 188 Fed. 707. Bankr. Act, § 57-n. 17. In re Mclntyre & Co. (C. C. A., 2d 15. In re Hagan, Fed. Cas. 5,898; In re Cir.), 25 Am. B. R. 93, 181 Fed. 960. See To\™, Fed. Cas. 14.112; In re Bank, etc., s. c, 24 Am. B. R. 1, 4, 626. Fed. Cas. 895. As to arrangement for dis- 18. In re Rosset (D. C, N. Y.), 2ft Am. tribution of dividends between two creditors B. R. 341, 203 Fed. 67. 65 1026 Declaration astd Payment off Dividends. [§ 65-b, attachment or gamishmeiit,*® it seems, that the bankruptcy court may, out of respect to the State court, direct the trustee to pay a judgment obtained in a garnishment proceedings against a creditor of the bankrupt.^" The rule of a State court permitting the garnishment of dividends after they have been declared by an officer of a State court, such as a receiver, administrator, or a trustee, cannot affect the administration by a Federal court of an estate in bankruptcy. The right to garnishee funds in custodia legis must depend upon express statutory authority. No such authority is to be found in the bankruptcy law. The distribution of the assets of the bankrupt, therefore, cannot be stayed or prevented by the process of a State court, the object of which is to withhold a dividend from a creditor entitled thereto for the security of a plaintiff pending litigation.^^ If a State "court could garnishee a trustee in bankruptcy, to catch funds in his hands which had been ordered paid by the court to which he was directly amenable, but which he had not actually paid out, and could compel him to withhold the payment, regardless of the order of the court of bankruptcy, it will be readily perceived that confusion and conflict of jurisdiction would at once arise, and that a State 19. Galrnisliiuent of dividends in hands of trustee. — Although the State law permits an attachment to be laid in the hands of a trustee appointed by a court of chancery to bind the funds in his hands, after the amount to be paid out by him has been definitely ascertained by the court, and nothing remains for him to do but to pay the sum over to the person whose credits are attached, the dividends in the hands of a trustee in bankruptcy are not subject to at- tachment. Where petitioner, who had ob- tained a judgment against a person entitled to a dividend out of a bankrupt's estate, had no claim of title to nor specific lien upon the fund in the hands of the trustee and had not procured the appointment of a receiver who had succeeded to the title of the creditor entitled to such dividend, the bankruptcy court is without power to order the trustee to pay over the dividend to the petitioner. In reHollander (D. C, Md.), 25 Am. B. E. 48, 181 Fed. 1019. In Gilbert v. Quimby, 1 Fed. Ill, the court said: "That the dividend was not attach- • able on process from the State courts would seem to be quite clear. While in the hands of the assignee, it would be part of the estate of the bankrupt in the custody of the court. It would not be held the property of the debtor, but would only be property that would become his when he should get it. He could not maintain any suit against the assignee for it, nor obtain it by any legal process other than by application to the Dis- trict Court having control of the fund as a party to the proceedings in that court. Money in the hands of a disbursing officer of the United States, due to a private person, cannot be attached on process against such person out of a State court, because the money will not be his, hut will remain the property of the United States until it is paid to him. Buchanan v. Alexander, 4 How. 20, 11 L. Ed. 857." In re Cunningham, Fed. Cas. 3,478, it was said : " The reason of this doctrine seems to be that the court having the money or property in its custody under the law holds it for some purpose, of which that court is exclusive judge. To permit property or money thus held to be seized on execution, attached, or garnished, would therefore defeat the very purpose for which it is held, and in many cases enable some other court to dispose of property or money, and wholly divert it from the end or purpose for which possession has been taken. A con- flict of jurisdiction and decision would in many cases thus ensue." There is nothing Id the present bankruptcy law to change the rule thus established under the provlBlons of the act of 1867. In re Argonaut Shoe Co. (C. C. A., 9th Cir.), 26 Am. B. E. 584, 187 Fed. 784; In re Thompson-Breese Co. (Ref., Ohio), 30 Am. B. R. 105; Matter of Port Tampa Phos- phate Co. (D. C, Mass.), 41 Am. B. R. 154. 20. Trustee to pay judgment. — In the case of In re Kranich (D. C, Pa.), 25 Am. B. R. 50, 182 Fed. 849, the judge said: "The following situation is therefore presented: A creditor has obtained judgment against the garnishee in an execution attachment. The garnishee is an officer of this court and has more than enough money in his hands to satisfy the judgment; and while the State tribunal could not compel him to pay over the money, he himself has made no objection either to the judgment or to the order that is not asked for by the creditor. Under such circumstances, I see no reason why this court should not pay due respect to a tribtinal of the State, and recognize a claim that has thus heen conclusively proved — although 1 repeat that the allowance must be accepted as purely ex gratia." 21. In re Argonaut Shoe Co. (C. C. A., 9th Cir.), 26 Am. B. R. 584, 187 Fed. 784; Clark V. Shaw, 28 Fed. 356. § 65-c.J Eights of Ceeditoes, 1027 court, by means of a garnistment, could indefinitely delay the final winding up of the matter in bankruptcy and tbe final discharge of the trustee. ^^ e. Practice. — The practice usually involves an order, reciting the giving of the statutory notice, the action of the creditors at the meeting, if any, and declaring a dividend at a specified per cent, on all claims allovred as shown on a dividend sheet annexed; it also should direct the trustee to pay the same.^^ It is the practice in some districts to require exceptions to a pro- posed distribution to be filed before the final decree of confirmation is entered.^ If a dividend has been declared, the court has power in a proper case to restrain the payment of it by the trustee in order to give to parties in interest an opportunity to move to have the order of dividend vacated,^ or to allow for an adjustment of the liability of the claimant to the bankrupt.^^* But a dividend so declared cannot be distributed except for some error or other cause. It cannot be opened for the purpose of paying an expense which would have been allowed, had it been brought to the attention of the court before the declaration of the dividend.^® Whether a dividend order, which was right when made should be revoked and the case reopened so that a claim may be proved, is a matter within the discretion of the referee, to the exercise of which no appeal lies except so far as it may have proceeded on erroneous principles of law.^'^ A State court cannot in any way interfere with the bankruptcy court in its distribution of the assets of the bankrupt.^* f. Illustrative cases. — There are but few cases even under the former law. Some of them will be found in the foot-note.^^ ni. EIGHTS OF CREDITORS WHOSE CLAIMS ARE ALLOWED SUBSEQUENT TO PAYMENT OF DIVIDENDS. a. In general. — There was a corresponding clause in the former law. Claims cannot be allowed after one year after the adjudication;'"' thus, the list of creditors entitled to share is fixed at that time. Prior to the amend- ments of 1903, it was held that if a dividend had been paid within the year, such dividend and payment should not be distributed or a creditor compelled to return what he has received, even that an expense of administration which was overlooked may be paid.^^ Such a contingency can rarely arise. As the law now is, a like dividend on such subsequent claims and such expenses must be paid before a further dividend is declared. b. Final dividends. — As the prior provisions of the act have made it necessary to declare a first dividend within thirty days after adjudication, if there are funds sufficient to do so, and as the statute has provided that 22. Cowart v. Caldwell Co. (Sup. Ot., Ga.), C, Cal.), 40 Am. B. R. 273, 243 Fed. 1004. 24 Am. B. E. 546, 551, 134 Ga. 544, holding 26. Iii re B. K. Smith, Fed. Cas. 12.989, that "garnishment will not lie from a state 15 N. B. E. 97. court to a trustee or assignee in bankruptcy 27. Matter of Siegel Co. (D. C, Mass.), 32 to catch dividends which have been declared Am. B. E. 645, 216 Fed. 943. in favor of certain creditors or the amount 28. In re Bridgman, Fed. Gas. 1,867, 2 N. which will be going to them under a composi- B. R. 252. tion." 29. In re Walker (D. C, N. Dak.), 3 Am. 23. See discussion under Section Forty- B. E. 35, 96 Fed. 550; In. re James, Fed. seven of this work. Cas. 7,175 ; Bristol v. Sanf ord, Fed. Cas. 1,898 ; 24. In re Heebner (D. C, Pa.), 13 Am. ^tkinson v. KeUogg, Fed. Cas. 613; In re B. E. 256, 132 Fed. 1003, holding that, in gf'e^aeo '^ ' this district, exceptions with a petition for „„' Ti__i- a,.* s kt t, review filed after a decree of confirmation, and „. 5? „, " ^h ' °',^ * m ^ o . ^ „ distribution of the final dividend, will be dis- „i^%^^''^'V -^f^^o i?^i£' -2^®^'' ^.^^- ?' ^■ missed with costs 263; In re Hegerty, 2 N. B. N. Rep. 1088; In re 25. In re N. Y. Mail S. S. Co., Fed. Cas. Smith, Fed. Cas. 12,989; In re N. T. MaU, etc., 10,212, 3 N. B. K. 280. Co., Fed. Cas. 10,212. 25a. Matter of La Jolla L. & M. Co. (D. 1028 Declaration a:^'d Payment of Dividends. [§ 65-b. creditors who are not diligent are permitted only to share in the estate that, remains, and not to interfere with the funds already divided, it would appear' that the court has the power to make a final dividend and to approve of a final report at any time after four months have elapsed subsequent to adjudi- cation, if the other conditions are present showing the estate to be apparently ready for the final accounting.^^ It is improper to delay the payment of a final dividend merely because certain creditors have not filed their claims.^^ It has been held that a final dividend may be declared on the expiration of three months from the time of the first dividend, notwithstanding the failure of creditors to prove their claims.^* An application for such a dividend should be made upon an order to show cause, or other sufficient notice to all persons scheduled or appearing in any way in the proceedings as cred- itors, giving them an opportunity not only to know if the dividend, but notifying them that their claims should be proven, or their rights lost.^^ IV. PREFERENCE TO RESIDENTS OF THE UNITED STATES. Subsection d applies only to cases where the bankrupt has been so adjudged not only in the United States but in a foreign country. It is intended to accomplish equality of payment to resident creditors, wherever the law of such a country does not permit such residents to prove thereon. The sub- section is rarely available and requires no discussion. 23. Matter of Eldred (D. C, N. Y.), 19 Ain. time of the first dividena." See In re Coulter B. E. S3, 155 Fed. 686. (D. C, Pa.), 30, Am. B. E. 75, 206 Fed. 906, 33. In re Stein (D. G, Ind.), 1 Am. B. E. in which it was held that the provisions of 663 94 Fed. 134. ,. ^ ,. , section 65-b of the Bankruptcy Act, providing li,h-«L Vf™-* li^y".dation of contingent for the declaration of dividends, by necessary ^ra^u^h^s retoTdig *u'; ^Ti^^^i '-f^^ ,rrr r '"^; th^ t^'^ tribution of an estate to await the deter- ^'*^i* and the declaration of the final divi- mination of a suit against the bankrupt on ''^"'^ ^"^ """^ ^"e'^ ^"""^ months from ad- the result of which a claim may be proven. Judication; and under section 65-e, providing Matter of Hutchcraft (D. C, Ky.), 41 Am. that the rights of creditors who have received B. E. 238, 347 Fed. 187. dividends, or in whose favor final dividends 34. Matter of Bell Piano Co. (D. C, N. have been declared, shall not be aflfeeted by T.), 18 Am. B. E. 183, 155 Fed. 373. In the proof and allowance of claims subsequent this case the court said: "To say that the to the date of such payment or declarations final dividend shall not be declared within of dividends, creditors have a vested right in three months after the first dividend is de- dividends as soon as declared, which cannot clared does, in my judgment, say by impli- be affected. cation that a final dividend may be declared 35. Matter of Eldred (D. C, N. Y.), 1* on the expiration of three months from the Am. B. E. 53, 155 Fed. 686. SECTION SIXTY. SIX. UNCLAIMED DIVIDENDS. § 66. Unclaimed Dividends. — a Dividends which remain imclaimed for six months after the final dividend has heen declared shall he paid by the trustee into court. fc Dividends remaining unclaimed for one year shall, under the direction of the court, be distributed to the creditors whose claims have been allowed but not paid in full, and after such claims have been paid in full the balance shall be paid to the bankrupt : Provided, That in case unclaimed dividends belong to minors such minors may have one year after arriving at majority to claim such dividends. Ana!o£;ci;3 provisions: In U. S.: None. In Eng. : Act of 1883, § 162 ; General Rules 345, 346A. In Can.: Act of 1919, §§ 37, 38. Cross-referenrep: To the law: Declaration and payment of dividends, { 66, and cross- references thereunder. SYNOPSIS OF SECTION. I. Unclaimed Dividends, 1029. a. Comparative legislation, 1029. b. In general, 1029. c. Payment of balance to bankrupt, 1030. d. IlliLStrative cases, 1030. L UNCLAIMED DIVIDENDS. a. Comparative legislation. — This section is new. There was nothing like it in our previou* )aws. The English statute requires the payment of unclaimed dividendo into the Bank of England, where they remain subject to the demands of the creditors entitled thereto and the orders of the Board of Trade.l There seems to be no provision in that act for a distribution among creditors who have already claimed and had their dividends. The Canadian Act provides for the payment of unpaid dividends to the Receiver General of Canada who is to pay to each unpaid creditor his proper dividend as shown by a list furnished by the trustee.la b. In general. — The practice here is simple. If for any reason a creditor entitled to a dividend does not accept it, the trustee mus.t wait until six months after the declaration of the final dividend and then pay the money into court. If such dividends are not claimed for one year after the final dividend is declared, the same must he distributed to creditors whose claima 1. Act of 1883, § 162. la. Can. Bankr. Act of 1919, § 37. [1029] 1030 Unclaimed Dividends. [§ 66. have been allowed but not paid in full, or, after they are paid, to the bank- rupt. The purpose clearly is to distribute every dollar declared by way of dividends, that there may be no bankruptcy funds " in chancery," as under our law of 1867^ and the present English law. The saving clause as to dividends due minors should be noted. While the consideration deposited for the purpose of carrying out a composition* is not strictly dividends, good practice would seem to require the deposit of the unclaimed funds in such a proceeding in a special account and its ultimate distribution as sug- gested by subsection b.* Dividends in the hands of the trustee are not property but a right to secure property,^ and are not subject to attachment by a creditor of the dividend creditor.* c. Payment of balance to bankrupt. — Subsection i provides that after the claims of creditors have been paid in full the balance shall be paid to the bankrupt. The balance meant is not a surplus, but the remainder of unclaimed dividends — the remainder of sums allotted to creditors who have failed to claim them; the remainder, after satisfying in full the claims of other creditors who have not failed to claim their dividends.'^ d. Illustrative cases. — There are but few cases. Some of them will be found in the foot-note.® 2. See remarks of Philips, J., in In re Fielding (D. C, Mo.), 3 Am. B. R. 135, 96 Fed. 800. 3. Bankr. Act, § 12-b-e. 4. For practice on "Payments of Moneys Deposited," see General Order XXIX. 5. Gilbert v. Lynch, 17 Blatchf. 402. 6. Jackson v. Miller, 9 N. B. R. 143. 7. Dispositio'n of balance after payment of claims. — In the case of Johnson v. Norrig (C. C. A., 5th Cir.), 27 Am. B. P. 107, 190 Fed. 459, it was held that the surplus, re- maining after the payment of all claims, proved against the bankrupt estate, and in- ■ terest thereon to the date of the filing of a voluntary petition by a partnership, should be applied to the payment of interest accru- ing on the claims subsequent to the filing of the petition, and the balance then remaining should be returned to bankrupt. The court said, in speaking of this provision of the subsection: "This section relates to un- claimed dividends only. It shows that the legislature intended (exempt property and costs, and debts having priority, being ex- cepted) that the entire estate should be divided pro rata among the creditors by the declaration of dividends. When a dividend is unclaimed, it provides for its disposition — it is to go to the satisfaction of other clams till they are paid in full. It is only after the claims are paid in full that 'the balance shall be paid to the bankrupt.' The balance meant is not a surplus, but the remainder of unclaimed dividends — the remainder of sums allotted to creditors who have failed to claim them; the remainder, after satisfying in full the claims of other creditors who have not failed to claim their dividends. This section gives no authority to pay a surplus to the bankrupt which has never been em- braced in a declaration of dividends, and it shows that the Act neither contemplates the existence nor provides for the disposition of any surplus which shall not be embraced in the declaration of dividends. But, unques- tionably, a surplus after paying in full all debts, including all interest due on the debts accruing before and subsequent to the filing of the petition, would equitably belong to the bankrupt, and no statute would be needed to authorize the court to direct its payment to the bankrupt." Right of administration of deceased bank- rupt to surplus. — ^Where a bankrupt dies pending bankruptcy proceedings, and there remains any surplus after the payment of all allowed claims, commissions and expenses, such surplus becomes a part of the deceased bankrupt's estate and should be paid over by the trustee in bankruptcy to the said bank- rupt's administrator or executor and not to his heirs at law. Matter of OhI (D. C, N. Y.), 44 Am. B. R. 328, a&O Fed. 338. 8. In re Fielding (D. C, Mo.), 3 Am. B. R. 135, 96 Fed. 800. As to the method of distribution now fixed by subs, b, see In re Haynes, Fed. Cas. 6,269; In re James, Fed. Cas. 7,175. Somewhat contra: In re Hoyt, Fed. Cas. 6,806. Compare also In re Blight, Fed. Cas. 1,540. And see In re Bridgman, Fed. Cas. 1,867. SECTION SIXTY-SEVEN. LIENS. § 67. Liens. — a Claims which for want of record or for other reasons would not have been valid liens as against the claims of the creditors of the bankrupt shall not be liens against his estate. h Whenever a creditor is prevented from enforcing his rights as against a lien created, or attempted to be created, by his debtor, who afterwards becomes a bankrupt, the trustee of the estate of such bankrupt shall be subrogated to and may enforce such rights of such creditor for the benefit of the estate. c A lien created by or obtained in or pursuant to any suit or pro- ceeding at law or in equity, including an attachment upon mesne process or a judgment by confession, which was begun against a person within four months before the filing of a petition in bankruptcy by or against such person shall be dissolved by the adjudication of such per- son to be a bankrupt if (1) it appears that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, or (2) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation of bankruptcy, or (3) that such lien was sought and permitted in fraud of the provisions of this act ; or if the dissolution of such lien would militate against the best interests of the estate of such person the same shall not be dissolved, but the trustee of the estate of such person, for the benefit of the estate, shall be subrogated to the rights of the holder of such lien and empowered to perfect and enforce the same in his name as trustee with like force and effect as such holder might have done had not bankruptcy proceedings intervened. d Liens given or accepted in good faith and not in contemplation of or in fraud upon this act, and for a present consideration, which have been recorded according to law, if record thereof was necessary in order to impart notice, shall, to the extent of such present con- sideration only* not be affected by this act. e That all conveyances, transfers, assignments, or incumbrances of his property, or any part thereof, made or given by a person •Amendments of 1910 in italics. [1031] 1032 Liens. [§ 67. adjudged a bankrupt under the provisions of this act subsequent to the passage of this act and within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay, or defraud his creditors, or any of them, shall be null and void as against the creditors of such debtor, except as to purchasers in good faith and for a present fair consideration; and all property of the debtor conveyed, transferred, assigned, or encumbered as aforesaid shall, if he be adjudged a bankrupt, and the same is not exempt from execution and liability for debts by the law of his domicile, be and remain a part of the assets and estate of the bankrupt and shall pass to his said trustee, whose duty it shall be to recover and reclaim the same by legal proceedings or otherwise for the benefit of the creditors. And all conveyances, transfers, or incumbrances of his property made by a debtor at any time within four months prior to the filing of the petition against him, and while insolvent, which are held null and void as against the creditors of such debtor by the laws of the State, Territory, or District in which such property is situate, shall be deemed null and void under this act against the creditors of such debtor if he be adjudged a bankrupt, and such property shall pass to the assignee and be by him reclaimed and recovered for the benefit of the creditors of the bankrupt. For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any State court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction* f That all levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attach- ment, or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, unless the court shall, on due notice, order that the right under such levy, judgment, attachment, or other lien shall be preserved for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid. And the court may order such conveyance as shaU be necessary to carry the purposes of this section into effect: Provided, that nothing herein contained shall have the effect to destroy or impair the title obtained by such levy, judgment, attach- ment, or other lien, of a bona fide purchaser for value who shall have acquired the same without notice or reasonable cause for inquiry. ' Amendment of 1903 in italics. i 67.] Synopsis of Section. 1033 Analogous provisions: In TT. S.; As to fraudulent transfers, Act of 1867, § 35, R. S., § 5129; As to liens which are unaffected, Act of 1867, § 20, R. S., § 5075; Act of 1841, § 2; Act of 1800, § 63; As to dissolution of attachment liens, Act of 1867, § 14, R. S., I 5044. In Eng.: None. In Can.: Act of 1919, §§ H, 39, 30, 32, 34. Cross-references: To the law: Definition of transfer, § 1(25). Insolvency; what includes; when person deemed insolvent, § 1(15). Jurisdiction of bankruptcy court to cause estates to be collected and reduced to money, § 2(7). Fraudulent transfer as act of bankruptcy, § 3-a(l) ; preferential transfer, § 3-a(2) ; permitting preference through legal proceedings, § 3-a(3). Fraudulent transfer or concealment as objection to discharge, § 14-b(4). Preferences, what constitute, § 60. Power of trustee to avoid fraudulent transfer, § 70-e. To the General Orders: Redemption by trustee of property mortgaged or pledged, XXVIII. To the Forms: Petition and order for redemption of property from lien. No. 43. See also Supplementary Forms; Hagar and Alexander's Bankruptcy Forms (2d ed.). SYNOPSIS OF SBCnON. LIKNS. I. Liens in General, 1035. a. Comparative legislation, 1035. b. Scope of section, 1035. c. Construction and general effect, 1036. d. Cross-references, 1036. n. Claims Void for Want of Record or Other Reascms, 1036. a. In general, 1036. b. State law controls, 1037. c. Want of record, 1038. (1) In general, 1038. (2) What constitutes want of record affecting validity, 1039. (3) Chattel mortgages and contracts for conditional sale, 1039. (I) In general, 1039. (II) Effect of failure to file or record; New York rule, 1040. (III) Bankrupt remaining in possession, 1042. (IV) Withholding from record or filing, 1043. (V) Recording or filing within four months' period, 1044. (VI) Place of filing or recording, 1045. (VII) Unrecorded contracts for conditional sale, 1045. (VIII) Effect of amendment of § 47a (2), 1046. d. Invalid for other reasons, 1046. in. Subrogation of Trustee to Rights of Creditors, 1047. a. In general, 1047. b. Is the trustee a " judgment creditor? " 1048. (1) Rule under former act, 1048. (2) Rule under present act, 1049. (3) Effect of amendments of § 47a (2) by amendment of 1910, 1049. 1034 Liens. [§ 67 IV. Valid Liens, 1050. a. In general, 1050. b. Good faith of transaction, 1050. c. Jurisdiction of bankruptcy court to determine validity of lien, 1051. d. Miscellaneous valid liens, 1052. e. Mechanics' liens, 1053. f. Landlords' liens, 1054. g. Mortgages to secure further advances, and on after-acquired property, 1056 h. Mortgagor in possession, 1057. i. Liens on special funds; mingling with other funds, 1057. j. Lien of pledgee, 1058. k. Other valid liens, 1059. (1) Vendor's lien, 1059. (2) Equitable liens, 1060. (3) Attorney's lien, 1060. (4) Banker's lien; liens for services, 1060. (5) Maritime liens, 1061. (6) Factor's lien, 1061. (7) Trust and other transfers, 1061. 1. Effect of valid liens on distribution, 1062. V. Fraudulent Transfers and Liens, 1062. a. In general, 1062. b. Scope of subsection, 1063. c. Insolvency not essential, 1063. d. Within four months prior to filing the petition, 1063. e. Intent to hinder, delay or defraud, 1064. (1) In general, 1064. (2) Revival of outlawed debt, 1065. (3) Evidence of intent, 1065. (I) In general, 1065. (II) Payments without fraudulent intent, 1065. (III) Fraudulent intent implied from circumstances, 1068. (IV) Sales of goods on account; bulk sales, 1069. (V) Burden of proof, 1070. f . Purchasers in good faith and for present fair consideration, 1070. g. Transfers and incumbrances under State laws, 1072. h. Suits to recover property, 1072. (1) In general, 1072. (2) Amendment of 1903, 1072. i. Miscellaneous invalid transfers or incumbrances, 1073. (1) In general, 1073. (2) Mortgages to secure antecedent debts, 1073. (3) Chattel mortgages, 1074. (4) Voluntary settlements, 1075. (5) General assignments, 1076. j. Practice, 1076. § 67.] LiE2«rs IN Geneeal. 1035 VI. Liens Through Legal Proceedings, 1076. a. In general, 1076. b. Comparative legislation, 1077. c. Confusion concerning subs. c. and subs. /., 1077. d. When subs. c. applies, 1078. e. Insolvency essential, 1079. ' f. Four months prior to the filing of the petition, 1079. g. Miscellaneous invalid liens through legal proceedings, 1080. (1) By judgment and execution, 1080. (2) Garnishment fboceedings, 1083. (3) By attachment, 1084. (4) By creditor's bill, 1087. h. Practice on suits to annul liens, 1088. i. Preserving liens, 1088. j. Saving clause, 1089. I. LIENS IN GENERAL. a. Comparative kgislatioji. — The act of 1898 is much more explicit in respect to liens than any previous bankruptcy law. In England, while a fraudulent transfer is an act of bankruptcy,' there is no statutory provision that such a transfer is void. Nor is that statute any more explicit as to liens, save those available as acts of bankruptcy. The only lien through legal proceedings in terms dissolved by bankruptcy under our law of 1867, was that of an attachment on mesne process. Fraudulent transfers, on the other hand, were interdicted,^ but were made up of elements more numerous and difficult of proof than those specified in the present law. Much of the section under discussion is new. Indeed, the law of 1898 is, in this par- ticular, far more favorable to the creditor than was that of 1867. b. Scope of section. — Starting with the well-recognized doctrine that a trustee in bankruptcy merely steps into "the bankrupt's shoes and, therefore, takes his property subject to aU valid liens,* the statute proceeds to declare what liens are not to be considered valid, as, in substance, (1) those which are invalid under the laws of a State,* and, provided they are less than four months old, (2) those which were not recorded or are invalid "for other reasons,"® (3) those which were given with intent to hinder, delay, or defraud creditors,® and (4) those which were obtained through legal pro- ceedings;'' with the further proviso that even liens so declared invalid shall not be so as to bona fide purchasers without notice. While somewhat out of 1. English Act of 1883, § 4(1) (b). 4. In re Davis, Fed. Cas. 3,618; Peck v. 2. Act of 1867, § 35, R. S., § 5129. Jenness, 7 How. 612; Downer v. Brackett. 3. Compare discussion under this section, 21 Vt. 599. post, subtitle " Valid Liens." See Conti- 5. See discussion under this section, pott, nental Bank v. Katz ( Super. Ct., 111. ) , 1 subtitle " Claims Void for Want of Record, Am. B. R 19; In re Moore (D. C, Vt.), or other Reasons." 6 Am. B. R. 175, 107 Fed. 234; Ex parte 6. See discussion under this section, post, Christy, 3' How. 292; Yeatman v. Savings subtitle "Fraudulent Transfers and Liens." Inst., .95 U. S. 764; Stewart v. Piatt, 101 7. See discussion under this section, pose, U. S. 731; In re Stuyvesant Bank, 49 flow. sufetitle "Liens through Legal Proceedings" Pr. 133. 1036 Liens. [§ 67-a. place in this section, the allied subject of fraudulent transfers is here inter- dicted in much the same way ; they are null and void as to creditors, if made by an. insolvent with intent to hinder, delay, or defraud and within four months of the bankruptcy. The section also phrases the doctrine of subroga- tion with regard to liens which, because declared void, a mere creditor can- not enforce. Read together, its various paragraphs and salient features make the section consistent and far-reaching in the extreme. c. Construction and general effect. — The following general suggestions may be made: Liens more than four months before the bankruptcy are, unless fraudulent, not affected;® no more are liens acquired after the bankruptcy.^ On the other hand, while subdivision e is in itself a statute of limitations on fraudulent transfers, if the transfer is also interdicted by the law of the State, it may, under § 70-e, be attacked- within the much longer period fixed by the State statute.^" Further, while liens through legal proceedings within the four months' period are dissolved by bankruptcy, other liens are not, unless the lienor was insolvent at the time and there was "intent to hinder, delay, or defraud." ^^ It follows also that a trustee, not being a pur- chaser for value,^^ not only stands in the shoes of the bankrupt as to his property, but, as the representative of creditors, may sue to avoid the effect of the bankrupt's acts.-^^ But the trustee does not represent creditors who are secured by valid liens ; and, therefore, he has no interest in the respective rights of priority of such creditors." Liens here referred to are liens within the meaning of the common law; the term does not occur in the civil law.^' It has also been held that, where a valid lien is incident to a debt and the debt is discharged, the lien nevertheless remains.-'® Subsections a, and 6 of this section apply only to liens created by the debtor." d. Cross-references. — This section is closely connected with both § 60-a-b, on voidable preferences, and § 70-e, on fraudulent transfers voidable under the State law; somewhat less closely with § 3-a (1), § 3-a (2), and § 3-a (3), where similar transactions are declared acts of bankruptcy; while by § 14-b (4) a fraudulent transfer, as defined in words almost identical with those in subsection e, is made an objection to discharge. What is said in the appro- priate paragraphs under the corresponding sections of this work should be consulted here. II. CLAIMS VOID FOK WANT OF RECORD OR OTHER REASONS, a. In general. — Subsection a precludes claims attaching as liens, which would not have been valid liens as against the claims of the creditors of the 8. In re Dunavant (D. C, N. Car.), 3 Am. 13. In re Legg, 96 Fed. 326; In re Leigh B. R. 41, 06 Fed. 542; Doe v. Childress, (Ref., Colo.), 2 Am. B. R. 606, aflfd. 96 21 Wall. 642. Fed. 806. Contra: In re Ohio Co-operative 9. Kinmouth v. Braeutigam (Sup. Ct. N. Shear Co. (Ref., Ohio), 2 Am. B. R. 775. J.), 4 Am. B. R. 344, 46 Atl. 769; In re 14. Goldman v. Smith (Ref., Ky.), 2 Am. Engle (D. C, Pa.), 5 Am. B. R. 372, 105 B. R. 104; Jerome v. McCarter, 94 U. S. Fed. 8«3. 734, 24 L. Ed. 136. 10. In re Adams (Ref., N. Y.), 1 Am. B. 16. Matter of Pilar Hermanos (D.C., Porto !R. 94; In re Dunavant (D. C, N. Car.), 3 Rico), 37 Am. B. R. 405. Am. B. R. 41, 96 Fed. 542. See cases cited 16. Bank of Commerce v. Elliot (Sup. Ct., under Section Seventy of this work. Wis.), 6 Am. B. R. 409, 109 Wis. 678. Com- 11. See discussion under this section, post, pare Bracken v. Johnston, Fed. Cas. 1,761. subtitle "Fraudulent Transfers and Liens." 17. Mishawaka Woolen Mfg. Co. v. Smith 12. Chattanooga Bank v. Rome Iron Co. (D. C, Wis.), 20 Am. B. R. 317, 158 Fed. (C. C, Ga.), 4 Am. B. R. 441, 102 Fed. 885; revd. on other grounds, sub nom. In re 755. Contra: In re Booth (D. C, Or.), 3 Bement (C. C. A., 7th Cir.), 22 Am. B. R. Am. B. R. 574, 98 Fed. 975. 616, 172 Fed. 98. 67-a.] Claims Void for Want of Eecobd. 1037 bankrupt, "for -want of record or for other reasons." It will be noticed that the subsection applies to claims which are ineflFectual as liens against the creditors of the bankrupt for any reason ; not alone "for want of record." 18 This subsection should be read in connection with the next to the last sentence in subsection e. b. State law controls. — Clearly the reference is to the State law. If not yet a lien, properly so called, under that law, as, for want of record or "for other reasons," it cannot be recognized in bankruptcy; it is the statute or judicially established rule of the State which must control in every case.l9 In the absence of a decision by the highest court of a State as to the validity of a lien the bankruptcy court will be governed by the decision of the United States Circuit Court of Appeals.lSa If once it is apparent that the State court founds its decisions as to the effect of a lien, upon a State statute, even though a Federal court has decided precisely the same question directly the contrary, the determination of the State court is controlling.20 This rule is subject to certain exceptions, as where the decision of a State court was rendered by a single trial judge,20a or after rights had accrued or liabilities have been incurred, which are the subject of determination by a court of the United States; in such a case the latter court is not bound by the decision of the State court, but exercises its independent judgment, although it will lean toward an agreement with the State court.21 Whether and to what extent a lien is valid is a local question, to be determined by the decisions of State courts, at least in the absence of Federal statute.22 It is the law of fhe State 18. Application to other liens. — The provision of this section that "claims which for want of record or for other Teasons would not have been valid liens as against the claims of the creditors of the bankrupt shall not be liens against his estate," does not mean that no lien may be maintained against an estate unless or until it has been recorded. Matter of Lane Lumber Co. (C. C. A., 9th Cir.), 33 Am. B. E. 491, 217 Fed. 550. 19. Humphrey v. Tatman, 198 TJ. S. 91, 14 Am. B. E. 74, 49 L. Ed. 956, 25 Sup. Ct. 567; Thompson v. Fairbanks, 196 U. S. 516, 13 Am. B. E. 437, 49 L. Hd. 577, 25 Sup. Ct. 306; In re First Nat. Bank of Canton (C. C. A., 6th Clr.), 14 Am. B. K. 180, 135 Fed. 62; Bryant v. Swafford Bros. Co., 214 U. S. 279, 22 Am. B. E. 115, 53 L. Ed. 997, 29 Sup. Ct. 614; Reardon v. Rock Island Plow Co. (C. C. A., 7th Cir.), 22 Am. B. R. 26, 168 Fed. 654; In re Burke (D. C, Ga.), 22 Am. B. R. 69, 168 Fed. 994; Mattley v. Wolfe (D. C, NebrD, 23 Am. B. R. 673, 175 Fed. 619; In re Hurley (D. C, Mass.), 26 Am. B. R. 434, 185 Fed. 851; Matter of Harrington (D. C, Mass.), 32 Am. B. B. 828, 212 Fed. 642; Scandi- navian-American Bank v. Sabin (C. C. A., 9th Cir.), 36 Am. B. R. 151, 227 Fed. 579; Matter of Kligerman (D. C, Pa.), 33 Am. B. R. 608, 219 Fed. 758; Grimes v. Clark (C. C. A., 4th Cir.), 37 Am. B: R. 142; Matter of Davidson (D. C, Ala.), 37 Am. B. R. 480, 233 Fed. 462; Preetorius V. Anderson (C. C. A., 5th Cir.), 38 Am. B. R. 93; Babbitt v. Read (C. C. A., 2d Cir.), 38 Am. B. R. 303, 236 Fed. 42; Davis T. Billings (Pa. Sup. Ct.), 38 Am. B. R. 957, 99 Atl. 163, holding that unless the bankruptcy law otherwise pro- vides the validity of an assignment or lien Is to be determined in accordance with the principles of the local law. Matter of Rosenthal (D. C, Ga.), 39 Am. B. R. 30, 238 Fed. 597; Border Nat. Bank v. Coupland (C. C. A., 5th Cir.), 39 Am. B. R. 165, 240 Fed. 355; Robertson v. Schlotz- hauer (C. C. A., 7th Cir.), 40 Am. B. R 237, 243 Fed. 324; Matter of Peterson (D. C, Nev.), 40 Am. B. R. 653, 252 Fed. 816; Matter of R. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. E. 189, 247- Fed. 139, atfd. 42 Am. B. R. 530, 254 Fed. 660; Garrison v. Kurt (C. C. A., 8th Cir.), 41 Am. B. R. 291, 249 Fed. 672; Fifth National Bank v. Lyttle (C. C. A., 2d. Cir.), 41 Am. B. R. 370, 250 Fed. 361 ; Stewart v. Asbury (Mo. Ct. of App.), 41 Am. B. E. 387, 201 S. W. 949; Goldberg V. Brule Timber Co. (Minn. Sup. Ct.), 41 Am. B. R. 674, 168 N. W. 22; Matter of Bettman- Johnson Co. (C. C. A., 6th Cir.), 42 Am. B. R. 128, 250 Fed. 657; Matter of Drag (D. C, Mich.), 43 Am. B. R. 59, 254 Fed. 474; Matter of Flint (D. C, N. Y.), 43 Am. B. E. 243; Matter of Peerless Weaving Co. (D. C, Pa.), 43 Am. B. E. 764, 259 Fed. 610; Jones v. Bank of Excelsior Springs (Mo. Ct. of App.), 44 Am. B. E. 89, 213 S. W. 892; Matter of Dagwell (D. C, Mich.), 45 Am. B. E. 358, 263 Fed. 406. The validity of a pledge made, executed and to be performed in New York, and the rights of the parties thereunder are governed by the State law. Hiscock v. Varick Bank, 206 U. S. 28, 18 Am. B. E. 1, 6, 51 L. Ed. 945, 27 Sup. Ct. 681, affg. 15 Am. B. R. 362, 142 Fed. 445 ; Matter of P. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affg. 42 Am. B. R. 530, 254 Fed. 660. 19a. Matter of Davles (D. C, Tenn.), 43 Am. B. E. 458, 256 Fed. 52 ; Matter of Ballard (D. C, Tex.), 44 Am. B. E. 651. 20. Babbitt v. Read (C. C. A., 2d Clr.), 38 Am. B. E. 303, 236 Fed. 42. 20a. Matter of F. & D. Company (C. C. A., 2d Cir.), 43 Am. B. R. 68, 256 Fed. 73. 21. State of Missouri v. Angle (C. C. A., 8th Clr.), 38 Am. B. It. 394, 236 Fed. 644, affg. 35 Am. B. E. 436, 224 Fed. 525. 22. Matter of Virgin (D. C, Ga.), 35 Am. B. R. 494, 224 Fed. 128; Matter of HefCron Co. (D. C, N. Y.), 33 Am. B. R. 443, 216 Fed. 642; Matter of Kligerman (D. C, Pa.), 33 Am. B. E. 608, 219 Fed. 758; Frey v. McGaw (Md. Ct. of App.), 35 Am. B. E. 822; Matter of Mutual Motors Co. (D. C, Mich.), 44 Am. B. E. 337, 260 Fed 341. See Am. Bankr. Dig. § 428. State law to control. — In the case of In re Wade (D. C, Mo.), 28 Am. B. E. 169, 173, 185 Fed. 664, the court said: "Whether, and to what extent, a mortgage of this kind is valid Is a local guestion and the decision of the State court wiU be followed by this court in such case. Dooley v. Pease, 180 U. S. 126, 21 Sup. Ct. 308, 45 L. Ed. 457; Thompson v. Fair- banks, 196 U. S. 516, 15 Am. B. R. 633, 25 Sup. Ct. 306, 49 L. Ed. 577. In short, it seems to be the settled rule that the trustee In bankruptcy takes the property of the bankrupt, subject to all the rights, claims, and equities that have been impressed upon it in the hands of the bankrupt, and that the validity of such rights, claims, and equities is to be determined, in the absence of federal statute, by the local law as 1038 Liens. [§ 67-a r ' " '- - — . , .. ■ , — — . . . — - — -^ where the property is located which governs.^ Where goods are sold under a conditional bill of sale in a State where registration of such sale is not required, but, by the contract, are to be delivered in another State where such registra- tion is required, the law of the latter State prevails.^* This is the corollary of the proposition that the property of the bankrupt comes to the trustee charged with all valid liens. The subsection is naerely declaratory of the law. V c. Want of record.— (1) Ik geneeal. — The laws of many of the States require chattel mortgages, contracts of conditional sale and other similar instruments to be recorded or filed in order that the lien thereby created shall be valid as against other creditors having judgments, or other judicial process. The absence of recording does not necessarily affect the validity of the lien as between the immediate parties; usually it affects such validity merely as to creditors of a certain class ;^^ nor does it affect the provability of the clann.^® The effect of this subsection is to preserve liens on the bankrupt's property, as against the other creditors, where such liens have been duly recorded or filed, as required by a State statute. The construction and effect of such a statute will largely depend upon State decisions. Eeference should be had to such decisions for a determination of the effect of a failure to record or file. Where a contract of conditional sale is made in one State, under the terms of which the goods are to be delivered in another State, the validity of the transaction, and the rights of the parties in respect thereto, will be governed by the laws of the latter State.^^ It will not be possible for us to more than suggest the principles involved in such a determination. The cases are numer- ous which involve the question of the validity of unfiled or unrecorded chattel CTiflonced by the decisions of the State courts." Savings Banli & Dep. Co. (C. C. A. 6th Cir ) Citing Thomas v. Taggart, 209 U. S. 385, 19 Am. 17 Am. B. K. 628, 148 Fed. 975 : In re McGhee B. R. 710, 28 Sup. Ct. 519, 52 L. Ed. 845; Bryan, (D, C, Ga.), 21 Am. B. E. 656, 166 Fed. 928. Trustee T. Swotford Bros. Dry Goods Company, An p.ssljrnment made by a contractor of Its 214 D. S. 279, 22 Am. B. R. Ill, 29 Sup. Ct. 614, plant to its surety under an agreement in the 53 L. Ed. 997; Humphrey v. Tatman, 198 U. S. siirotyship contract that In case the principal 91, 14 Am. B. E. 74, 25 Sup. Ct. 567, 49 L. Ed. failed to complete the contract he would trana- 856: In re Dunlop (C. C. A., 8th Cir.), 19 Am. for the plant to the surety, is a present one and B. E. 361, 156 Fed. 945, 86 C. C. A. 485 ; In ro does not constitute a chattel mortgage required Great Western Manufacturing Company (C. C. to be recorded in order to be valid. Angle v. A., 8th Cir,), 18 Am. B. K. 259, 152 Fed. 123, 81 Banljers' Surety Co. (C. C. A., 2d Cir.), 41 Am. C. C. A. 341; Title Guaranty & Surety Co. v. B. E. 90, 244 Fed. 401. Compare Matter of Witmire (C. C. A., 6th Cir.), 28 Am. B. E. 235, Schilling and Loller (D. C, Ohio), 41 Am. B. B. 195 Fed. 41. 705, 251 Fed. 972, 966. «3. So held In respect to a mortgage executed gg. In reBurlage Bros. (D. C, la.), 22 Am. In New Yorl£ upon property in Connecticut. In B. E. 410, 169 Fed. 1006. re Greene (D. C, Conn.), 13 Am. B. E. 504, 134 ri. In re Wall (D. C, Okla.), 29 Am. B. E. Fed. 137. See also In re Gray (D. C, Oljla.), 901, 207 Fed. 994, holding that In determining 21 Am. B. E. 375, 170 Fed. 638; Matter of the validity of a contract of conditional sale, McAusland (D. C, N. J.), 37 Am. B. E. 519, 235 where the laws of the State in which the con- Fed. 173; Matter of Davies (D. C, Tenn.), 43 tract was made are not pleaded, the court will Am. B. E. 458, 256 Fed. 52 ; Hoyt v. Zibell (C. C. presume that they are similar to the laws of A., 7th Cir.), 43 Am. B. E. 538, 259 Fed. 186. the State where the goods were delivered and 24. lex loci controls. — The case of In re where they were when bankruptcy intervened; Yukon Woolen Co. (D. C, Conn.), 2 Am. B. E. Matter of Anson MercantUe Co. (D. C, Tex.), 38 805, 96 Fed. 326, follows the general principle Am. B. E. 952, 203 Fed. 871. of law recognized by the Federal courts that when Jaw of situs governs application of where a contract contemplates or provides that recordinsr statute. — Where an excavating ma- property is to be delivered or used In another chine, purchased under a conditional sale, was State the lex loci, solutionis governs. See also shipped by the vendors to another State to be Matter of Southern Textile Co. (C. C. A., 2d there used quasi permanently, the recording dr.), 23 Am. B. E. 172, 174 Fed. 523. The con- statute of the State to which It was shipped Btructlon placed by the State courts upon a applies. And upon failure to record the oon- State statute relating to conditional sales will tract as required by the laws of that State, be adopted by the bankruptcy court. Matter of the title of a trustee in bankruptcy is good aa Pacific Electric & Automobile Co. (D. C, against an attempted reclamation by the Wash.), 35 Am. B. E. 222, 224 Fed. 220. vendor. Potter Mfg. Co. v. Arthur (C. C. A.. 26, First Nat'l Bank v. Connett (C. C. A., 8th 6th Cir.), 34 Am. B. E. 75, 220 Fed. 843. Gr.), IB Am. B. E. 662, 142 Fed. 33; Loeser v. § 67-a.j Want of Eecord. 1039 mortgages or contracts of conditional sale as against general judgment cred- itors of the bankrupt. The determination of the question must necessarily depend upon the statutes and decisions of the several States,^® and they do not, therefore, admit of ready classification. A number of these cases are cited in the note.^® (2) What constitutes want of eecoed affecting validity. — A mort- gage given and received in fraud of creditors, or to hinder, delay, or defraud creditors is invalid as to creditors. But a mortgage not so given, that is, not given and received for such a purpose, if there be a good present consideration and it is given more than four months prior to the filing of the petition in bankruptcy in New York, is good and valid as to creditors and the trustee in bankruptcy, whether recorded or not. A mortgage is not "required" to be recorded as to general creditors and a trustee in bankruptcy, when it is not required to be recorded except as to subsequent purchasers in good faith and subsequent mortgagees. If good as to general creditors without being recorded, then as to general creditors and the trustee in bankruptcy representing them and their interests it is not " required " to be recorded within the meaning of the bankruptcy act.*** (3) Chattel moetgages and conteacts foe conditional sale. — (I) In general. — The object of recording acts is to prevent the obtaining of credit by reason of the ostensible ownership of property which in reality is covered by a secret lien by giving notice to those intending to purchase such property and to creditors who give credit on the faith thereof.** A trustee in bank- ruptcy is, generally speaking, in the shoes of the bankrupt; he acquires no better title than that of the bankrupt, and, except for the provisions of 28. In re Beede (D. C, N. Y.), 11 Am. C, Mo.), 9 Am. B. R. 180, 118 Fed. 471. B. R. 387, 126 Fed. 853; In re Andrae Co. Equitable claim on proceeds of sale. Hanson (D. C, Wis.), 9 Am. B. R. 135, 117 Fed. v. Blake & Co. (D. C.', Me.), 19 Am. B. R. 561; In re Antigo Screen Door Co. (C. C. 325, 155 Fed. 342; Pontiac Buggy Co. v. A., 7th Cir.), 10 Am. B. R. 359, 123 Fed. Skinner (D. C., N. Y.), 20 Am. B. R. 206, 249; Matter of McDonald (D. C, Mass.), 23 158 Fed. 858; Deupree v. Watson (C. C. A., Am. B. R. 51, 173 Fed. 99; In re Nuckols 6th Cir.), 32 Am. B. R. 407, 216 I'ed. 483; (D. C. Tenn.). 29 Am. B. R. 867, 201 Fed. Grimes v. Clark (C. C. A., 4th Cir.), 37 437. Am. B. E. 142; Davis v. Harlow (Md. Ct. of The TiglitB of creditors to avoid unrecorded App.), 39 Am. B. E. 300, 100 AtL 102; Matter liens, wliicli the bankruptcy act confers on of Terrell (C. C. A., 8th Cir.), 40 Am. B. E. trustees in bankruptcy, are to be determined 713, 246 Fed. 743. See discussion and cases by the laws of the State requiring the record cii»& under this section, post, subtitles, In re Dancy Hardware & Furniture Co. (D. C, " Mechanics' Liens," " Chattel Mortgages," " By Ala.), 28 Am. B. E. 444, 198 Fed. 336; Matter of r",^?.™!"' ^""^ Execution, "By Creditors' ST^.o'if^i^A ^•' ,'^^'' ^? f^-r.\ ^. $\.^^ ^^^^ »' Pl»<=« wte" property is situated.- Fed. 597; Matter of TerreU (C. C. A., 8th Cir.), Where mortgaged property, at the time of the 40 Am. B. E. 713, 246 Fed. 743 ; American Laun- execution of the mortgage, is situated in a dry Mach. Co. v. Everybody's Laundry (la. Sup. State other than that in which the mortgagor Ct.), 43 Am. B. E. 294, 171 N. W. 161. is domiciled and the mortgage executed, the 29. In re Harrison (N. Y.), 2 N. B. N Ben Question of the preservation of the lien acquired 541- In TP Booth (D C Or 1 .1 Am B P V7i. ^'^ ^^'^^ mortgage, under the laws in refer- gsVd 975 Inre Tktemetal (D r N r»rt' ^'"'^ *" registration and the priority of such fi Am R B i?R iin p!S^ ^10 Vi -^ ^' S ^' "«" ""f^"^ ">« "^iSlits and interests subsequently 6Am. B. E. 426, llOFed. 519; lu re N. y. Econ. acquired by third persons, should be deter- Printing Co. (C. C. A., 2d Cir.), 6 Am. B. E. mined by the law of the place where the prop- 615, 110 Fed. 514; In re Sewell (D. C, Ky.), 7 erty is situated at the time the mortgage is Am. B. E. 133, 111 Fed. 791; In re WUkes (D. C, executed. In re Nuckols (D. C, Tenn.), 29 Ark.), 7 Am. B. E. 574, 112 Fed. 975; In re Am. B. E. 867, 201 Fed. 437. Pekin Plow Co. (C. C. A., 8th Cir.), 7 Am. B. E *•• Matter of Mosher (D. C, N. Y.), 35 Am. 369, 112 Fed. 308 ; In re Hull (D. C, Vt ) 8 ^- ^- 284, 224 Fed. 739 ; Eobertson v. Schloti- Am. B. E. 302, 115 Fed. 858; Dunplain Silk Co. 5,^!J^''oiP' ^- ^- "^ ^"■'>- *° ■*•'"• 2- K- 237, 243 V. Spencer (C. C. A., 3d Cir.), 8 Am. B. E. 367, ^^'f- ^T. * , .,- -. , 115 Fed. 689; In re Josephson (D. C, Ga.), 8 Am. . **• f^^"^ »„' r?^"^ i"?.' a^V'°p "li ^iS," B. E. 423, 116 Fed. 404; In re Gosch (C. C. A., 5th |°d Tsb- In re a'aussen^D C k cJ^^ Tk "ilf^i^,- ^;}''^f'F'^; ^%'- T^- '^^- I Am''B.'°E."34.'''l64"Fed!°30o'^^' Matte^'if B. E. 610, 121 Fed. 602; In re Eaubenan (D. Southern Textile Co. (C. C. A., 2d Cir.), 23 1040 Liens. [§ 67-a. § 47-a (2), as amended by the act of 1910, is not in any sense a subsequent purchaser in good faith within the meaning of recording acts.^^ One purpose of the amendment of 1910 to § 47-a (2) was to reach that class of cases in which no creditors had acquired a lien by legal or equitable proceedings, so as to vest in the trustee for the beneiit of all the creditors the potential rights of a creditor having such a lien.^* A mortgagee, taking possession before the commencement of bankruptcy proceedings against the mortgagor of after- acquired property covered by the mortgage, is entitled under the laws of some states to hold it against the trustee.^* If actual notice of the chattel mortgage or conditional sale is shown, the failure to record or file is immatcTial.^^ (II) Effect of failv/re to file or record; New York rule. — Under the law in IvTew York an unfiled chattel mortgage is void only as against judgment creditors of the mortgagor, and it has been held that a general creditor upon obtaining judgment and issuing execution may impeach the validity of the mortgage for nourfiling, although in the meantime it may have been filed. *** The Court of Appeals of ISTew York has held that the trustee of a bankrupt mortgagor could attack a mortgage for failure to file to the extent of the claims of those creditors whose claims accrued prior to the time when the Am. B. E. 172. 174 Fed. 523. See Bayley V. Greenleaf, 7 Wheat. (U. S.) , 46, 5 L. Ed. 393, where Chief Justice Marshall says: " There is not perhaps a State in the Union, the laws of which do not make all convey- ances not recorded and all secret trusts void as to creditors, as well as subsequent pur- chasers without notice. To support the secret lien of a vendor against a creditor who is a mortgagee would be to counteract the spirit of these laws." Cooper Grocery Co. v. Penland (C. C. A., 5th Clr.), 40 Am. B. E. 589, 247 Fed. 480. 33. In re Wade (D. C, Mo.), 26 Am. B. E. 169, 185 Fed. 664; Hewit v. Berlin Machine Worlts, 194 U. S. 296, 11 Am. B. E. 709, 48 L. Ed. 986, 24 Sup. Ct. 690; Thompson v. Fairbanks. 196 U. S. 516, 13 Am. B. E. 437, 49 L. Ed. 577, 25 Sup. Ct. 306; York Mfg. Co. v. Cassell, 201 U. S. 344, 15 Am. B. E. 633, 50 L. Ed. 782, 26 gup. Ct. 481. 33. In re Calhoun Supply Co. (D. C, Ala.), 26 Am. B. E. 528, 189 Fed. 537; In re Hart- dagen (D. C, Pa.), 26 Am. B. E. 532, 189 Fed. 546; Lake View State Bank y. Jones (C. C. A., 7th Cir.), 40 Am. B. E. 148, 242 Fed. 821. Conditional sale; failure to record; rights of trustee under section 47-a (2) as amended in 1910. — 'Where a vendor under a condi- tional sale contract, failed to record such contract in a State whose laws required record and avoided contracts unrecorded, as against purchasers for a valuable considera- tion, mortgages and judgment creditors with- out notice, said vendor could not reclaim the chattel covered by the contract from the trus- tee in bankruptcy of the vendee, since the purpose of the amendment to section 47-a (3) of the bankruptcy act, enacted June 25, 1910, providing "and such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon" was to obviate the previous rule that the title of the vendor, in an unrecorded conditional sale contract, would prevail over that of the trus- tee in bankruptcy of the vendee. The opera- tion of the amendment of 1910 to section 47-a (2) of the bankruptcy act was not in- tended to be restricted to cases in which a creditor had in fact acquired a lien by legal or equitable proceedings, as it would then add nothing to section 67 of the original act per- mitting the subrogation of the trustee to'auch a lien, if created within four months; but the class of cases, unprovided for by the original act, and intended to be reached by the 1910 amendment, was that in which no creditors had acquired liens by legal or equi- table proceedings and to vest in the trustee for the interest of all creditors the potential rights of creditors potential with such liens. In re Bazemore (D. C, Ala.), 26 Am. B. R. 494, 189 Fed. 236. See In re Dancy Hard- ware & Furniture Co. (D. C, Ala.). 28 Am. B. R. 444, 198 Fed. 336. Conditional sale contract; failure to record. — ^Where a State statute renders a contract of conditional sale invalid as to lien creditors or iona fide purchasers where it is not registered, a seller of property by condi- tional sale who has failed to register his con- tract has no remedy as against the trustee in bankruptcy to enforce his lien, and he can- not recover the property from a purchaser at the trustee's sale, but he is a mere general creditor with a right to share in the assets of the estate. Hlnton v. Williams (N. C. Bup. Ct.), 35 Am. B. E. 878, 86 S. E. 904. 84. In re Hurley (D. C, Mass.), 26 Am. B. R. 434, 185 Fed. 851; Jones v. Bank of Excelsior Springs (Mo. Ct. of App.), 44 Am. B. E. 99, 213 S. W. 892. 86. In re Bazemore (D. C, Ala.), 26 Am. B. R. 494, 189 FeS. 236; First Nat. Bank v. Wegener (Ore. Sup. Ct.), 44 Am. B. R. 587, 186 Pao. 41. 36. In re Beede (D. C, N. Y.), 11 Am. B. R. § 67-a.j Effect of Failure to File oe Recced. 1041 mortgage was filed, although if any one of such creditors sought relief against such mortgage it would be necessary for him to put his claim into a judg- ment.^^ This ruling of the Court of Appeals of New York would seem con- clusive upon this question, in view of the determination of the Supreme Court of the United States,^^ already referred to, to the effect that Federal courta are required in all such cases to follow the rules laid down by State courts."* The rule in force in New York depends upon a construction of the New York statute; it does not necessarily apply in other jurisdictions.^" 387, 120 Fed. 853; In re Beede (D. C, N. Y.), 14 Am. B. E. 697, 138 Fed. 441, in which cases Judge Eay considered at length and in fuU all the New York authorities applicable to the validity of unfiled chattel mortgages. 37. Skilton V. Codington, 15 Am. B. K. 810, 185 N. Y. 80, 77 N. B. 790, disapproving In re New York Economical Printing Co. (C. C. A., 2d Cir.), 6 Am. B. E. 615, 110 Fed. 514, See also Gove v. Morton Trust Co., 12 Am. B. E. 297, 96 N. Y. App. Div. 177, 89 N. Y. Supp. 247; Matter of Metropolitah Store, etc. Co. (Eef., N. Y.), 15 Am. B. E. 119; In re Beede (D. C, N. Y.), 11 Ad>. B. E. 387, 126 Fed. 853; Matter of Thompson (D. C, N. Y.), 10 Am. B. E. 242, 122 Fed. 174; In re Ducker (C. C. A., 6th Cir.), 13 Am. B. E. 760, 133 Fed. 771; In re Schlebler (D. C, N. Y.), 21 Am. B. E. 309. 165 Fed 363; In re Thomas (D. C, N. Y.), 29 Am. B. E. 945, 199 Fed. 214; Matter of Palmer (D. C, N. Y.), 33 Am. "B. E. 689, 218 Fed. 74; Matter of PerpaU (C. C. A., 2d Cir.), 44 Am. B. E. 519, 261 Fed. 858. As to effect of failure to record assignment of mortgage upon subsequent assignee, see In re Buchner (D. C, 111), 29 Am. B. E. 179, 202 Fed. 979. Failure to file within reasonable time. — In New York, a chattel mortgage must be filed within a reasonable time after the execution, and a failure to file it for nearly three months after its execution renders it invalid as against aU the creditors of the bankrupt even though the mortgagee was unable to speak the English language and was apparently entirely unac- quainted with business, and such failure was through the omission of her attorney either to do so or to tell her to do so. Matter of Schmidt (C. C. A., 2d Cir.), 24 Am. B. E. 687, 181 Fed. 73. Failure to refile chattel mortgraire; New York statute. — Where, as in New York, the statute provides that a chattel mortgage shall be invalid as against creditors of the mortgagor and against subsequent purchasers or mort- gagees in good faith after the expiration of, one year from its original filing, unless refiled within thirty days next preceding the expira- tion of such time, a failure to reflle a mort- gage given by bankrupt until some five months after the expiration of one year from the date of its original filing, renders such mortgage invalid as against the bankrupt's creditors and may be attacked by the trustee. Matter ~ of Watts-Woodward Press, Inc. (C. C. A., 2d Cir.), 24 Am. B. E. 684, 181 Fed. 71; Matter of Flint (D. C, N. Y.), 43 Am. B. E. 243; Benedict v. Zutes (N. Y. Sup. Ct.), 88 Misc. 214, 150 N. Y. Supp. 147. 38. Humphrey v. Tatman, 198 V. S. 91, , 14 Am. B. E. 74, 49 L. Ed. 956, 25 Sup. Ct. 567. 39. Compare In re Burnham (D. C, N. T.), 15 Am. B. E. 548, 140 Fed. 926. 40. York Mfg. Co, v. Cassell, 201 tJ. S. 344, 15 Am. B. E. 633, 50 L. Ed. 782, 26 Sup. Ct. 481 ; Crosby v. Miller (Ct. App., D. C), 16 Am. B. E. 805, 25 E. I. 172; In re Doran (D. C, Ky.), 17 Am. B. E. 799, 148 Fed 327; In re Thomas (D. C, N. Y.), 29 Am. B. E. 945, 199 Fed. 214; Foerstner v. Citizen's Savings & Trust Co. (C. C. A., 6th Cir.), 26 Am. B. E. 377, 186 Fed. 1; Davis V. Hanover Savings Fund Society (C. C. A., 4th Cir.), 31 Am. B. E. 368, 210 Fed. 768, as to effect of faUure to record against general creditors under West Virginia statute. Matter of TerreU (C. C. A., 8th Cir.), 40 Am. B. E. 713, 246 Fed. 743; American Laundry Mach. Co. V. Everybody's Laundry (la. Sup. Ct.), 43 Am. B. E. 294, 171 N. W. 161. Under the Miehigran statute where possession of the mortgaged property is not transferred, failure to properly file the chattel mortgage renders it absolutely and conclusively void as to creditors of the mortgagor who become such after the mortgage is given ar^d before the statute is complied with, and such creditors may attack the mortgage although they did not acquire a lien during the period of non- compliance with the statute. Goldberg v. Brule Timber Co. (Minn. Sup. Ct.), 41 Am. B. E. 674, 168 N. W. 22 ; Matter of Am. " Steel Supply Synd., Inc. (D. C, Mich.), 43 Am. B. E. 271, 256 Fed. 876; Matter of Mutual Motors Co. (D. C, Mich.), 44 Am. B. E. 337, 260 Fed. 341. Com- pare In re Ottenwess v. Huxall (C. C. A., 6th Cir.), 27 Am. B. E. 579, 193 Fed. 851; Detroit Trust Co. V. Pontlac Sav. Bank (C. C. A., 6th Cir.), 27 Am. B. E. 821, 196 Fed. 29, affd. 237 U. S. 186, 34 Am. B. E. 759, 59 L. Ed. 907, 35 Sup. Ct. 509. It is settled law in the State of Ohio that a chattel mortgage not filed for record and under which possession had not previously been taken by the mortgagee, is void as to all creditors of the mortgagor, and subsequent purchasers and mortgagees in good faith. Matter of SchiUing and LoUer (D. C, Ohio), 41 Am. B. E. 705, 251 Fed. 966. TTnder 3103 of the Code of West Tlrginia, providing that a deed of trust shaU be void as to creditors "until and except from the time it is duly admitted to record," an unrecorded deed of trust Is not void as to general creditors ; and the holders of bonds secured by an unre- corded deed of trust merely lose their right to priority as against creditors who have obtained judgments or other liens on the property. In re Charles Town Light & Power Co. (D. C, W. Va.), 29 Am. B. E. 721, 199 Fed. 846. In Kentncky, an unrecorded contract of con- ditional sale, with reservation of title in the vendor, is good as against the trustee of the vendee, though some of the creditors did' not sustain that relation at the time the contract was entered into. The word " creditors " as used in the statute Includes only such as have acquired a lien. Crucible Steel Co. of America v. Holt (C. C. A., 6th Cir.), 23 Am. B. R. 302, 174 Fed. 127; In re Ducker (D. C, Ky.), 13 Am. B. E. 760, 133 Fed. 771. In Missouri it has been held that the insti- tuting of bankruptcy proceedings amounts to an effectual sequestration of the bankrupt's property in favor of all the creditors, and that therefore an unrecorded chattel mort,"-a"-e Is invalid as against the trustee representinn- all the creditors. Bradley t. McAfee (D. C, Mo.). 1042 LlEI^TS. [§ G'-^- (III) Bankrupt remaining in possession. — If a bankrupt gave a lien on certain chattels to secure an. antecederut indebtedness, the bankriipt remaining in possession, with the power of disposition, and no notice by filing or other- wise being given, the lien is not effectual against the bankmpt's creditors, such lien being regarded as fraudulent against creditors.*^ It has been held 17 Am. B. K. 499, 149 Fed. 254; In re Pekin Plow Co. (C. C. A., 8tli Cir.), 7 Am. B. E. 369, 112 Fed. 308; In re Martin (C. C. A., 8th Cir.), 23 Am. B. K. 151, 173 Fed. 597; In re Wade (D. C, Mo.), 26 Am. B. E. 169, 185 Fed. 664. In Kansas, wliere the title of an assignee for the benefit of creditors Is good as against an unfiled contract of conditional sale, the rights of creditors of the assignor under such contract may be enforced by his trustee. In re Fish Bros. Wagon Co. (C. C. A., 8th Cir.), 21 Am. B. E. 149, 164 Fed. 553. TTnder the law of Maryland, although sub- eequent creditors of the mortgagee without notice are not affected by an unrecorded chattel mortgage, a creditor whose debt has been contracted prior to the making of such mortgage Is, so far as the mortgaged property Is concerned, postponed to the mortgagee's claim, notwithstanding that he has reduced his claim to Judgment and levied execution upon the mortgacjed property. Hence, in determin- ing the question of priority of the distribution of the proceeds of the property so mortgaged, the mortgagee's rights are not affected by the amendment of 1910 to section 47-a (2) of the bankruptcy act, vesting in the trustee, who represents the general creditors, ail the rights and priorities which by State law are accorded a creditor holding a lien by legal or equitable proceedings on the property, but he is entitled to share in the proceeds with the subsequent creditors. In re Eiehl (D. C, Md.), 29 Am. B. E. 613, 200 Fed. 455. Under the law of Arkansas, a contract of conditional sale, although unrecorded, is valid as against the vendee's trustee in bankruptcy, and vests no title in the vendee, even as against hona fide purchasers without notice, untU performance of the conditions. In re Lutz (D. C, Ark.), 28 Am. B. E. 649, 197 Fed. 492. The Washington statute is similar to the New York act, and it has been held there- under that the courts will not restrict the word " creditors " but will declare a chattel n>ort- gage not filed within ten days from the time of its execution to be of no force or effect as to any creditor, whether prior or subsequent, at least until it is actually filed. In re Mission Fixture & Mantel Co. (D. C, Wash.), 24 Am. B. E. 873, 180 Fed. 263; Pacific State Bank v. Coats (C. C. A., 9th Cir.), 30 Am. B. E. 655, 205 Fed. 618; In re United States Lumber Co. (D. C, Wash.), 30 Am. B. E. 682, 206 Fed. 236. Under the Washington statute a chattel mortgage, not filed within ten days, but filed before bankruptcy proceedings were commenced and before the bankrupt had any creditors. Is valid" as aganist the trustee in bankruptcy of the mortgagor. Matter of Bolstad (D. C, Wash.), 35 Am. B. E. 355, 224 Fed. 283. Under the law of North Carolina, which declares every mortgage or deed of trust to be invalid as against creditors until its registra- tion, a trustee in bankruptcy may avoid and set aside a chattel mortgage which, although given before and for a consideration passing at the time of its execution, was not recorded until within four months prior to the beginning of bankruptcy proceedings, and which oper- ated at the date of its registration to give the mortgagee a preference over other creditors. Brigman v. Covington (C. C. A., 4th Cir.), S3 Am. B. E. 644, 219 Fed. 500. Under the law of Minnesota, a chattel mortgage vests the legal title to the mort- gaged property in the mortgagee, and, al- though unrecorded, is good as against gen- eral creditors of the mortgagor who have not seized the mortgaged property by legal process or acquired some lien upon it. Title Guaranty & Surety Co. v. Witmire (C. C. A., 6th Cir.), 28 Am. B. R. 235, 195 Fed. 41. A trust receipt under which money ia advanced to a manufacturer for the purchase of property, is so far in the nature of a con- ditional sale as to fall within the Ohio statute. Matter of Bettman-Johnson Co. (C. C. A., 6th Cir.), 42 Am. B. E. 128, 250 Fed. 657. 43. In re Bellevue Pipe &, Foundry Co. (Ref., Ohio), 22 Am. B. R. 97, citing Ohio cases. See also In re Braselton (D. C, Ga.), 22 Am. B. R. 419, 169 Fed. 960; Wil- liamson V. Richardson (C. C. A., 9th Cir.), 30 Am. B. R. 559, 205 Fed. 245; Covington v. Brigman (D. C, N. Car.), 32 Am. B. R. 35, 210 Fed. 499; Matter of P. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. R. 189, 247 Fed. 139, aff'd 42 Am. B. R. 530, 254 Fed. 660; Matter of Schilling & LoUer (D. C, Ohio), 41 Am. B. R. 698, 251 Fed. 972. See Am. Bankr. Dig., i, 442. 44. In re Bement (C. C. A., 7th Cir.), 22 Am. B. R. 616, 172 Fed. 98; In re Burke (D. C, Ga.), 22 Am. B. R. 69, 168 Fed. 994; In re Danoy Hardware & Furniture Co. (D. C, Ala.), 28 Am. B. R. 444, 198 Fed. 336. 45. Stellwagen v. Clum (C. C. A., 6th Cir.), 38 Am. B. R. 904, 218 Fed. 730. See also Matter of Schilling & Loller (D. C, Ohio), 41 Am. B. R. 688, 251 Fed. 973. Sale to person, living with bankrupt. — Where a bankrupt and his wife lived with his mother-in-law, a sale of personal prop- erty made by him in good faith to her is not void as to creditors under the law of Pennsylvania, upon the ground that there was no obvious change of possession, since under the circ\imstances a change of posses- sion was not practicable. Matter of Komara (C. C. A., 3d Cir.), 42 Am. B. R. 236, 251 Fed. 47. 4.6. State Bank v. Cox (C. C. A., 7th Cir.), 16 Am. B. R. 32, 143 Fed. 91 ; Ci-uchet v. Red Rover Co. (C. C, Mass.), 18 Am. B. R. 814, 155 Fed. 486; Clay v. Waters (C. C. A., 8th Cir.), 24 Am. B. R. 293, 178 Fed. 388; Schaupp V. Miller (D. C, Ore.), 30 Am. B. R. 699, 306 Fed. 575. 47. Duffy V. Charak, 236 U. S. 97, 34 Am. B. R. 5, 59 L. Ed. 483, 35 Sup. Ct. 264. § 67-a.] Effect of Failuke to File ok Recoed. 1043 under a statute requiring a contract for the sale of personal property, where the title is to remain in the seller, and the possession' in the purchaser, to be filed, that an unfiled contract for the sale of goods intended for resale, with reservation of title in the vendor until payment of the purchase price, is invalid as against general creditors of the vendee; in such a case the trustee in bankruptcy of the vendee may contest the validity of such contract in behalf of such creditors.** Where there has been no actual change of possession but circumstances, as where the property was marked as belonging to the purchaser, indicate that title has been passed under a bill of sale, the trustee does not take title, although the bill of sale was not recorded.*^ Possession of the property by the mortgagee, taken after the filing of the petition in bank- ruptcy, cannot avail the mortgagee as against the trustee in bankruptcy.*" But the holder of an unrecorded chattel mortgage may take possession of the property, subject to possession by an officer of a State court under an attach- ment, so as to render the mortgage valid under a State law providing that an unrecorded mortgage is invalid against third parties unless the property is in the possession of the mortgagee.*'' (IV) Withholding from record or filing. — Where chattel mortgages are withheld from record contrary to the provisions of a statute for the purpose of enabling the mortgagor to preserve his credit, such mortgages are not entitled to priority of payment in bankruptcy over claims arising subsequent to the execution of the mortgages and before they were recorded.** An agree- ment to withhold from record, for the purpose and with the effect of securing credit not justified by the debtor's financial status, is evidence of fraud which is of itself sufficient to vitiate the transfer.*® But the failure to promptly 18. Clayton v. Exchange Bank of Macon held from record by agreement for the pur- (C. C. A., 5th Cir.), 10 Am. B. R. 173, 121 pose of enabling the mortgagor to preserve Fed. 630; Guras v. Porter (D. C, Cal.), 9 his credit, are fraudulent as against subse- Am. B. E. 271, 118 Fed. 668; In re Andrae quent creditors. Hawkins v. Dannenberg Co. Co. (D. C. Wis.), 9 Am. B. R. 135, 117 Fed. (D. C.,'Ga.), 37 Am. B. R. 262, 234 Fed. 752. 561; Orr v. Park (C. C. A., 5th Cir.), 25 49. !„ ^e Duggan (D. C, Ga.), 25 Am. B. Am. B. R. 544, 183 Fed. 683; In re Jacob- jj ^05, 182 Fed. 252, affd. 25 Am. B. E. 479, «on 4 Perrill (D. C., Ga.h 29 Am. B R. 603 ^33 ^^^ ^^g q^^. "^^ p^^j^ ,(.. C. A., 5th 200 Fed. 812; National Bank of Bakei^field ^ g ^ Fed. 383; V. Moore (C. C. A.. 9th Cir. , 41 Am. B. R. ,^ /' „, , ,^ ^i a oj-i, r^- \ na 409. 247 Fed. 913;' Stewart v. Asbury (Mo. Y''^*^^^-, .^.^f/, ^ S' /;., T i' ,^ Ct. of App.), 41 Am. B. R. 387, 201 S. W. A™- ^- ^- 151, 163, 185 Fed. 442; In re Bothe 949 ^^ (C. C. A., 8th Cir.), 23 Am.. B. R. 151, 173 Withholding from recotd.— A trust deed Fed. 597; Fourth Nat'l Bank v. Willingham or mortgage, executed by a corporation as (C. C. A., 5th Cir.), 32 Am. B. R. 159, 213 security against indorsements of notes, with- Fed. 219; Covington v. Brigman (D. C, N. held from record for the purpose of avoiding Car.), 32 Am. B. R. 35, 210 Fed. 499; Matter publicity and injury to the credit of the cor- of National Boat & Engine Co. (D. C, poration, and not mentioned in a bill of sale Maine), 33 Am. B. R. 154, 216 Fed. 208. to the bankrupt, wag not a valid incumbrance Secret agreement to withhold chattel on the property purchased as against the mortgage from record; void as to both prior bankrupt, and did not constitute a valid ^^^ subsequent creditors.—Where a, bank- consideration for the delivery of bonds by ^ ^l^^^tel mortgage to . creditor the bankrupt^ to the indorser who was a ^ ^ ^ agreement that the same should -director of the bankrupt. Butterfield v. ,.,,,_;" ^ ,, , j t,- i, Voodman (C. C. A.. 1st Cir.), 34 Am. B. R. ^^ withhe d from the record and which was 10 223 Fed. 956, modifying 33 Am. B. R. so withheld for a period of many months, 54 216 Fed. 308. during which time other creditors, unaware Agreement' to' withhold.— Mortgages with- of this undisclosed mortgage, sold him goods, 1044 Liens. [§ 67-a. record or file a mortgage is not in itself fraudulent as to other creditors, where there is no proof of fraudulent intent. °° In some jurisdictions and under some statutes it must affirmatively appear in order to invalidate the mortgage that it was withheld from record by agreement, or that some prejudice resulted to creditors on account of its not having been filed for record.^^ (V) Recording or filing within four months' period. — In Massachusetts a chattel mortgage made prior to the four months' period and recorded within that period is good as against the mortgagor's trustee in bankruptcy. ^^ The same rule apparently exists in Maine under a similar, statute.^ The contrary rule, however, is maintained in l^orth Carolina,^* Missouri,^*^ and 'New Jer- sey.^**" A failure to record a real property mortgage until after the adjudica- tion of the bankrupt mortgagor and the appointment, of his trustee has been which they had refused to do while a prior mortgage to the same mortgagee was on record, and which, for that reason, was can- celed of record and the mortgage in question given, the mortgage was fraudulent and void, not only as to subsequent creditors, but- as to prior creditors as well. In re Duggan (C. C. A., 5th Cir.), 25 Am. B. R. 479, 183 Fed. 405, aflFg. 25 Am. B. R. 105, 182 Fed. 252. 50. Bean v. Orr (C. C. A., 5th Cir.), 25 Am. B. R 400, 182 Fed. 599, revg. In re Tysor-Cheatham Mercantile Co., 24 Am. B. R. 434, 178 Fed. 733, and distinguishing •Clayton v. Exchange Bank (C. C. A., 5th Cir.), 10 Am. B. R. 173, 121 Fed. 630, 57 C. C. A. 656. Compare In re Sturtevant (C. €. A., 7th Cir.), 26 Am. B. R. 574, 188 Fed. 196. 51. Deland v. Miller & Cheney Bank, 11 Am. B. R. 744, 119 Iowa, 368; In re Wil- liams (D. C, Ga.), 9 Am. B. R. 731, 120 Fed. 543. See also Hawkins v. Dannenberg (C. C. A., 5th Cir.), 42 Am. B. R. 332, 253 Fed. 529. Intervention of bankruptcy before time for recording contract of conditional sale has expired. — ^Under the requirement of § 3394 of Civil Code of Alabama of 1907 that where personal property is delivered from without the State to a purchaser under a contract of conditional sale whereby the vendor retains title until payment of the purchase price the contract must, within three months of the time the property subject to the condition comes into the State, be recorded, the failure to record such a contract within the stated period avoids the condition in favor of the purchaser's trustee in bankruptcy, though at the time bankruptcy intervened the prop- erty had not been within the State for the full period of three mionths allowed by the statute for the purpose of recording. In re Dancy Hardware & Furniture Co. (D. C, Ala.), 28 Am. B. R. 444, 198 Fed. 336. Rights of creditors subsequent to unre- corded instrument; withholding from record. — Under the law of Iowa a creditor, subse- quent to an unrecorded instrument, has no equity and no right to assert a claim superior to the rights accruing under the unrecorded instrument, unless before record, he acquires a lien by attachment, execution or otherwise ; but, he has the right to allege that the unre- corded instrument was witl;held from record as part of a fraudulent scheme to procure credit. 'Where conditional contracts were filed for record before the filing of a petition in bankruptcy, the trustee in bankruptcy acquired no rights greater than those which would be acquired by creditors who on the day that the petition in bankruptcy was filed secured a lien tiy attachment or otherwise. A mortgage, executed more than four months before the bankruptcy petition is filed, is valid as against the trustee, even though the same is not recorded until three days previous to the filing of the petition in bank- ruptcy, where there is no claim of preference. Emerson-Brantingham Implement Co. v. Law- son (D. C, Iowa), 38 Am. B. R. 344, 237 Fed. 877. 52. Humphrey v. Tatman, 198 U. S. 91, 14 Am. B. R. 74, 49 L. Ed. 956, 25 Sup. Ct. 567. The rule in Ohio seems to be the same. In re First Nat. Bank of Canton (C. C. A., 6th Cir.), 14 Am. B. R. 180, 135 Fed. 62. Recording mortgage within four months' period. — A mortgage executed and delivered by an insolvent debtor more than four months prior to the filing of his voluntary petition, but not recorded within the statutory four months, has been held a valid and subsisting lien as against the trustee. In re Wright (D. C, Ga.), 2 Am. B. E. 364, 96 Fed. 187; Matter of Virgin (D. C, Ga.), 35 Am. B. K. 494, 224 Fed. 128. 53. In the case of Matter of Marriner (D. C, Me.), 34 Am. B. E. 444, 220 Fed. 542, it was held that since, under the Maine statute, a chattel mortgage, made in good faith, is valid against all parties who, previous to the date of its record, have not acquired a lien by attachment, levy, or some such proceeding, it is valid as to creditors who extend credit to the mortgagor prior to its record, where it appears that it was not withheld from record for the purpose of giving the mortgagor a fictitious credit, and that the subsequent record was not made in contemplation of bankruptcy, or with any corrupt purpose. See also De Laval Separator Co. V. Jones (Me. Sup. Ct.), 41 Am. B. E. 440, 102 Atl. 968. 64. Brigman v. Covington (C. C. A., 4th Cir.), 33 Am. B. E. 044, 219 Fed. 500. 64a. Stewart v. Asbury (Mo. Ct. of App,), 41 Am. B. E. 387, 201 S. W. 949. 64b. Matter of Capital City Cap Co. (D. C, N. J.), 41 Am. B. K. 604, 251 Fed. 664. § C7-a.j j^rFi:cT op ITailuee to File or Recokd. 1045 held, tinder 'the Peainsylvania rule, to deprive the mortgagee of his lien as against the trustee.^^ (VI) Place of filing or recording. — It has been held in Massachusetts under a statute (Rev. Laws, Mass., ch. 198, § 1) requiring a chattel mortgage to be recorded in the office of the clerk of the municipalitjs where the mortgagor has his principal pLvce of business and also in the clerk's office of the munici- pality where he lives, that a failure to file in the latter place defeats the lien of the mortgage as against the trustee in bankruptcy of the mortgagor, and such trustee is not estopped by the fact that the mortgagor stated in the mortgage that he lived in the municipality where the mortgage was filed. ^^ A corporation is deemed a resident of the State wherein it is incorporated and its principal place of business is situated, within the meaning of an act relating to recording instruments, and the county of its residence must be taken to be the county in which such place of business is located.^^ The trustee in bankruptcy of the corporation representing the creditors for whose protection the recording act was passed may assail the validity of a chattel mortgage which was not recorded in the proper county.'* Where a chattel mort- gage is properly recorded in the State where it is made, the subsequent removal of the property to another State, with the consent of the mortgagee, does not affect the validity of the lien, although the mortgage was not recorded in the second Staite.^*"- (VII) Unrecorded contracts for conditional sale.. — Where a State statute provides that an unrecorded contract for the conditional sale of chattels, with leservation of title, is good as between the parties, such contract is not void a?, to creditors who have not acquired a specific lien, and under such statute the trustee of the bankrupt vendee has not acquired such a lien by the adjudi- cation of the vendee, and may not avoid the contract.^' But the opposite is true where the State law provides that, in order to be valid and binding as ag-ainat creditors, instruments evidencing conditional sales must be filed of record.^^^ Where a conditional sale consists of two separate written instru- ments and one only was recorded, and the unrecorded one materially altered 66. In re Lukens (D. C, Pa.), 14 Am. B. R. ing, "Property sold to bankrupt on condition." 683 133 Fed 188 Compare as to mortgage exe- Conditional sale, what constitntes. — Where a cuted in good faith but not recorded, Rogers v. contract in writing, under which goods were Page (C C A 6th Cir.), 15 Am. B. R. 502, 140 delivered to bankrupts in Arkansas, to be resold Fed 596 72 C C A 164. '" f*^ usual course of business, provided that 56 Matter of McDonald (D. C, Mass.), 23 the title to and right of possession thereof. Am ' B R 51 173 Fed. 99. ^od ^n proceeds of resales thereof, should be 67 Fairbanks Steam Shovel Co. v. Wills, 240 vested and remain in the seller until payment U S 642 36 Am B. R. 754, 60 L. Ed. 841, 36 of the purchase price, and that except for the SuD Ct 466 affg. 32 Am. B. R. 381, 212 Fed. right to resell the goods in the ordinary course ^go ■ ' of business, the bankrupts should not remove 58 Fairbanks Steam Shovel Co. t. WiUs, 240 them from the city in which they were doing tJ S 642 36 Am B R. 754, 60 L. Ed. 841, 36 business, an obligation arose upon the part of Sun 'ct 466 affg 32 Am. B. R. 381, 212 Fed. 688. the bankrupts to account for and pay over ss'a Hoyt'v Zibell (C. C. A., 7th Cir.), 43 Am. what was collected of the proceeds of resales, B R ' 538 259' Fed. 186 ; Matter of Davles (D.. C, and the transaction constituted a conditional Tenn ) 43 Am B R. 458, 256 Fed. 52. sale. The trustee is bound by the terms of such KB Mattpr of Terrell (C. C. A., 8th dr.), 40 contract. Bryant v. Swa£ford Bros. Dry Goods Am BR 713 246 Fed. 743; De Laval Separator Co., 214 U. S. 279, 22 Am. B. R. Ill, 53 L. Ed. C^v" Jones (Me? Sup. Ct. , 41 Am. B. R. 440, 997, 29 Sup. Ct. 614. See aslo In re McGhee 102 Atl 968- York Mfg. Co. V. Cassell, 201 U. S. (D. C, Ga.), 21 Am. B. R. 656, 166 Fed. 928. 344 15 Am B R 632 50 L. Ed. 782, 26 Sup. Ct. Sale dependent upon condition subsequent. — 48l'- Matter of Superior Drop Forge & Mfg. Co. Since a conditional sale may be made to depend (D ' C Ohio) 31 Am B. R. 455, 208 Fed. 813. upon a condition subsectuent as well as a con- The statute iinder consideration In this case dition precedent, a bill of sale, in the form of waq similar to that under consideration in the a deed of indenture which, after conveying followin? cases where a different rule was personal property with covenants of warranty, annlied • In re Press Post Printing Co. (D. C, provides that in default In payment by the Ohlol i'J Am B R 797 134 Fed. 998; In re vendee when due the vendors may declare the Diinn Hardware'* Furniture Co. (D. C, N. sale forfeited and retake the property, makes Car') 13 Am B R 147 132 Fed. 719. As to the sale conditional, and, the condition having property sold on condition with possession in been broken by default in payment, the purchaser see disnusslon under § 70, post, head- vendors have the right to retake the property. ' 0/.. Liens. [§ 6T-a. the legal offect of the other, the provisions of the statute requiring record hswe not been complied with.^** (VIII) Efect of amendment of § 47-a (2). — Under § 47-a (2), as amended by the act of 1910, trustees have the rights and remedies of lien creditors or judgment creditors as against unrecorded transfers or incumbrances.*^ So that equities or rights in favor of such creditors as against a chattel mort- gage or other instrument which for want of record or other reason is invalid as to them, may be asserted with the same force and effect by the trustee of the bankrupt debtor.*^ Prior to the amendment of 1910 to § 47-a (2) it was .held under the Ifew York statute that an unfiled conditional sale contract accompanied by delivery of the goods, being void only as against " subsequent purchasers, pledgees and mortgagees in good faith," was valid as against a trustee in bankruptcy. ^^ d. Invalid for other reasons, — Where for a reason contained in a State statute a lien is invalid as against a person's creditors, it is also invalid as against such creditors in bankruptcy. As where it is provided that a chattel mortgage, containing a provision for the sale of the goods mortgaged, and the use of the proceeds thereof other than in payment of the debt, is void as to creditors; in such a case the mortgage is not valid as against the creditors In re Lutz (D. C, Ark.), 28 Am. B. R. 649, 197 Fed. 492. Effect of unfiled contract. — A Tender, under a contract of conditional sale which provides that he shall be entitled to possession of the property whenever he may feel insecure or when the vendee may become insolvent or bank- rupt, is entitled to the possession of property sold thereunder, as against the trustee in bankruptcy of the vendee and other creditors, although the contract was not filed until a few days before the bankruptcy of the vendee, when it appears that no creditors were misled thereby. Deere Plow Co. v. Edgar Farmer Store Co. (Wis. Sup. Ct.), 31 Am. B. B. 156, 143 N. W. 194. Under New Jersey statute, see Matter of Vandewater Co. Ltd. (D. C, N. J.), 33 Am. B. E. 671, 219 Fed. 627. Under the recordinjf law of Kansas a condi- tional sale contract Is valid between the parties, whether filed for record or not, but Is void as against a creditor who fastens a lien upon the property by execution, attachment, or like legal proceedings before the contract is re- corded. Bailey v. Baker Ice Machine Co. (U. S. Sup. Ct.), 239 U. S. 268, 35 Am. B. E. 814, 60 L. Ed. 275, 36 Sup. Ct. 50. Washingrton statute. — TJndei: section 47a (2) of the bankruptcy act, as amended in 1910, creating a lien In favor of the trustee upon all property in the custody, or coming Into the custody of the bankruptcy court, the lien of a trustee supersedes any rights existing in favor of a conditional sale, a memorandum of which was not recorded pursuant to section 3670 of the Washington Code. Matter of Pacific Electric & AutomobUe Co. (D. C, Wash.), 35 Am. B. E. 222, 224 Fed. 220. Effect of permission-to sell. — Where a written contract between a manufacturer and a dealer, under which automobile parts were delivered to the latter, contained a formal reservation of title, but the understanding when the con- tract was made and their subsequent course of dealing contradicted the written instrument, the written contract was held to be merely colorable and not enforceable against the dealers trustee in bankruptcy. Matter of Har- rington (D. C, Mass.), 32 Am. B. E. 828, 212 Fed. 542. 69a. In re King Motor Car Co. (Eef., Mich.), 31 Am. B. E. 172 ; Stewart v. Asbury (Mo. Ct. of App.), 41 Am. B. E. 387, 201 S. W. 949. Compare Smith V. Carukin (C. C. A., 6th Cir), 44 Am. B. E. 278, 259 Fed. 51. 60. In re Bazemore (D. C, Ala.), 26 Am. B. E. 494, 189 Fed. 236. Fart of contract not recorded. — Where the clause of a conditional sale contract retaining title in the vendor is not recorded the condi- tional sale is not valid against a trustee in bankruptcy. Matter of A. E. Savage Baking Co. (D. C, N. J.), 43 Am. B. E. 721, 259 Fed. 607. 61. See discussion under § 47a (2) and cases cited, ante. 62. Fairbanks Steam Shovel Co. v. Wills, 240 U. S. 642, 30 Am. B. R. 754, 60 L. Ed. 841, 36 Sup. Ct. 460; Lake View State Bank v. Jones (C. C. A., 7th Cir.), 40 Am. B. E. I'S, 2 '2 Fed. 821; Matter of P. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. E. 189, 217 Fed. 130, aftd. 42 Am. B. R. 530, 254 Fed. 060 ; Matter of Bettman- Johnsou Co. (C. C. A., 6th Cir.), 42 Am. B. E. 128, 250 Fed. 657; Matter of Mutual Motors Co. (D. C, Mich.), 44 Am. B. E. 337, 260 Fed. 3U. The proceeds of property on which there is a lien, invalid for failure to record, must be distributed among all of the creditors of the bankrupt without distinction. Matter of Rosen- thal (D. C, Ga.), 39 Am. B. E. 30, 238 Fed. 597. Under the amendment of 1910 to' section 47-a (2) of the Bankruptcy Act, which clothed the trustee with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings, the trustee's lien can- not antedate the institution of bankruptcy proceedings, so aa to affect the validity of a chattel mortgage executed more than four months prior to bankruptcy, but recorded within the four months' period. Matter of Virgin (D. C, Ga.), 35 Am. B. R. 494, 224 Fed. 128. § 67-b.J Subrogation of Trustee. 1047 of the bankrupt mortgagor.'* The trustee may attack the validity of such a mortgage, as conclusively as though fraudulent intent were shown to exist. "^ A collusive arrangement between the holders of liens and a bankrupt to keep such liens alive for the individual benefit of the bankrupt and against the interests of his creditors, will nullify the liens."* A contract for the con- ditional sale of a chattel is subject to the same rule.®'' Any defect in tho execution of a chattel mortgage or other instrument, resulting in its invalidity, as where there was a failure to obtain the necessary constnt of stockholders in case of a corporation, may be taken advantage of by the trustee, in behalf of the creditors.''* So a pledge of property is not effective against the trustee where the property has not been delivered to the pledge© at the time of the filing of the petition.^'^ JSTo part of this section makes invalid a chattel mort- gage merely because it was given at a time when the mortgagor was insolvent, and within four months of the filing of the petition.*^'' III. SUBROGATION OF TRUSTEE TO RIGHTS Of CREDITORS. a. In general. — Subsection h in effect provides that when a creditor is pre- vented by bankruptcy from enforcing his rights against a lien created, or attempted to be created, by his debtor, the trustee in bankruptcy is subrogated to the rights of such creditors for the benefit of the estate. This provision presei-ves for the benefit of the estate a right which' some particular creditor had been prevented from enforcing by the intervention of the debtor's bank- ruptcy.*'^ The subsection is doubtless declaratory of the rule at law.™ This 63. Holt V. Henley, 233 U. S. 637, 33 Am. B. R. 161, 58 L. Ed. 767, 34 Sup. Ct. 459; Matter of White's Express Co. (C. C. A., 2d Cir.), 33 Am. B. R. 74, 315 Fed. 894. 64. In re National Bank of Canton (C. C. A., 6th Cir.), 14 Am. B. R. 180, 135 Fed. 62 In re Marine Construction & Dry Doelt Co. (D. C, N. Y.), 14 Am. B. R. 466, 135 Fed. 921; SklUen v. Bndelman, 11 Am. B. R. 766, 39 Misc. 261, 79 N. Y. Supp. 413; Dodge v. Nodin (C. C. A., 8th Cir.), 13 Am. B. B. 176, 133 Fed. 363 (under Colorado statute) ; In re HuU (D. C, Vt.), 8 Am. B. R. 302, 115 Fed. 858; In re Volence (D. C, N. Y.), 27 Am. B. B. 914, 197 Fed. 232; Matter of Purteel (D. C, N. Y.), 32 Am. B. H. 824, 215 Fed. 191; Matter of Swain (D. C, N. Y.), 44 Am. B. B. 475, 259 Fed. 900. Bight of morteagror to seU for own benefit; validity. — In New York, a chattel mortgage Is not per se void because of a provision contained In it permitting the mortgagor to sell the mort- gaged property provided the mortgage also requires the mortgagor on making sales to pay over the proceeds thereof and apply them to the payment of the mortgage debt; but a chattel mortgage given and filed is fraudulent and void as to creditors when accompanied by an agreement between the parties, whether found in the mortgage or not, which authorizes and permits the mortgagor to treat and deal with the mortgaged property as his own and to seU the same and use the proceeds or any part thereof for his own benefit. In re Hart- man (D. C, N. Y.), 26 Am. B. B. 6, 189 Fed. 196. Hortgasor . permitted to seU and use pro- ceeds; Wisconsin statute.— Where, under Wis- consin statute, a chattel mortgage is not valid as against creditors unless accompanied by an actual and continued possession of the prop- erty by the mortgagee, or the mortgage be filed, or, if the mortgagor remains in possession of a stock of goods, the mortgage shall cease to be a lien except as between the parties, unless the mortgagor shall file a statement every sixty days showing the amount of sales therefrom, amount applied on mortgage and amount of new stock bought, a chattel mort- gage, providing that the mortgagor may remain in possession of the stock of goods, applying the proceeds of sale thereof to its own use, providing for a sinking fund and stipulating that the mortgagee may consent to waive the requirements as to any payments Into the sinking fund in his discretion. Is fraudulent and void as to creditors, even in the absence of intentional bad faith, no statement of the amount of sales, amount of new stock bought and amount applied on the mortgage having been filed, as required by the Wisconsin statute. In re Standard Telephone & Electric Co., 216 U. S. 545, 24 Am. B. R. 761, 54 L. Ed. 610, 30 Sup. Ct. 412. "66. In re Standard Telephone & Electric Co., 216 U. S. 545, 24 Am. B. R. 761, 54 L. Ed. 610, 30 Sup. Ct. 412. 66. In re Kyte (D. C, Pa.), 25 Am. B. R. 337, 182 Fed. 166. 67. In re Garcewlch (C. C. A., 2d Cir.), 8 Am. B. R. 149, 115 Fed. 87. 68. The provision of the New ITotIc Stock Corporation Law (see. 6), requiring, except in certain cases, the consent of two-thirds of the stockholders of a corporation to the execution of a mortgage by the corporation may be taken advantage of by the trustee in bankruptcy of a corporation in contesting the validity of a chattel mortgage executed by its oflScers. Matter of Progressive Wall Paper Corporation (D. C, N. T.), 37 Am. B. R. 207, 230 Fed. 171. 68a. Matter of P. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affd. 42 Am. B. B. 530, 254 Fed. 660. 68b. Matter of Schilling and Loller (D. C, Ohio), 41 Am. B. K. 688, 251 Fed. 966, 972. 69. In re New York Economical Printing Co. (C. C. A., 2d Cir.), 6 Am. B. R. 615, 110 Fed. 518; Matter of Schweitzer (D. C, Pa.), 33 Am. B. R. 212, 217 Fed. ■■/,- . . 1064 Liens. [§ 67-e. four months' period and the enforcement of one previously acquired; so that where a mortgage was given prior to such period, the mortgagee may, if authorized by the terms of the mortgage, take possession of the property, or do any other act with a view of enforcing the mortgage, at any time prior to the adjudication.'*' A complaint does not state a cause of action under this subdivision unless it is alleged that the transfers sought to be attacked were made within four months of the time the petition in bankruptcy was filed. '^ e. Intent to hinder, delay or defraud. — (1) In geneeal. — The words "with intent to hinder, delay or defraud," as used in subsection e, have their im- memorial meaning.'** They have already been considered under sections three and fourteen. The cases under the former law, found in the foot- note,'®" are thought still applicable, though in that statute used in defining an act of bankruptcy. Knowledge of, or participation in, the fraud by the creditor to whom the transfer was made is not material.'®' Transfers by this subsection are only those fraudulent and therefore voidable at common law, or, what is the same thing, such as constitute acts of bankruptcy under § 3 of the act.'®^ A creditor's passive receipt of payment is not of itself sufficient to make it fraudulent.'®* An intent to defraud is the test; if the transaction was in good faith, there is no fraud.'®* It is not necessary in order to avoid a transfer as a transfer made to hinder and delay creditors that the transferor at the time of the transfer was insolvent, but if the circum- stances are such that the jury can find that the transfer was made with intent to hinder and delay creditors it is voidable.'®^ 186. Thompaon v. Fairbanks, 196 XT. S. 516, 13 Am. B. R. 437, 49 L. Ed. 577, 25 Sup. Ct. 306. 187. Woods T. Klein, 22 Am. B. R. 722, 223 Pa. St. 257, 72 Atl. 523, citing Metcalf v. Barker, 187 U. S. 165, 9 Am. B. E. 36, 47 L. Ed. 122, 23 Sup. Ct. 67; Davis v. Billings (Pa. Sup. Ct.), 38 Am. B. E. 957, 09 Atl. 163. 188. Thomas v. Eoddy, 19 Am. B. E. 873, 122 N. Y. App. DiT. 851, 107 N. T. Supp. 473. 189. See Githens v. Shiffler Bros. (D. C, Pa.), 7 Am. B. R. 453, 112 Fed. 505. 190. Sedgwick v. Place, Fed. Cas. 12,620; In re Cowles, Fed. Cas. 3,297; In re McKibben, Fed. Cas. 8,859 ; In re AVilliams, Fed. Cas. 17,703 ; Curran v. Munger, Fed. Cas. 3,487. 191. Sherman v. Luckhardt (Sup. Ct., Kan.), 11 Am. B. E. 26, 67 Kan. 082. Compare Stitch V. Berman, 15 Am. B. E. 466, 49 N. Y. Misc. 104, 96 N. Y. Supp. 743; In re Leader (D. C, Ark.), 26 Am. B. E. 668, 190 Fed. 624. 192. Wright V. Sampler (D. C, N. Y.), 18 Am. B. E. 355, 152 Fed. 196; Underleak v. Scott (Sup. Ct., Minn.), 28 Am. B. E. 926, 134 S. W. 731; Baldwin t. Kingston (D. C, N. J.), 40 Am. B. R. 641, 247 Fed. 163. It is not a fraud at common law for a debtor "Who is in straitened circumstances to prefer one or more creditors, though such payment may render it impossible to pay anything to his other creditors. Nor does it make any difference that both the creditor and debtor know that the effect of such appropriation will be ^ to deprive other creditors of the power of reaching the debtors' property by legal process in satis- faction of their claims. If there is no secret trust agreed upon or understood between the debtor and creditor, but the sole object of the transfer of property is to pay or secure the payment of a debt, the transaction is valid at common law. Lyon v. Wallace (Mass. Sup. Ct.), 35 Am. B. E. 688, 108 N. E. 1075. 198. Wright v. Sampter (D. C, N. Y.), 18 Am. B. R. 355, 152 Fed. 196. 194. In re Bloch (C. C. A., 2d Cir.), 15 Am. B. K. 748, 142 Fed. 674, holding that where a member of a firm pledges his life Insurance policies to secure certain creditors with the understanding that they were not firm assets, fraudulent intent is not shown. In re Benjamin (D. C, Pa.), 15 Am. B. E. 351, 140 Fed. 320; In re Longbottom (D. C, Pa.), 15 Am. B. E. 437, 142 Fed. 291; In re Hill (D. C, Cal.), 15 Am. B. E. 499, 140 Fed. 984; Coder v. Arts (C. C. A., 8th Cir.), 18 Am. B. E. 513, 152 Fed. 043, modifying 16 Am. B. E. 583, afld. 213 U. S. 223, 22 Am. B. R. 1, 53 L. Ed. 772, 29 Sup. Ct. 438; Vollmer v. Plage (D. C, N. Y.), 26 Am. B. E. 500, 186 Fed. 598; Matter of Braus (C. C. A., 2d Cir.), 40 Am. B. R. 668, 2-:S Fed .^^E ; Potter T. American Ptg. & Lith. Co. (la. Sup. Ct), 40 Am. B. E. 854, 165 N. W. 1644; Keith v Simp- son (Ga. Ct. of App.), 44 Am. B. R. 3i9, 100 S. E. 649; Matter of Sola (C. C. A., 1st Cir.), 44 Am. B. E. 372, 261 Fed. 822. In order to render a conveyance void on the ground that It was intended to hinder or delay creditors, it must have been executed for that purpose, that is, to secure delay advantageous to the debtor and disadvantageous to his creditors. Matter of Peterson (D. C, Nev.), 40 Am. B. R. 653, 252 Fed. 846. Successive assignments of accounts receiv- able by way of security, in pursuance of a contract undei' which advances were made to enable the assignor, subsequently adjudged a bankrupt, to get goods on the faith of the undertaking that the accounts should be as- signed, are not fraudulent in law because the contract embraced all accounts, where neither party contemplated any fraud or knew that the assignor was insolvent. Greey v. Docken- dorflF, 231 U. S. 513, 31 Am. B. R. 407, 58 L. Ed. 339, 34 Sup. Ct. 166. 195. Holbrook v. International Trust Co. (Sup. Jud. Ct. Mass.), 33 Am. B. B. 808, 107 N. E. 665. § 67-e.J Intent to Hinder, Delay oe Defkaud. 1065 (2) Kevival op outlawed debt, — ^A bankrupt with, knowledge of his insol- vency, cannot on the eve of bankruptcy revive an outlawed claim by a written acknowledgment or by part payment,^®* although if the creditor or the bank- rupt was ignorant of the fact of insolvency such revival may be effectual. ^®^ (3) Evidence of intent. — (I) In general. — Whether a conveyance was made with intent to hinder, delay and defraud creditors is a question of fact.^®® It is only an intent to hinder, delay and defraud creditors unlaw- fully, and not every intent to hinder or delay them in collecting, or to prevent them from collecting their claims that avails to avoid a transfer. ^^^ A transfer alleged to be void under subsection e, so far as the purchase is concerned must be impugned, if at all, by actual fraud sis distinguished from constructive fraud.^*"* Actual fraud, as distinguished from constructive fraud based upon the failure to file or record, must appear.^"^ There must be some evidence of actual fraud in order to invalidate a conveyance; mere suspicion of wrongdoing is insufficient.^**^ In determining whether the result of a number of transactions was the consummation of a preconceived purpose to hinder, delay or defraud creditors, the court will not separately and inde- pendently regard each step which, of itself, might be innocent, but will con- sider the transactions in connection with what else appears, especially when they are in close consecutive association.^"* The rule that persons who do not meet their obligations as they mature in the ordinary course of business are "insolvent," within the meaning of bankruptcy and insolvency acts does not apply to all persons but does apply to traders. Hence where the bank- rupt was a trader the fact that he was unable to pay his debts as they matured and became due and payable in the ordinary course of business as persons carrying on trade usually do is a fact to be given its full weight by the jury in determining whether the payments made by him were made with intent to hinder and delay his creditors.^"* To render a transfer of personal property valid as against creditors it must be accompanied by such change of possession as is consistent with the nature of the property and the situation of the parties.^"*^ (II) Payments without fraudulent intent. — An insolvent debtor has the jus disponendi of his property until the commencement of proceedings in 196. Matter of Salmon (D. C, N. Y.), 38 Am. which it was obvious would result in closing B. E. 692. ■ the business of the debtor. Dean v. Davis (C. 197. Matter of Banks (D. C, N. Y.), 31 Am. C. A., 4th Cir.), 31 Am. B. E. SOS, 212 Fed. 88, B. E. 270, 207 Fed. 662 ; Matter of Blankenship attd. 242 U. S, 438, 38 Am. B. E. 664, 37 Sup. Ct. (D. C, Cal.), 33 Am. B. E. 756, 220 Fed. 395. 30. 198. Matter of McKane (D. C, N. Y.), 19 Am. 200. Chambers v. Continental Trust Co. (D. B. E. 103, 155 Fed. 674; Clingman v. Miller (C. C, Ga.), 38 Am. B. E. 78, 235 Fed. 441, afld. 39 C. A., 8th. dr.), 20 Am. B. E. 300, 160 Fed. 326; Am. B. E. 872, 239 Fed. 1020 .holding that a Maires v. Metal & Machinerj' Co. (D. C, N. Y.), transfer by a director of an insolvent bank to 33 Am. B. E. 422, 220 Fed. 115. secure the payment of his note to another bank Use of defendant as "witness for plaintiff. — which had loaned money for the payment of Campbell v. Berrymau (D. C, Ga.), 42 Am. B. the creditors of the insolvent bank, made for a E. 661, 256 Fed. 402. present and fair consideration, and taken in 199. Coder v. Arts (C. C. A., 8th Cir.), 18 Am. good faith by the purchaser, is not invalid B. E. 513, 518, 152 Fed. 943, modifying 16 Am. under section 67-e of the bankruptcy act, B. E. 583, 145 Fed. 202, affd. 213 U. S. 223, 22 although the director knew of his own insolv- Am. B. E. 1, 53 L. Ed. 772, 29 Sup. Ct. 436; ency when he made the conveyance. Sargent v. Blake (C. C. A., 8th Cir.), 20 Am. 201. McAfee v. Shade (C. C. A., 8th Cir.), 26 B. E. 115, 160 Fed. 57. Am. B. E. 151, 185 Fed. 442. Actual fraud in secnrins present loan to 808. Johnson v. Barrett (D. C, Ga.), 38 Am. prefer creditor. — This section applies only to B. E. 464, 237 Fed. 112. actual fraud as distinguished from a mere pref- 803. Amundson v. Folsom (C. C. A., 8th Cir.), erence, and the fact that a lender knew at the 33 Am. B. E. 318, 219 Fed. 122; Calkins v. Llch- time of making a loan and taking security that tig (C. C. A., eth Cir.), 42 Am. B. E. 306, 251 the borrowed money would be used to prefer Fed. 844. a creditor does not make the transaction 204. Holbrook v. International Trust Co fraudulent. But actual fraud exists where (Sup. Jud. Ct, Mass.), 33 Am. B. E. 808, lOT there is also an actual participation by the N. B. 665. lender as agent of the borrower and for his 2a4a. Northrop v. Finn Construction Co. (Pa. benefit in carrying out the plan of prcf:>ror.c3 S-jp. Ct.), 41 Am. B. E. 811, 103 Atl. 544 1066 Liens. [§ 67-e. bankruptcy against liim. So a preference of one creditor over others by a payment or by security, which is free from actual or constructive fraud, and from any purpose to alfect other creditors injuriously beyond the necessai-y effect of the security or preference, is valid and lawful, and the fact that a creditor is so preferred is not in itself sufficient to show evidence of an intent to hinder, delay or defraud creditors so as to make the transaction void or voidable under this subsection,^"^ yet, when the preferential transaction is so manipulated or when it is carried along into such later steps as to attempt to defeat the recovei-y of the preference by the trustee, it results that the parties ar6 engaged in an attempt to defeat the intended operation of the Bankruptcy Act itsielf, and that they have placed themselves . within the condemr.ation of subsection e of this section.^""^ As stated by the Supreme Court -^"^ _" Making a mortgage to secure an advance with which the insolvent debtor intends to pay a pre-existing debt does not necessarily imply an intent to hinder, delay or defraud creditors. The mortgage may be made in the expectation that thea-eby tho debtor will extricate himself from a particular difficulty and be enabled to promote the interest of all other creditors by continuing his business. The lender who makes an advance for that purpose with full knowledge of the facts may be acting in perfect ' good faith.' _ But where the advance is made to enable the debtor to make a preferential payment with bankruptcy in contemplation, the transaction presents an element upon which fraud may be predicated. The fact that the money advance is actually used to pay a debt does not necessarily establish good faith. It is a question of fact in each case what the intent was with which the loan was sought and made." ^ A mortgage taken to secure a loan with knowledge by the mortgagee MB Sarffpnt v Blake (C. C. A., 8th Cir.), 20 207. Mortsages taken as security for loans — 4m -RR 115 121 160 Fed 57; Coder T. Arts, The following cases were classified in the 91^'tt "<5 !>9<1 22 Am B R 1 53 L. Ed. 772. 29 margin to the case of Davis v. Dean, 242 U. S. s^fn ^t 436' loht^tone v ' Bkbb (C. C. A., 4th 438, 38 Am. B. R. 664, 668, 37 Sup. Ct. 30. Cases Cir i SS Am' B E 715 holding that making a holding that a mortgage is a fraudulent con- mortgage to' secure an advance with which an veyance where taken as seeuritv for a loan Insolvent debtor intends to pay a pre-existing which the lender knows is to be used to prefer dihi- lines not necessarilv Imply an Intent to avored creditors, in fraud of the act: Parker hinder delay 01^ deftaud creditors; the lender v. Sherman (C. C. A., 2d Cir.), 32 Am. B. R. who makes an advance for that purpose with 393, 129 C. C. A. 437, 212 Fed. 917; Re Soforenko fSl knowledge of the facts may be acting in (D. C, Mass.), 32 Am. B. R. 32, 210 Fed. 562; DerferteTod flith Watson v. Adams (C. C. A., Johnson v. Dismukes (C. C. A., 5th Cir.), 29 «th Cirf 39 Am B B 473, 242 Fed. 441; Matter Am. B. R. 686, 122 C. C. A. 552, 204 Fed. 382: of Rraus (C C 'a ' 2d Cir.), 40 Am. B. R. 608, Lumpkin v. Foley (C. C. A., 5th Cir.), 29 Am. 248 Fid 55 ■Potter v. American Ptg. & Llth. B. R. 673, 122 C. C. A. 542, 204 Fed. 372; Re Co (la Sun Ct ) 40 Am. B. R. 854, 165 N. W. Lynden MercantUe Co. (D. C, Wash.), 19 Am. lb4'4- Chamnan v. Hunt (C. C. A., 2d Cir.),' 42 B. R. 444, 156 Fed. 713; Roberts v. Johnson (C. Am BR 509, 254 Fed. 768, rev'g 41 Am. B. R. "C. A., 4th Cir.), 18 Am. B. R. 132, 81 C. C. A. 482 '248 Fed 160; Richardson v. Germania Bank 47, 151 Fed. 567; Ee Pease (D. C, Mich.), 12 rr ' C A 2d Cir ) 45 Am. B. E. 351, 263 Fed. Am. B. R. 66, 129 Fed. 446. See also Walters T. oij; ■ ■' Zimmerman, s. c. on appeal (D. C, Ohio), 30 s-'^ of accounts.— McGiU V. Commercial Am. B. R. 776, 208 Fed. 62, (C. C. A., 6th Cir.), Credit Co (D C, Md.), 39 Am. B. R. 702, 243 136 C. C. A. 409, 220 Fed. 805. Fed 637 ' Cases upholding the mortgage security be- 205a Watson v. Adams (C. C. A.; 6th Cir.), cause the lender did not know that the Insolvent 39 Am' B R 473, 242 Fed. 441. borrower intended to make Improper payments When fraudulent Intent presumed.— Under the to favored creditors — thus indicating that the Jaws of Minnesota a creditor may avoid a mortgage would be fraudulent if such addl- Ssfer made with Intent to hinder, delay, or tlonal fact were f<>J^-^^^^f^lll- U^i?? defraud creditors. Such intent of the debtor Is ?57-ii/p^?; ^Y Vns 'inn w^,i KiC tS' I'l essential to the fraudulent character of the ^^fe Citv Bank '(C C A fth'^'cfr )' 24 T™ R transfer. A voluntary conveyance is presump- S^%y7n2 C c A w i'tr Fert roq . 1jf^„i^' tlvely fraudulent as to existing creditors, but ?■ ^^®,V ?. m?;',,^' oq I n i> ^ri ^So^'i' not conclusively so. Where the debtor is soly- be'-g •.) 20 Am. B. «■ 919; 24 L R A. (N. S.) absence of an actual intent to hinder, delay, or ^^l,^^^9\Jp-Jt^ ^S' n a £„^??-' ^^'o''?'"' ^■ Sefraud creditors, such a transfer Is valid. |''°4^ Jf ^Tl 'oro in'Fed o^V"-'!?! l"?,',,?,; ^°'«lf ?34 S Wx^'''^- '"'• "■'■ '' ^^' ""^ cl%''c^A''U"cir.f ■8''lm.''^B.'"R"'4"^ B. 926, 134 S. W. 7il. 51 C C. A. 476, 113 Fed. 804. 206. Dean v. Davis, 242 tJ. S. — , 38 Am. B. R. In accord with this view are also the deci- a64, 667, 37 Sup. Ct. 30. sions which hold that a general assignment § 67-e.j Payments Without Featjdulent Intent. 1067 that the proceeds of the loan were to be used by the insolvent mortgagor to make preferential payments to certain creditors on the eve of bankruptcy is invalid.^*** Where a transfer is made by a debtor who is in embarrassed circumstances although not insolvent, a jury in some cases may be warranted in finding the fact of intent to delay and defraud.^"® A transfer made to secure a loan will not be set aside as fraudulent because the transferee knew that the proceeds of the loan were to be used in payment of an existing debt.^^° A transfer made in good faith to pay or to secure an honest ante- cedent debt by an insolvent within four months of the filing of a petition in bankruptcy by or against him constitutes no evidence of an intent to delay or defraud creditors, notwithstanding the fact that its necessary effect is to hinder and delay them, and to deprive them of the opportunity they might otherwise have had to collect their claims in fuU.'^^^ Thus where a bankrupt convoys property in trust to secure a person who has indemnified a surety company on a bond discharging a lien of attachment the transfer is valid, where there is no evidence of a preference or a fraud upon the creditors.^" A transfer by an allied bankrupt to secure funds to be used by a third person on specified contracts, is not rendered fraudulent by the fact that such third person, with the consent of the bankrupt, diverted a part of the funds to another purpose.^^^* And where a mortgage was given by an insolvent debtor within the four months' period to secure a pre-existing debt owing to the mortgagee, who was in ignorance of the mortgagor's insolvency, an intent to hinder, delay or defraud other creditors must be shown in order to avoid the mortgage.^^^ But a mortgage made to secure a much greater amount than that really lor the benefit of creditors, though without preferences, is void under section 67-e because its necessary effect is to hinder, delay or de- fraud creditors In their rights and remedies under the bankruptcy act. Re GutwiUlg (D. C la.), 1 Am." B. B. 78, 90 Fed. 475. affd 1 Am. B. R. 388, 34 C. C. A. 377, 63 U. S. App. 191, 92 Fed. 337; Davis v. Bohle (C. C. A., 8th ar.), 1 Am. B. E. 412, 34 C. C. A. 372, 92 Fed. 325; Eumsey & S. Co. v. Novelty Mach. Mfg. Co. (D. C, Mo.), 3 Am. B. E. 704, 99 Fed. 699. See Kandolph v. Scruggs, 190 TJ. S. 533, 536, 10 Am. B. B. 1, 47 L. Ed. 1165, 1169, 23 Sup. Ct. 710; George M. West Co. v. Lea Bros., 174 U. S. 590, 596, 2 Am. B. E. 463, 43 L. Ed. 1098, UOO, 19 Sup. Ct. 836. It is difficult to reconcile the following cases or dicta in them with the great weight of authority and the decisions of this court: Be Baar (C. C. A., 2d Cir.), 32 Am. B. B. 465, 130 C. C. A. 292, 213 Fed. 628; Be Hersey (D. C, Iowa), 22 Am. B. E. 863, 171 Fed. 1004; Sargent T. Blake (C. C. A., 8th Cir.), 20 Am. B. E. 115, 17 L. B. A. (N. S.) 1040, 87 C. C. A. 213, 160 Fed. 57, 15 Ann. Cas. 58, Be Bloch (C. C. A., 2d dr.), 15 Am. B. E. 748, 74 C. C. A. 250, 142 Fed. 674; Githens v. Shiffler (D. C, Pa.), 7 Am. B. E. 453, 112 Fed. 505. 208. Matter of Soforenko (D. C, Mass.), 32 Am. B. E. 32, 210 Fed. 562; Smith v. Coury (D. C, Me.), 41 Am. B. E. 219, 247 Fed. 168. Advances to prevent bankruptcy until after four months. — In a suit by a trustee in bank- ruptcy to recover book accounts assigned by the bankrupt to the defendant because of advances, evidence held to show that the defendant made the advances for the purpose of keeping the bankrupt from going into bank- ruptcy before the expiration of four months from the time of other illegal preferences to the defendant. This is a fraud upon the law, and property assigned by the bankrupt for such purpose may be recovered by the trustee. Enbenstein V. Lottow (Mass. Sup. Ct.), 35 Am. B. E. 243, 220 Mass. 156. 809. Holbrook v. International Co. (Sup. Jud. Ct., Mass.), 33 Am. B. E. 808, 107 N. E. 656. 210. Van Iderstine v. National Discount Co., 227 U. S. 575, 582, 29 Am. B. E. 478, 57 L. Ed. 652, 33 Sup. Ct. 343; Matter of Soforenko (D. C, Mass.), 32 Am. B. E. 32, 210 Fed. 562: Com- pare Matter of Anderson (D. C, E. I.) 41 Am. B. E. 731, 252 Fed. 272. 211. Coder v. Arts (C. C. A., 8th Cir.), 18 Am. B. E. 513, 519, 152 Fed. 943, modifying 16 Am. B. E. 583, 145 Fed. 202, affd. 213 U. S. 223, 22 Am. B. E. 1, 53 L. Ed. 772, 29 Sup. Ct. 436; Meservey v. Eoby (C. C. A., 8th Cir.), 28 Am. B. B. 529, 198 Fed. 844, holding that where bankrupt's real estate was heavily incumbered by different mortgages and bankrupt conveyed a part of such real estate to a mortgagee hold- ing a mortgage in a large amount, past due, in consideration of his discharging the liens upon all the property and the payment of a small sum in cash, in order to avoid such transfer under subsection e, actual fraud in fact, as distinguished from constructive fraud, must be shown. Preference made for purpose of continning: business. — A preferential payment made by an insolvent in the hope and for the purpos2 of thereby continuing his business is not reaUy fraudulent though It is under certain circum- stances voidable by the trustee. Matter of Soforenko (D. C, Mass.), 32 Am. B. E. 32, 210 Fed. 562. 212. Matter of Federal Biscuit Co. (C. C. A., 2d Cir.), 32 Am. B. B. 612, 214 Fed. 221. 212». Angle v. Bankers' Surety Co. (C. C. A., 2d Cir.), 41 Am. B. E. 90, 244 Fed. 401. 213. Coder v. Arts, 213 U. S. 223, 22 Am. B. E. 1, 53 li. Ed. 772, 29 Sup. Ct. 436; In re Kullberg (D. C, Minn.), 23 Am. B. E. 758, 176 Fed. 585. 214. McMahon v. Pithan (Sup. Ct., Iowa), 33 Am. B. E. 125, 147 N. W. 920. 215. Sargent v. Blake (C. C. A., 8th. Cir.), 20 Am. B. B. 115, 160 Fed. 57 ; Matter of McConnell V. Williams (Bef., Cal.), 32 Am. B. E. 589; Byan V. Cavanagh (D. C, Iowa), 39 Am. B. B. 44, 238 Fed. 604. Compare WarteU v. Moore (C. C A., em Cir.), 44 Am. B. B. 624, 261 Fed. -762. 1068 LiEJTs. [§' 67-a due, with the specific intent and purpose on the part of both mortgagor and mortgagee to hinder, delay and defraud other creditors of the mortgagor, is invalid in equity not only as to the fictitious debts secured, but as to the genuine indebtedness!.^^* When all the parties consent, the application of the partner- ship property to the payment of an individual debt of a partner within four months of the filing of a petition in bankruptcy, and while the partners axd the •partnership are insolvent, does not evidence any intent to hinder, delay, or defraud the creditors, ^^^ But where the partnership assets are used by one partner to pay his individual debt without the consent of his copartner the trustee in bankruptcy may sue and recover such property. ^-^^ Directors and stockholders who, with knowledge of the insolvent condition of the corporation' within four months before the bankruptcy of the corporation, sell their stock to it "and take in payment therefor notes of the corporation secured by a deed of trust cannot assert a preference under such deed.^" The organization of a corporation or partnership by one who does not knoAV whether he is solvent or insolvent, and the transfer thereto of his property, is not, of itself, to be re- garded as hindering or delaying creditors.^^^^ (Ill) Fraudulent intent implied from circumstances. — Conveyances of real estate made by bankrupts to their wives, four months prior to the filing of a petition in bankruptcy, and without a present consideration, are void, since it may be implied from the circumstances of the transaction that they were made with intent to hinder and defraud creditors.^^* However the rule is different where the property transferred was the exempt property of the husband.^^* But a transfer in payment of a creditor of the bankrupt's wife is not ipso facto fraudulent ; the intent to defraud must be proven.^^" Although there is a presumption against the hona fides of a conveyance made by a failing busband to his wife, it is merely a presumption of fact, negativing the idea of a valid consideration, and the burden is upon the wife to support- her riffht by clear and convincing proof ; ^'^^^ there is no presumption of law against the validity of such a transfer which will stand against eatablished facts to the contrary. ^^^ An agreement to withhold a mortgage from record is not of itself conclusive upon the question of fraud, but is a circumstance constituting more or less cogent evidence of a want of good faith.^^^ A transfer in good faith 816 Eyan v. Cavanagh (D. C, Iowa), 39 Am. erty with her own means, as an investment for B. r! 44, 238 Fed. 604, wherein it was held that her own benefit, but the deed, by a mistake in an action by a trustee to recorer property of the scrivener, was made out to bankrupt, a belonging to a partnership which was trans- trust was thereby created in favor of the wife, ferred by one partner without the consent of who paid the purchase money, and when bank- the other, the burden of proof was on the rupt subsequently transferred to her the legal defendants to establish such consent. title, te did no more than a court of equity in 217. Moore & Co. v. Gilmore (C. C. A., 4th ?„PI°P*'cff.°™«5°Lr/P"/' Jt 220a. Adams v. Osley (D. C, Ga.), 42 Am. 218. Henkel v. Seider (D. C, N. Y.), 20 Am. B. E. 665, 255 Fed. 117 ; Eberline v. Prager B. E. 773, 163 Fed, 553 ; Fouche v. Shearer (D. jMich. Sup. Ct.), 45 Am. B. E. 250, 176 N. W. C, Ga.), 22 Am. B. E. 828, 172 Fed. 592; Wood- *'^°- ~ ., ^ w„Tr„„ ,r, „ a r,^r. ^- ^ o. ford V. Eice (D. C, Okl.>, 30 Am. B. R. 455, .^^^■■J^^i'' Jk ^??=^ '^'o^- 4' ^*-^ ^'l):,^^ 207 Fed. 473; Jackson v. Jetter (Sup. Ct., Iowa), f"»■ C'.), 42 Am. B. E. 214, 174 Pae. Huffaker (Cal. Ct. of App.), 41 Am. B. E. 138, ^""°- „„„„„ „ T.o,r„ /r> r. a o*,. ,^, ■. 170 Pac. 431: McCrory v". Donald (Miss. Sup. ig^^J^^T'l. ^h02 iw F^fl 506 72 r r'"'']' Ct.), 43 Am. B. E. 181, 80 So. 643. lL «„„ Vn V» «T,„i ?^ n W ^ ^i,^.-*^' 219. Jacksop V. Jetter (Sup. Ct., Iowa), 32 i,^*' p ®%\/° , J? ^J7 o^H' t" ^^'Vr-V ^'"• Am. B. E. 667 142 N W 431 °- ^- ^^^' 1*'' ^^°- 2*3; In re Hickerson 220. In re Kayser (C. C. A., 3d Cir.), 24 Am. (D. C, Idaho), 30 Am. B. R. 683, 162 Fed. B. E. 174, 177 Fed. 383, 345, holding that an agreement to withhold pnrcSLlaw'ik''r;^7u''„*ds.-X*re"LXr"uptt a chattel mortgage from record is evidence wife purchased and Improved certain real prop- 01 traudulent intent; In re Duggan (0. 0, § 67-e.J Fraudulent Intent. 1069 to pay an honest antecedent debt is not of itself sufficient to establish actual fraud in fact, or an intent on the debtor's part, or on the part of the cred- itor, to hinder, delay, or defraud other creditors, within the meaning of this subsection.^^ A transfer by a corporation within the four months' period to a creditor of officers of such corporation in payment of an obligation incurred by them for the benefit of the corporation, is fraudulent where the parties had knowledge of the financial condition of the corporation and of the improper use of the corporate funds.^^* And the same is true where a hopelessly in- solvent corporation sells most of its assets and with the proceeds therefrom pays a portion of its creditors in full.^^*^ (IV) Sales of goods on account; bulk sales. — An agreement whereby goodsi were consigned to a person for sale and account, the consignee to return the goods which were unsold, is not necessarily invalid; as to the goods unsold the agreement is one of bailment and if made in good faith the consignor may assert and sustain his title to the goods.^^^ If the contract requires the con- signee " to buy and pay for " all the goods remaining in his hands at thei expiration of a certain period, and the consignee subsequently becomes bank- rupt, an attempted transfer of the goods to the consignor just before bank- ruptcy without consideration is fraudulent.^^^ Sales of goods in bulk other- wise than in the ordinary course of trade, are presumptively fraudulent under the statutes of many States; under such statutes the fact that full value was paid is immaterial, if it be shown that the vendee knew of the vendor's intent to defraud his creditors.^^' So where a debtor mortgages his entire stock of A., 5th Cir.), 25 Am. B. R. 479, 183 Fed. 405, affg. 25 Am. B. R. 105, 182 Fed. 252; Matter of National Boat & Engine Co. (D. C, Me.), 33 Am. B. R. 154, 216 Fed. 208. Scheme to remove property beyond the reach of creditors. — Where the bankrupt made four conveyances simultaneously as part of a scheme to put his real estate beyond the reach of his creditors in view of his imminent and inevitable bankruptcy and the grantees knew or should have known of such intent and kept the conveyances from record, with the intent to assist in its accomplishment, such conveyances should be set aside. Cowan V. Burchfleld (D. C, Ala.), 25 Am. B. R. 293, 180 Fed. 614. 223. Meservey v. Roby (C. C. A., 8th Cir.), 28 Am. B. R. 529, 198 Fed. 844; Watson v. Adams (C. C. A., 6th Cir.), 39 Am. B. R. 473, 242 Fed. 441. 224. Matter of Rockaway Mfg. Co. (D. C, N. Y.), 34 Am. B. R. 627, 226 Fed. 520; McCullan v. Buckingham Hotel Co. (Ct. of App., Mo.), 41 Am. B. R. 104, 199 S. W. 417. Transfer in purchase of own stock. — Henderson v. Garner (Ala. Sup. Ct.), 39 Am. B. R. 792, 75 So. 387. 224a. Smith v. Powers (D. C, N. Y.), 43 Am. B. R. 303, 255 Fed. 582. 225. Ludvigh v. American Woolen Co., 231 U. S. 522, 31 Am. B. R. 481, 58 L. Ed. 345, 34 Sup. Ct. 161, aflFg. 188 Fed. 30, 110 C. C. A. 180, which revd. 23 Am. B. R. 314, 176 Fed. 445. 226. Parlett v. Blake (C. C. A., 8th Cir.), 26 Am. B. R. 25, 188 Fed. 200. 227. In re Calvi (D. C, N. Y.), 26 Am. B. R. 206, 185 Fed. 642; Bentley v. Young (D. C, N. Y.), 31 Am. B. R. 506, 210 Fed. 202; Brown v. Kossove (C. C. A., 8th Cir.), 43 Am. B. R. 408, 255 Fed. 806; Matter of Clay- ton_(p. C, N. X), 43 Am. B. R. 687, 259 Fed. 911. See Am. B. R. Dig., § 634. Sales in bulk. — In the case of Matter of Farrell Co. (Ref., N. Y.), 9 Am. B. R. 341, it was held, where the provisions of the New York statute, L. 1902, chap. 528, entitled "An act to regulate the sale of merchandise in bulk," are willfully and deliberately ignored by an alleged bankrupt, upon such a sale raade by him within the four months' period, the transfer is void under subsection e of the above section. Matter of Robert- shaw Mfg. Co. (D. C, Pa.), 13 Am. B. R, 409, 133 Fed. 556; Shelton v. Price (D. C. Ala.), '23 Am. B. R. 759, 176 Fed. 585. Carpenter v. Karnow (D. C, Mass.), 28 Am B. R. 21, 193 Fed. 762; Parker v. Sherman (D. C, Vt.), 29 Am. B. R. 862, 201 Fed. 155 Matter of Thompson (D. C, Wash.), 40 Am, B. R. 82, 242 Fed. 602. Evidence insufficient to show fraudulent intent of vendee. Sabin V. Horenstein (C. C. A., 9th Cir.), 44 Am. B. R. 422, 260 Fed. 754. Validity of sale of entire retail stock. — Where bankrupt, a few days prior to the filing of the petition, transferred by bill of sale his entire stock of merchandise in a retail store to his sister, who failed to make the inquiries or give notice to his creditors as required by the New Jersey "Sales in Bulk" Act, the sale was voidable under said 1070 Liens. [§ 67-e. goods and uses the money to pay a portion of his creditors it will be presumed Siat he intended to hinder, delay, and defraud his other creditors.^^^ (V) Bwrden of proof. — The rule is that one who alleges fraud takes upon himself the burden of proving it.^^ Circumstances of the transaction may be shown; if sufficient to show that the entire intent was to delay, hinder or defraud, the transaction should be set aside; if it is attempted to prove the intent by evidence apart from the face of the instrument attacked, the burden of proof is usually imposed upon the party attacking. ^^" Other illustrative cases under the present law are cited in the foot-note ^^ and under subsequent paragraphs. f. Purchasers in good faith and for present fair consideration. — This saves valid transfers,^^ as subsection d does valid liens. A purchaser is not in good faith who makes no effort to determine whether an insolvent may make a transfer which will not be in violation of the act;^^* nor is he in good faith if he has knowledge of the insolvent's insolvency, or where facts are shovm which place upon the purchaser the duty of making inquiries as to the insolv- ent's financial condition, and he fails to make them, as where the sale consists of the transfer of the entire stock of merchandise owned by a retail merchant.^* Act, ana it appearing that the transfer was contrived and consummated in fraud of bank- rupt's creditors, it came within the inhibition of subsection e and was void as to such credi- tors. In re Lipman (D. C, N. 3.), 29 Am. B. K. 139, 201 Fed. 169. Where the question Is one of fact as to the purchasers' good faith, and they as witnesses have failed to satisfy the trial court thereof and their stories In the printed record are iinpersuasive, the verdict will not be disturbed. Bentley v. Young (C. C. A., 2d Cir.), 34 Am. B. R. 365, 223 Fed. 536, afEg. 31 Am. B. R. 506, 210 Fed. 202. Creditors' bill by trustee. — A trustee in bank- ruptcy may m-aintaln an action in the nature of a creditors' bill against the persons who have purchased and disposed of the entire assets of his bankrupt's estate in violation of the provisions of section 2651, Kev. St. 1913, commonly caUed the "Bulk Sales Law." Miklaus v. Lessenhop (Neb. Sup. Ct.), 37 Am. B. E. 401, 157 N. W. 1019. 228. In re Walden Bros. Clothing Co. (D. C, Ga.), 29 Am. B. B. 80, 199 Fed. 315. But in this case on appeal the court held (C. C. A., 5th Cir.), 29 Am. B. R. 673, that where a transfer of a bankrupt's entire stock of goods, which was made for a present fair consideration, is sought to be impugned on the ground that it was made to hinder, delay and defraud credi- tors, so far as the purchaser Is concerned, actual fraud as distinguished from constructive fraud, must be shown. 229. In re Kayser (C. C. A., 3d Cir.), 24 Am. B. B. 174, 177 Fed. 383; Jackson v. Sedgwick (D. C, N. Y.), 26 Am. B. R. 836, 189 Fed. 508; Potter v. American Printing & Litho. Co. (la. Sup. Ct.), 40 Am. B. R. 854, 165 N. W. 1044. 230. In re BUeston (D. C, W. Va.), 23 Am. B. R. 530, 174 Fed. 859; In re Kayser (C. C. A., 3d dr.), 24 Am. B. R. 174, 177 Fed. 383; Craw- ford T. Broussard (C. C. A., 5th Cir.), 44 Am. B. R. 187, 260 Fed. 122. 231. Carter v. Goodykoontz (D. C, Ind.), 2 Am. B. R. 224, 94 Fed. 108; Johnson v. Wald (C. C. A., 5th dr.), 2 Am. B. R. 84, 93 Fed. 640; In re Stelninger (C. C. A., 5th Cir.), 6 Am. B. E. 68, 107 Fed. 669; In re HugiU Mer- cantUe Co. (D. C, Ohio), 3 Am. B. R. 688, 100 Fed. 616; In re KeUogg (Ref., N. Y.), 6 Am. B. E. 389, affd. 7 Am. B. R. 270, 112 Fed. 52; In re Shepherd (Ret, lU.), 6 Am. B. R. 725; Calkens v. Llchtig (C. C. A., eth Cir.), 42 Am. B. R. 306, 251 Fed. 844; Crawford v. Broussard (C. C. A., 5th dr.), 44 Am. B. E. 187, 260 Fed. 122; Matter of Sola (C. C. A., 1st Cir.), 44 Am. B. E. 372, 261 Fed. 822. 232. Compare Tiffany v. Lucas, 15 Wall. 410; Sedgwick v. Wormser, Fed. Cas. 12,626; Curran V. Munger, Fed. Cas. 3,487. 233. In re Moody (D. C, Iowa), 14 Am. B. R. 272, 134 Fed. 628, holding that a transfer of all the bankrupt's property to a person with knowledge of the bankrupt's financial condi- tion is not in good faith ; In re Knopf (D. C, S. Car.), 16 Am. B. R. 432, 144 Fed. 245; Dokken V. Page (C. C. A., 8th Cir.), 17 Am. B. E. 228, 147 Fed. 438; Dreyer v. Kicklighter CD. C, Ga.), 36 Am. B. E. 199, 228 Fed. 744; Murray v. Ray (C. C. A., 9th dr.), 42 Am. B. R. 315, 251 Fed. 866. Burden of proof.— In an action by one claim- ing to be the owner of property transferred by a bankrupt to recover the proceeds of the sale of the property made by the trustee, the burden Is upon the plaintiff to aver and prove that he was a purchaser in good faith and for a present fair consideration. Crawford v. Broussard (C. C. A., 5th dr.), 43 Am. B. R. 603, 260 Fed. 122; rehearing denied, 44 Am. B. R. 187, 260 Fed. 122; Watson V. Adams (C. C. A., 6th Cir.), 39 Am. B. E. 473, 242 Fed. 441. 234. Parker v. Sherman (C. C. A., 2d Cir.), 32 Am. B. E. 393, 212 Fed. 917; Godwin v. Tuttle (Sup. Ct. Ore.), 33 Am. B. E. 93, 141 Pac. 1120; Matter of Rosenberg (Ref., N. Y.), 22 Am. B. R. 900. Sale in bulk sustained In Sheltou v. Price (D. C, Ala.), 23 Am. B. R. 431, 174 Fed. 891; see In re Walden Bros. Clothing Co. (D. C, Ga.), 29 Am. B. R. 80, 199 Fed. 315 (affd. 29 Am. B. R. 673), holding that where bankrupt mortgaged its entire stock of merchandise, and then used the money received from the mort- gage to pay three creditors, leaving a number of its creditors wholly unprotected, it wiU be presumed (under Ga. Code, § 3224) that the mortgage was given by bankrupt with intent to hinder and delay such unprotected creltors, the circumstances being such as to have put the mortgagee upon Inquiry which, if made, would have informed him of bankrupt's inten- tion, and therefore the mortgage Is void. See also In re Thweatt (D. C, Ga.), 29 Am. B. E. 84, 199 Fed. 319, affd. sub nom. Johnson v. Dis- mukes (C. C. A., 5th dr.), 29 Am. B. B. 686, 204 Fed. 382. And see under " Sales of ^ooda on account; bulk sales," ante. § 67-e.] PuECHASEEs IN GooD Faith. 1Q71 A payment of a note dated prior to the four months' period, which is imme- diately followed by bankruptcy, is not in good faith and for a present fair consideration.^''" The fact that a mortgagee knew that the proceeds of a mort- gage was to be used in the payment of mortgagor's creditors does not affect the good faith of the transaction, in the absence of proof that he had cause to believe that the mortgagor was insolvent.^^® If the consideration is fair and passes to the bankrupt and goes into his estate, the transfer is valid, unless there is clear and convincing proof of fraud. ^" The general rule is that a present consideration does not necessarily consist of money. It may consist in the substitution of one security for another or the giving up of value which could have been secured at the time, for a postponement.^^'^ If the bankrupt was solvent when he transferred the property, and there vs'ere no grounds for believing that an indebtedness would arise which would embarrass him, the transfer may be sustained as being in good faith, even if made to his wife, it appearing that the property had been acquired in part by money of the wife advanced to the husband in trust. ^^* A new corporation organized by the bond- holders of an insolvent corporation to take over the assets of such corporation with no provision made for the payment of its debts, does not take such assets in good faith, or " for a preaent fair consideration." ^^® If valid as to the " present consideration " and void as to the remainder of the value of the prop- erty transferred because in fraud of creditors, the recovery will be limited to the part that is void and the remainder may be retained.^** If part of the consideration is present and made in good faith, such a mortgage will be good to that extent.^*^ But where there is an entire absence of good faith, the fresh consideration does not save the mortgage ; it is void even as to that.^^ Marriage is a proper and valuable consideration for the transfer of property under this section.^*^ 835. Spencer v. Nekemoto (D. C, Hawaii), 24 operate stone Quarries, had become Insolvent, Am. B. E. 517. and, within four months, prior to its adjudlca- 236. In re KuUberg (D. C, Minn.), 23 Am. tion In bankruptcy, a bondholders' committee B. E. 758, 176 Fed. 585. organized a new corporation for the purpose 237. Parker T. Sherman (C. C. A., 2d Cir.), of transferring to It by biU of sale all the 32 Am. B. E. 393, 212 Fed. 917; Matter of Baar assets of the quarry company, and such bill (C. C. A., 2d Cir.), 32 Am. B. E. 465, 213 Fed. of sale within such four months' period was 628; Vollmer v. Plage (D. C, N. Y.), 26 Am. B. given with the intent to hinder, delay or de- E. 590, 186 Fed. 598; Matter of Copiag-Linden- fraud the creditors of the quarry company, and hurst Co. (D. C, N. Y.), 39 Am. B. E. 412, 240 the new corporation did not buy the property Fed. 431; Eobertson v. Schlotzhauer (C. C. A., in good faith or give "present appropriate 7th Cir.), 40 Am. B. E. 237, 243 Fed. 324; Potter consideration therefor," such transfer is null T. American Ptg. & Litho. Co. (la. Sup. Ct.), and void under § 67-e of the bankruptcy act. 40 Am. B. E. 854, 165 N. W. 1044; McNamara v. In re Medina Quarry Co. (D. C, N. Y.), 24 Am. Farnsworth (Wash. Sup. Ct.), 43 Am. B. E. B. E .769, 179 Fed. 929. 554, 180 Pac. 466. 240. Jackson v. Sedgwick (D. C, N. Y.), 26 A chattel mortEase Biven upon the payment ^^ g jj g3g^ ^gg jig^ gog. VoUmer v. Plage of cash, which cash goes Into the hands of the (p q ^ jyj. y.), 26 Am. B. E. 590, 186 Fed. 598; bankrupt and is used for the purposes of his jq je Mahland (D. C, N. Y.), 26 Am. B. E. 81, estate and of which his creditors have the jg^ jigj 743 benefit, is a valid mortgage under § 67-e of the j^ ^„y ^p ^ j„^^) 3 j^ g ^ bankruptcy law even if made within four „„ qo ppfi 04. cttv Nat Bank v Bruce (C C months of the filing of the petition if no actual f f- ^f/^^i^^*' Tim B^^E m, 109 ^ Fed! fraud be shown. In re Mahland (D. C, N. Y.), „„' f. •, " ai„„-.o„ (-a^f a p_- > 5 26 Am. B E. 81 184 Fed 743; Lake View State i»i,/g^- k!"85§1 sSman v^^'lank^of'^Monroe Bank v. Jones (C. C. A., 7th Cir.), 40 Am. B. E. ir c A Sth Cir > 9 Am B R 4 117 Fed 148, 242 Fed 821. As to assignment of book ^3^^ ^^ re Davidson' '(D. cT^fa.),' 5 Am*' B. E. sll; accounts made by parol as security for pur- yy^'-g.^^^ ggg; m re Durham (D. C, Md.), 8 Am. chase price, of goods delivered prior to four ^ ^g ^^^ p^^. 750; In re Sawyer (D. C, months period, see In re Stiger (D. C, N. J.), j^^^^ ^^ ^3 Am. B. E. 269, 130 Fed. 384, where ,0^' w;Jn'„^ MpNiPl /r r A 4th Cir ) 41 » chattel mortgage given In security for the A^ R B TO9 9^^Fert 716 ' payment of notes to a certain amount was sus- 2S8B?tcher'v Cantor (D C N Y ) 26 Am talned as to the amount actuaUy loaned at the be: I4 % Fed 94lTyouns'v. Evants (C C. ^e the mortgage was executed : In re Dismal A Sii. r.,--\ ii im T? Tt ha a^il Fefl 2R2- Swamp Contracting Co. (D. C, Va.), 14 Am. B. A., 5th C^.), 41 Am BE. 379, 251 led 28^, Bankers' Trust iu I7T Pac 1065 ^"^ (D- ^- N- Y.), 32 Am. B. E. 71, 210 Fed. 289. 239, Beorganimt'ion of corporation to take 248. In re Huprill (D. C, Ohio), 3 Am. B. E. assets of Insolvent corporation; present con- 686, 100 Fed. 616. See also a ease somewhat sideration.— Where a corporation, organized to analogous, In re Barrett (Eef., N. Y.), 6 Am. 1072 LiEHs. [§ 67-e. g. Transfers and incumbrances under State laws. — The last sentence of the subsection is in line with the policy of the law. It adopts all State laws which interdict fraudulent transfers and liens, provided the acts complained of are within four months of the bankruptcy. Section 70-e is broader and applies the period of limitation fixed by the State law. This sentence is of little importance. h. Suits to recover property.— (1) In general, — Though all fraudulent transfers or incumbrances are here declared null and void and, by § 70-a (4) the title to property affected thereby vests in the trustees, yet. a suit to recover will often be necessary. This is invariably so, where possession is not in the bankrupt. If in his possession, it may be reached summarily .^^^ Not so where a third party is interested, save with his consent.^" The set- ting aside of a mortgage in which the wife of the bankrupt joined, to release her dower, revives the wife's right of dower.^^ A payment of a premium to an insurance company upon an annuity policy, whereby a bankrupt becomes entitled to an annuity payable during life, may be recovered by the trustee of the annuitant; such a contract is wholly executory and the trustee may elect to cancel it, and recover the consideration for the benefit of creditors.^^ What has been said as to suits to set aside voidable preferences is largely applicable here.2^« (2) Amendment of 1903. — The words added here are the same as those added to § 60-b and § 70-e. Clearly, they refer to any suit which may be brO'Ught under the subsection, and not merely to a suit based on a State law. The meaning and purpose of the amendment have already been dis- cussed. The amendatory act has conferred jurisdiction upon district courts concurrent with State courts to set aside transfers made by a bankrupt within the four months' period, which, are alleged to be null and void as to creditors by a State law.^^* If the property, against which the lien is asserted, is in the possession of a State court, the question of the validity of the lien should B. K. 48. Compare also In re Soudans Mfg. ware & Metal Co. (D. C, Wash.), 35 Am. Co. (C. C. A., 7tli Cir.), 8 Am. B. K. 45, 113 Fed. B. R. 851, 227 Fed. 304. ^'*^- „ ^ , o i,w V ,r. <. A ^fi 245. Matter of Lingafelter (C. C. A., 6th 248a. Eobertson v. Schlotzhauer (C. C. A., 7tu p,- \ o,( a™ tj t? acj: Cir.), 40 Am. B. R. 237, 243 Fed. 324. ^'^-j' ^^ 4™" ^- ?," f^^: ^ ., ^ r, ,r. r. 243. See In re Deuell (D. C, Mo.), 4 Am. ,246 Smith v. Mutua Life Ins Co (C. C. B. R. 60, 100 Fed. 633, and many cases ^^f^^'it t^'h-yW"! ^f V^^-"" v , ., ' J, c i iT,i; "*8. oee under ejection Sixty of this work. where the remedy of contempt has been re- g^g Johnston v. Forsyth Mercantile Co. sorted to. (p_ C__ Qa.), 11 Am. B. R. 669, 127 Fed. 845. 244. Bardes v. Bank, 178 U. S. 524, 4 Am. See MoNulty v. Feingold (D. C, Pa.), Z B. R. 163, 44 L. Ed. 1175, 20 Sup. Ct. 1000; Am. B. R. 338, 129 Fid. 1,001, holding that Matter of Mansur (Ref., Mass.), 36 Am. B. R. a trustee in bankruptcy may maintain a suit 57. in equity in a district court for an account- Consent of defendant. — An action, wherein ing of money collected by defendants on ac- it is alleged that the defendant claimed to counts fraudulently assigned to them by be the owner of an account due the bankrupt bankrupts, although the face value of such and that such claim was based on a con- accounts is known to the trustee. As to spiracy between the bankrupt and the defend- actions by trustees to set aside fraudulent ant, is in the nature of a suit to quiet title conveyances, see Schmitt v. Dahl (Sup. Ct., to personal property, and cannot be brought Minn.), 11 Am. B. R. 226, 188 Minn. 506; in the federal courts without the consent of Kohout v. Chaloupka (Sup. Ct., Neb.), 11 the defendant. Simpson v. Western Hard- Am. B. R. 265, 69 Neb. 677; Loganville Bank- § 67-e.J I"NYALiD Transfers oe Incumbeances, 1073 be tried in the State court.*^ Tor the time when the amendments became operative, see "Supplementary Section to Amendatory Act," post. i. Miscellaneous ijivalid transfers or incumbrances. — (1) In geneeal. — The books are already well filled with precedents. All turn on their own facts.^^^ It is impossible to deduce hard and fast rules. The more important cases are classified in the succeeding paragraphs. (2) MoETGAGEs TO SECTTEE ANTECEDENT DEBTS. — These are void.^^^ Where the mortgagor remains in possession with power to sell in the usual course of business, under a mortgage that contains no provision that the proceeds bf sales shall be applied upon the debt secured, the legal effect of the mortgage is to hinder and delay creditors ; and if given within the four months' period is null and void.^^^ Although the mortgage is given to secure a present loan, ing Co. V. Forrester (Ga. Ct. of App.), 36 Am. B. E. 279, 87 S. E. 694; Simpson v. Western Hardware & Metal Co. (D. C, Wash.), 35 lAm. B. R. 851, 227 Fed. 304; Eubenstein v. Lottow (Mass. Sup. Ct. ), 35 Am. B. H. 243, 220 Mass. 156. 250. Pietri v. Wells (La. Sup. Ct.), 36 Am. B. E. 105, 69 So. 847. 251. For instance, In re Little Eiver Lum- ber Co. (D. C, Ark.), 1 Am. B. E. 483, 92 Fed. 585, and In re Head (D. C, Ark.), 7 Am. B. E. 556, 114 Fed. 489; In re Faul- haber Stable Co. (C. C. A., 2d Cir.), 22 Am. B. E. 381, 170 Fed. 68. See also for decisions on this general subject, Harvey v. Smith (Sup. Jud. Ct., Mass.), 7 Am. B. E. 497, and In re Standard Laundry Co. (C. C. A., 9th Cir.), » Am. B. E. 538, 116 Fed. 476; Henderaon v. Garner (Ala. Snp. Ct.), 39 Am. B. E. 792, 75 So. 387; Matter of Hawkins (D. C, Ga.), 40 Am. B. E. 271, 243 Fed 792. 252. In re Ronk (D. C, Ind.), 7 Am. B. K. 31, 111 Fed. 154; PoUock v. Jones (C. C. A., 4th Cir.), 10 Am. B. B. 616, 124 Fed. 163, affg. 9 Am. B. E. 262, 118 Fed. 673; Farmers' Bank v. Carr & Co. (C. C. A., 4th Cir.), 11 Am. B. E. 733, 127 Fed. 690; In re Hill (D. C, Cal.), 35 Am. B. E. 499, 140 Fed. 984; Matter of Hutchinson Co. (Eef., Mich.), 14 Am. B. E. 518; Morgan v. First Nat. Bank (C. C. A., 4th Cir.), 18 Am. B. E. 639 145 Fed. 466. Compare In re Wolf (D. C, Iowa) , 3 Am. B. R S58, 98 Fed. 84, and Sabin V. Camp (D. C, Oreg.), 3 Am. B. R.' 678, 98 Fed. 974. Mortgage, when invalid. — But a transfer or mortgage made by an adjudged bankrupt,' to secure a pre-existing debt, within four' months of the filing of the petition, is not . void, under section 67-e, unless it was either' made iwith the intent on his part to hinder, delay or defraud hia creditors, or some of them, or is held void as against his creditors by the laws of the jurisdiction in which the property is situated. Coder v. Arts ( C. C. A., 8th Cir.), 18 Am. B. E. 513, 152 Fed. 943, modifying 16 Am. B. E. 583, affd. 213 U. S. 223, 22 Am. B. E. 1, 53 L. Ed. 772, 29 Sup. Ct. 436. Chattel mortgage by corporation organized to take over business of bankrupt; lack of present consideration. — ^Where a creditor, with knowledge that a bankrupt had made various transfers of his property to his wife, 68 received stock in a corporation formed to take over bankrupt's business and which was at all times insolvent, and subsequently turned back the stock, taking in part pay- ment therefor a chattel mortgage upon assets of the corporation, such mortgage was in- valid, the evidence failing to establish that the creditor had ever purchased the stock for a present consideration or advanced money -thereon as claimed. In re Levine (D. C, ,N. Y.), 28 Am. B. E. 481, 196 Fed. 589. < 253. Egan State Bank v. Eice (C. C. A., 8th Cir.), fl' Am. B. E. 437, 119 Fed. 107; Zartman v. Jfational Bank, 16 Am. B. E. 152, lOfl N. Y. App. Div. 406, 96 IN". Y. Supp. 633; Skilton v. Codingtoa, 15 Am. B. E. 810, 185 N. Y. 80, 77 N. E. 790; In re Marine Construction & Dry Dock Co. (D. C., N. Y.), 14 Am. B. E. 466, 135 Fed. 921; Dodge T. Norlln (C. C. A., 8th Cir.), 13 Am. B. E. 177, 133 Fed. 363; In re Standard Telephone & Electric Co. (D. C, Wis.), 19 Am. B. R. 491, 157 Fed. 106; In re Herman (D. C, Iowa), 31 Am. B. E. 243, 207 Fed. 594; Pierre Banking & Trust Co. v. Winkler (S. Dak. Sup. Ct.), 40 Am. B. R. 622, 165 N. W. 2. Mortgragre to secure prior advances. — ^Where bankrupt gave to a bank a mortgage to secure prior advances which had been made under an agreement to give such security and it plainly appeared that bankrupt, who was ;then knowingly, hopelessly insolvent, had determined, days before he gave the mort- gage, to abscond and leave his creditors un- paid, except as secured, the mortgage con- stituted a transfer to hinder, delay and de- fraud creditors, and, there being no "present" consideration, it was void, not- 'withstanding that the mortgagee might have acted in good faith. In re Thomas (D. C, N. Y.), 29 Am. B. E. 945, 199 Fed. 214. Mortgage on shifting stock of merchan- dise. — A chattel mortgage given by a bank- rupt on a stock consisting of wines, liquors and cigars, etc., which, with the knowledge of the_ mortgagee, were (bought and sold and dealt in from day to day in the usual course of trade, all of the proceeds being retained by the bankrupt and no part being turned over to the mortgagee, is invalid. In re Noethen fC. C. A., 2d Cir.), 29 Am. B. E. 234, 201 Fed. 97, affg. 27 Am. B. E. 910, 193 Fed. 573. 1074 Liens. [§ 67-e. if the money borrowed is to be used in. part payment of antecedent debts, the mortgage has been held to be void.^^* (3) Chattel moetgages. — Here the cases are quite numerous and in each instance turn upon the requirements of the State law.^^ Any chattel mortgage which was ineffectual as against creditors under the law of the State of the transaction, is ineffectual as against the bankrupt's trustee. ^^^ 254. In re Pease (D. C, Mich.), 12 Am. B. R. 66, 129 Fed. 446; In re Butler (D. C, Ga.), 9 Am. B. R. '539, 120 Fed. 100; In re SoudauB Mfg. Co. (C. C. A., 7th Cir.), 8 Am. B. R. 45, 113 'Fed. 804; In re Hersey (D. C, Iowa), 22 Am. B. R. 763, 171 Fed. 998; Matter of Schacht Motor Car Co. (Ref., Cal.), St Am. B. R. 624. Compare Smith v. Coury (D. C, Me.), 41 Am. B. R. 219, 247 Fed. 168; Matter of Lake Chelan Land Co. (C. C. A., 9th Cir.), 44 Am. B. R. 14, 257 Fed. 497. MortgaEre to secure advances to pay pre- existing debt. — A mortgage, executed by an Insolvent debtor within four months of bank- ruptcy, covering all his property, to secure notes representing a loan with which the mortgagee had taken upon notes discounted by a bank and on which the debtor was threatened with arrest for forgery, held, on all the evidence, to constitute a fraudulent transfer, void under section 67-.e of the bankruptcy act. Dean v. Davis, 242 U. S. 438, 38 Am. B. R. 664, 37 Sup. Ct. 230, and cases cited in marginal note. 255. In re Adams (Ref., Mich.), 2 Am. B. R. 415; In re Leigh (Ref., Col.), 2 Am. B. R. 606; Stroud v. McDaniel (C. C. A., 4th Cir.), 5 Am. B. R. 695, 106 Fed. 493; In re Shirley (C. C. A., 6th Cir.), 7 Am. B. R. 299, 112 Fed. 301; In re Platts (D. C, S. Dak.), 6 Am. B. R. 568, 110 Fed. 126; In re Ronk (D. C, Ind.), 7 Am. B. R. 31, 111 Fed. 154; In re Pekin Plow Co. (C. C. A., 8th Cir.), 7 Am. B. R. 369, 112 Fed. 308; In re Soudans Mfg. Co. (C. C. A., 7th Cir.), 8 Am. B. R. 45, 113 Fed. 804; Dodge Y. Norlin (C. C. A., 8th Cir.), 13 Am. B. R. 177, 133 Fed. 363; Bank of Dillon v. Mur- chison (C. C. A., 4th Cir.), 31 Am. B. R. 740, 213 Fed. 147. As to binding effect of State law and decisions, compare In re Hull (D. C, Vt.), 8 Am. B. R. 302, 115 Fed. 858, with In re Josephson (D. C, Ga. ), 8 Am. E. R. 423, 111 Fed. 404. The latter case is thought the more reliable. Matter of Petersen (D. C, Nev.), 40 Am. B. B. 653, 252 Fed. 846, 849; Matter of Taylor Corporation (C. C. A., 2d Cir.), 40 Am. B. E. 659, 248 Fed. 223. The validity of a mortgage is a local ques- tion, and the decisions of the State courts will control. In re Hickerson (D. C, Idaho), 20 Am. B. R. 682, 688, 162 Fed. 345; In re Harnilen (D. C, N. Mex.), 29 Am. B. R. 507, 200 Fed. 175; Scandinavian-American fiank v. Sabin (C. C. A., 9th Cir.), 36 Am. B. E. 151, 227 Fed. 579. A bill of sale executed by a corporation "While it is insolvent, to secure a loan is Invalid Tinder this section. In re Arkonia Fabric Mfg. Co. (D. C, Pa.), 18 Am. B. R. 470, 151 Fed. 914. Possession and sale of property hy mort- gagor. — ^A provision in a chattel mortgage, that the mortgagors may remain in posses- sion of a stock of merchandise and sell it out in the usual course, paying a per cent, of the sales each week to the mortgagee, does not render the mortgage void per se. Good faith is the controlling principle in testing the validity of such a conveyance, and this must be in each case decided upon the evi- dence. Cauthorn v. Burley JSDate Bank (Sup. Ct., Idaho), 33 Am. B. R. 794, 144 Pac. 1608. 256. In re First National Bank of Canton (C. C. A., 6th Cir.), 14 Am. B. E. 180, 135 Fed. 62; In re Birck & Co. (C. C. A., 7th Cir.), 15 Am. B. R. 694, 142 Fed. 438, holding that under the Illinois statute a chattel mortgage is void as against the mortgagor's trustee, where such mortgage was given to secure notes containing no mention upon their face that they were secured by an Instrument In the form of a chattel mortgage. In re Shaw (D. C, Me.), 17 Am. B. R. 196, 146 Fed. 243; In re Chadwick (D. C, Ohio), 15 Am. B. E. 528, 140 Fed. 674; Matter of Petersen (D. C, Nov.), 40 Am. B. R. 653, 252 Fed. 846, 849; Park v. South Bend Chilled Plow Co. Teansfee oe Ingumbeances. 1075 If a bankrupt purchases property subject to a chattel mortgage, his trustee cannot attack the mortgage because not filed as required by statute; the bankrupt received the property subject to the lien, and his trustee cannot avail himself of the remedies afforded the creditors of the original mort- gagor.^^^ Cases where the validity of conditional sales has been attacked are also cited here.^* So also where a pledge of collateral has been called in question.^'® (4) Voluntary settlements. — These are avoided in terms by the English law. We have no similar provision, but judicial construction has made our rule substantially the same. If made by an insolvent husband to his wife they are held void.^®" No matter how devious the method, if the wife gets the property from an insolvent husband without consideration, intent will be presumed and the transfer be set aside.^®^ Similarly, transfers statute; tbat, In Missouri, an unrecorded ebattel mortgage is void as to creditors extend- ing credit to the mortgagor between the time of giving the mortgage and the date of record ing, and that the superior equity of such credi- tors follows the property into the hands of the trustee in bankruptcy. In ro W.ide fD. C, Mo.), 26 Am. B. E. 169, 185 Fed. 004. BiK^^t of trustee to take advaiitiige of In- validity. — Prior to bankruptcy, the bankrupt had given to his father-in-law a ehn:r(.'l mort- gage covering tools, furniture, persor.aJ prop- erty, etc., of every kind. He was at tlie time running a small store and his stock of merchan- dise, covered by the mortgage, was sold from time to time as his own and the proceeds used primarUy for the support of the bankrupt's family, though occasional payments wore made upon the mortgage but no account of sales was kept, and the mortgagee made no objection to tile disposition made of the proceeds. Held, tiiat the mortgage was invalid as to auy of tiie property, as against the general creditors, and that the trustee in bankruptcy might take advantage of such invalidity. In re Hartnan (D. C, N. Y.), 26 Am. B. It. 76, 189 Fed. 190. Mortgage on shifting stock of merchandise. — A New York chattel mortgage given to secure a part of the purchase price of a stock of goods, which permits the mortgagor to seU the goods in the ordinary course of business although providing that the stock shall be kept up to its present standard as to ciuality and quantity and , purporting to give a lien on all goods purchased to replenish the stock is void as to the mortgagor's creditors, in the absence of a provision for turning over the proceeds of sales to the mortgagee or ,for using such pro- ceeds to replenish the stock or for a renewal of the lien by giving renewal or new mortgages on new stock purchased. Matter of Purtell (D. C, N. Y.), 32 Am. B. E. 824, 215 Fed. 191. Under the decisions of Oregon, when it appears either upon the face of a chattel mortga;;o or by parol evidence aliunde, that a mortgagee of personal property has given the mortgagor un- limited power and authority to dispose of the property in the usual course of trade, the mort- gage is void as to attaching creditors, even though there was not actual fraudulent intent on the part of either of the parties to the instrument, and hence it is also void as to the trustee in bankruptcy of the mortgagor. Scan- dinavian-American Bank v. Sabin (C. C. A., 9th Cir.), 36 Am. B. E. 151, 227 Fed. 579. 257. In re Columbia Fireproof Door i Trim Co. (D. C, N. Y.), 21 Am. B. E. 714, 168 Fed. 159. 268. In re KUngaman (D. C, Iowa), 4 Am. B. E. 254, 101 Fed. 691; In re Howland (D. C., N. Y.), 6 Am. B. E. 495, 109 Fed. 860; In re Tatem (D. C, N. Car.), 6 Am. B. R. 426, 310 Fed. 519; In re Sewell (D. C, Ky.), 7 Am. B. E. 133, 111 Fed. 791; In re Garcewich (C. <:. A., 2d Cir.), 8 Am. B. R. 149, 115 Fed. 87. 259. Chattanooga Nat. Bank v. Rouie Iron Co. (D. C, Ga.>, 4 Am. B. E. 441, 102 Fed. 733; In re Cobb (D. C, N. Car,), 3 Am. B. E. 129, 96 Fed. 821; Casey v. Cavaroc, 96 U. S. 467, 2t 1>. Ed. 119; Clark v. Iselin, 21 Wall. 300; Adams v. Nat. Bank, 2 Fed. 174; Davis v. E. E. Co., Fed. Cas. 3,048; la re Grinnell, Fed Cas. 5,bi;9. 260. In re Skinner (D. C, la.), 3 Am. B. K. 163, 97 Fed. 190; In re Grabs (Eef., Ohio), 1 Am. B. 11. 465; Kehr v. Smith, 20 Wall. 31; Sodgwick V. Place, Fed. Cas. 12,622; Pratt v. Curtis, Fed. Cas, 11,375; Antrim v. KeUy, Fed. Cas. 494. Compare Conron v. Cauchois (C. C. A., 2d Cir.), 39 Am. B. E. 780, 242 Fed. 909. 2C1. In re Smith (D. C, Ga.), 3 Am. B. E. 95, 100 Fed. 795; In re Eldred, Fed. Cas. 4.328. Compare In re Teter (D. C, Va.), 23 Am. B. E. 223, 1/3 Fed. 798, affd. 24 Am. B. E. 242, 179 Fed. 655; Phillips V. Kleinman (Pa. Com. Pleas. AUeg. Co.), 23 Am. B. E. 266. Assignment of life insurance poliey; i^liattel mortgage to wife to secure note. — A. bankrupt had two policies of life insurance in which his wife was named as beneficiary subject to the usual right of the insured to change the bene- ficiary. Assignments of both of the policies to the company as security for loans were sJgni'd by tie wife. Thereafter a note was gi-ven to the wife secured by a mortgage, for the amount of the loan with interest. The mortgaged prop- erty was sold free from liens. Held, that the note to the wife and the mortgage to secure it were without consideration, and that the pro- ceeds of the sale of the property beiong to the estate in bankruptcy. Matter of Farrand (D. C, Me.), 38 Am. B. E. 101, 235 Fed. 809. 262. In re Johann, Fed. Cas. 7,331. Compare Adams v. Collier, 122 U. S. 382, 30 L. Ed. 1207, 7 Sup. Ct. 1208. 263. In re Porterfleld (D. C, W. Va.), 15 Am. B. E. 11, 138 Fed. 192; In re Grandy (D. C, S. Car.), 17 Am. B. E. 206, 146 Fed. 318. 263a. Baldwin V. Kingston (D. C, N. J.), 40 Am. B. E. 641, 247 Fed. 163, affd. 44 Am. B. R. 12 257 Fed 554. 86Sb. Eobertson v. Schlotzhauer (C. C. A., 7th Cir.), 40 Am. B. R. 237, 243 Fed. 324. 264. Gifts by husband to wife; recovery by trustee. — Small sum of moneys voluntarily given by a husband to his wife from time to time when he was entirely solvent, should not be taken from her to pay persons who became creditors as a result of a business enterprise into which he subsequently engaged; but sums BO given the wife, when the husband is not in a financial condition to do so. may be recov- ered by the trustee in bankruptcy. Milkman v. 1076 Liens. [§ 67-c,f. to other relatives are suspicious and require proof.262 But if a transfer be made in good faith to a wife, in consideration of her release of her inchoate dower right, it is valid,263 and the same is true of a transfer to the wife in lieu of support,263a, or pursuant to an ante- nuptial agreement.263b A husband may give his earnings or other property to his wife, without affecting the rights of his creditors, provided he is at the time in solvent circum- stances, and there is no purpose to avoid his obligations.264 (5) Genebal assignments. — ^Voluntary general assignments, whether with or without preferences, are legal frauds, and therefore voidable. The cases are already numerous,265 and establish a doctrine not always recognized under the former laws. The legal effect of a general assignment is considered elsewhere.266 j. Fractice. — If the property may be recovered summarily, a petition, duly verified, will usually be enough to secure the order to show cause. It should show facts bringing it within the terms of some of the subsections of this section.2G7 If the bankrupt or his agent who is in possession refuses to deliver the property, contempt proceedings may be brought. In cases where a suit is necessary it must be brought in the proper tribunal,267a and must be for either the property or its value. The trustee should not, however, bring such a suit without obtaining a direction to that effect by the referee in charge.2fi8 He must also allege and prove that the property is required to pay claims against the bankrupt's estate.268a In a suit to recover specific property an injimction against further transfer is a right incidental to the suit.268b VI. LIENS THROUGH LEGAL PROCEEDINGS. a. In general. — Subsections c and / both relate to liens obtained througb legal proceedings. Subsection c relates to liens obtained in suits or pro- Arthe (C. C. A., 2d Cir.), 34 Am. B. K. 536, 223 Fed. 507, revg. 32 Am. B. R. 519, 213 Fed. 642. 265. West Co. T. Lea, 174 U. S. 590, 2 Am. B. E. 463, 43 L. Ed. 1098, 19 Sup. Ct. 836; Davis v. Bohle (C. C. A., Sth Cir.), 1 Am. B. E. 412, 92 Fed. 325, afeg. In re Sievers (D. C, Mo.), 1 Am. B. E. U7, 91 Fed. 366 ; In re GutwiUlg (D. C, N. Y.), 1 Am. B. E. 78, 90 Fed. 475; affd., s. c, 1 Am. B. E. 388, 92 Fed. 327; In re Gray, 3 Am. B. E. 647, 47 N. Y. App. Dlv. 554, 62 N. Y. Supp. 618; Globe Ins. Co. v. Cleveland Ins. Co., Fed. Cas. 5,486 ; Boese v. King, 108 U. S. 379, 27 L. Ed. 760, 2 Sup. Ct. 765; Detroit Trust Co. v. Pontiac Sav. Bank (C. C. A., 6tli Cir.), 27 Am. B. E. 821, 196 Fed. 29; affd. 237 U. S. 186, 34 Am. B. E. 759, 35 Sup. Ct. 509 ; Matter of Braus (D. C, N. Y.), 38 Am. B. E. 112, 237 Fed. 139; Matter of Vorck (D. C, Mont.), 38 Am. B. E. 203, 235 Fed. 655. Compare Matter of Creech Bros. Lumber Co. (C. C. A., 9tli Cir.), 39 Am. B. E. 487, 240 Fed. 8. A general assignment, even though without preferences, is now, if made within four months of the filing of the petition, a constructive fraud on the bankruptcy act. Cohen v. Ameri- can Surety Co., 20 Am. B. E. 65, 72, 192 N. Y. 227, 84 N. E. 947; Eiehholz v. Polack (N. Y. App. Dlv.), 25 Am. B. B. 243, 140 N. Y. App. Dlv. 551, 125 N. Y. Supp. 1108. 266. See under Sections Three and Twenty- three of this work. 267. AUeEations in pleadings. — For instance, in the case of McNulty v. Wiesen (D. C, Pa.), 12 Am. B. R. 341, 130 Fed. 1,012, it was held that an aUegation in an answer that the purchase of book accounts was made without intent on the part of the defendants to delay, hinder and defraud the bankrupt's creditors, or any of them, is not impertinent, for the reason that under Bubseetion e the defendants are re- quired to show that they were purchasers in good faith and for a present fair consideration. See also Johnston v. Forsyth Mercantile Co. (D. C, Ga.), 11 Am. B. R. 669, 127 Fed. 84. 267a. See, generaUy, under Sections Two and Twenty-three of this work. Trice v. Coolidge Banking Co. (D. C, Ga.), 39 Am. B. E. 843, 242 Fed. 175. A receiver cannot sue to recover property which has been frauduently transferred by the bankrupt. Frost v. Latham & Co. (D. C. Ala ) 25 Am. B. E. 313, 181 Fed. 866. Equity jurisdiction. — To establish a liability under section 67-e of the bankruptcy act actual fraud must be shown and therefore suits under that provision are peculiarly within the cog- nizance of, and should be entertained on, the equity side of the court. Simpson v. Western Hardware & Metal Co. (D. C, Wash.), 35 Am. ?;,^-„^^^' ^"'^ ^«'i- 304; Henderson v. Garner (Ala. Sup. Ct.), 39 Am. B. E. 792, 75 So. 387. n^C '^^ ^^^°' eenerally, under Sections Three, Twenty-three and Sixty of this work. Intervention by trustee.— The trustee may be brought before the court by amendment to the original bill although it was filed before bank- ruptcy. Eennells v. Potter (Mich., Sup. Ct.). 40 Am. B. E. 480, 164 S. W. 475. 268b. Hibschmau v. Bevis (Wash. Sup Ct ). 42 Am B. R 154, 174 Pac. 5. Compare Rlggsv Amount of recovery.— In an action by a trustee in bankruptcy to recover property fraudulently transferred, the amount of the recovery by the trustee wiU be limited to the amount of claims against the bankrupt with in t^A '"','' ""f^^' including any unpaid costs m ,5 bankruptcy proceedinss. Smith v. Seibel 9b«k' i"-,',' ** A^- ^- ^- *39, 258 Fed. 454. 54'''l4''7 Fe"" 997^"''° ^°- ''- ^'"•'- '» ^'"- «■ ^- § 67-c, f.] Liens Theough Legal Proceedings. 1077 ceedings at law or in equity against the bankrupt, begun within the four months' period. Such liens are nullified, or if the nullification would work an injury to the bankrupt estate, they may be preserved for the benefit of the estate, and the trustee may be subrogated to the rights of the holder of the lien, and be empowered to perfect and enforce the same. Subsection / nullifies all liens obtained through legal proceedings " against a person who is insolvent," which are perfected within the four months' period.^** The prop- erty subject thereto passes upon the bankruptcy of such person to his trustee. The court may also preserve such liens for the benefit of the estate. Bona fide purchasers are protected under this subsection. The provisions of this subsection are not limited to the annulment of liens on property that passes to the trustee ; it is general and sweeping and applies to all liens acquired through legal proceedings during the four months' period, on all property of the bankrupt, including exempt property.^™ The section does not, however, defeat rights in the exempt property acquired by contract or by waiver of the exemption.^'"^ b. Comparative legislation. — The wide gulf between the former and the pres- ent law here needs little comment. Then, as has been said, only attachment liens were dissolved. JSTow all liens through legal proceedings share the same fate. Thus, the subsections under discussion are in harmony with the so-called " passive " act of bankruptcy ^''^ and, with it, establish a new class of construc- tive frauds resulting from what we have been wont to think justifiable foresight. This is the high-water mark of bankruptcy jurisprudence both in England and the United States. The change is so marked that the constitutionality of the clause has been attacked, though unsuccessfully.^^^ e. Confusion concerning subs. c. and subs. f. — A question much discussed early in the administration of the law was whether subsection / applied to voluntary bankruptcies. Some cases held that it did not.^'^ The great weight 269. Matter of Southern Arizona Smelting Co. bankrupt's own property, and tliat therefore (C. C. A., 9th Cir.), 36 Am. B. E. 827, 231 Fed. liena against the exempt property were not 87. annulled even though obtained by legal pro- Void or Toidable. — The lien of a judgment ceedings within four months of filing the peti- entered against an Insolvent debtor within four tion. Ee Driggs (D. C, N. Y.), 22 Am. B. E. months of bankruptcy is absolutely void, not 621, 171 Fed. 897; Ee Durham (D. C, Ark.), 4 merely voidable. Greenberger v. Schwartz (Pa. Am. B. E. 760, 104 Fed. 231. On the other hand, Sup. Ct.), 42 Am. B. B. 239, 104 Atl. 574. Ee Tune (D. C, Ala.), 8 Am. B. E. 285, 115 870. In re Forbes (C. C. A., 9th Cir.), 26 Am. Fed. 906; Ee Forbes (C. C. A., 9th Cir.), 26 Am. B. E. 355, 186 Fed. 79. It is apparent that the B. E. 355, 108 C. C. A. 191, 186 Fed. 79, holds effect of § 67-f of the Act of 1898 is not to avoid that 67-f annuls aU such liens, both as against attachments, levies or liens therein referred to the property which the trustee takes and that agalhst aU the world, but merely as against the which may be set aside to the bankrupt as trustee in bankruptcy and those claiming under exempt. This view, we think, is supported both him, so that the property may pass to and be by the language of the section and the general distributed by him among the creditors of the policy of the act, which was intended not only bankrupt, and such is the view entertained by to secure equality among creditors, but for the several well-considered cases. Casady & Co. v. benefit of the debtor in discharging him from IlartzeU 34 Am B. E. 236, 151 N. W. 97; his liabilities and enabling him to start afresh Peoples' Nat'l Bank v. Maxson (Sup. Ct., Iowa), with the property set apart to him as exempt. 33 Am. B. E. 765, 150 N. W. 601; Matter of Both of these objects would be defeated if American Candy Mfg. Co. (D. C, N. Y.), 41 Am. judgments like this present were not annulled, B E 461 248 Fed. 145; Archenhold Co. v. for otherwise the two Iowa plaintiffs would Schaefer (Tex. Ct, of Cir. App.), 42 Am. not only obtain a preference over other credi- B. E. 232, 205 S. W. 139; Compare Jewett tors, but would take property which it was Bros V HufEman (N. Dak. Sup. Ct), 13 the purpose of the bankruptcy act to secure to Am B E 738 14 N. Dak. 110 ; Matter of Down- the debtor." See discussion under Section Six Ing (D. C, Ky.), 15 Am. B. E. 432, 139 Fed. 590; of this work, sub-title "Exemptions out of First Nat. Bank v. Lee (N. Dak. Sup. Ct.), 34 incumbered property." Am B E 555 141 N. W. 716. Failure of trustee to claim property. — The Tlie Supreme Court In the case of Chicago, Men of a judgment acquired within four months Burlington & Quincy Ey. Co. v. Hall, 229 U. S. <>* bankruptcy is rendered void by section 67-f 511, 30 Am B. E. 619, 57 L. Ed. 1306, 33 Sup. ot the bankruptcy act, although the trustee does Ct. 885, has settled such doubt as may have not claim the property against which the lien existed in respect to this matter. The court is asserted. Peoples' Nat'l Bank v. Maxon (Sup. says: "On this question there is a difference Ct, Iowa), 33 Am. B. E. 765, 150 N. W. 601. of opinion, some State and Federal courts hold- Contractual liens not affected.— The language ing that the bankruptcy act was Intended to of section 67 of the bankruptcy act, which pro- protect the creditor's trust fund, and not the lors Liens. L§ 67-c, f. of authority, however, is that both subsections may refer to either voluntary or involuntary cases.^^* The courts were at first also much confused by two subsections with apparently the same purpose, yet, while inconsistent in part, at the same time overlapping. This confusion is not now important. Subsection / seems to cover in general terms almost every lien specifically declared voidable in subsection c, as well as many more. Besides, it occurs later in the law and, having been inserted while the bill was in conference committee of the two Houses of Congress, thus represents, as it were, the last word of the framers of the statute.^^ It, therefore, is now usually relied on; subsection c is important only in those rare instances where subsection / does not apply. d. When subs, c applies. — The element of insolvency at the time of the lien not always being essential under subsection c, as under subsection f, cases where this matter is in doubt will often, if possible, be brought within the former. This distinction is not important where the facts bring the alleged lien within subdivisions c (1) or c (2). Still, liens may be obtained through legal proceedings which amount to a fraud on the act irrespective of insolvency. In that event, while such cases will be rare, subsection c, and not its companion, applies. The distinction between " void " and " voidable," in the respective subsections, is not important. Several of the clauses mak- ing up subsection c have been considered elsewhere.^® The phrase " in fraud of the provisions of the act" comes from the law of 1867.^" It means, in brief, any act intended to disturb or resulting in a disturbance of that equilibrium between creditors of the same class which is the basic principle Tides that " levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at a time ■within four months prior to the filing of a pe- tition in bankruptcy against him, shall be deemed null and void in case he is alleged a bankrupt, and the property affected by the levy, Judgment, attachment, or other lien shall be deemed discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt," relates merely to levies, judgments, attachments, and liens which are acquired through legal proceedings, and does not affect contractual or quasi contractual liens. Scrupulous care. Indeed, is evidenced through- out the act to save all such rights and liens whicli are obtained in good faith from the bank- rupt. Gray v. Arnot (N. Dak. Sup. Ct.), 35 Am. B. R. 704, 154 N. W. 268. The framers of the Bankruptcy Act in em- ploying the words "levies, etc." in section 67(f) had reference to writs of execution, fl. fa. garnishment, etc. Bird v. City of Eichmond (C. C. A., 4th Cir.), 39 Am. B. B. 1, 240 Fed. 545. 270a. Matter of Goldberg (D. C, Pa.), 42 Am. B. E. 299, 254 Fed. 440; First Nat. Bank of Sayre v. Bartlett, 21 Am. B. E. 88, 35 Pa. Super. Ct. 593. See discussion under Section Six of this work, subtitle "Exemptions out of encumbered property." 271. Bankr. Act, § 3-a (3). 272. In re Ehoads (D. C, Pa.), 3 Am. B. R. 380, 98 Fed. 399. 273. Voluntary bankruptcies. — In the case of In re DeLue (D. C, Mass.), 1 Am. B. E. 387, 91 Fed. 510, It was held that where an attach- ment of the property of a voluntary bankrupt had been made by virtue of a precept issued within four months prior to the filing of the petition or in a suit that was commenced a year before the filing of the petition the lien of at- tachment was not destroyed by an adjudica- tion of the petitioner in bankruptcy on the ground that the case falls within section 67-e, and the provisions of section 67f, being limited to voluntary bankruptcy, have no application. This case was followed by In re Easley (D. C, Va.), 1 Am. B. E. 715, 93 Fed, 419, where prop- erty had been levied upon by an execution issued upon a judgment prior to the statutory four months, and also by the case of In re O'Connor, 95 Fed. 943. 274. In re Friedman (Eef., N. Y.), 1 Am. B. E. 510; Peck, etc., Co. v. Mitchell, 95 Fed. 258; In re Fellerath (D. C, Ohio), 2 Am, B. E. 40, 95 Fed. 121; In re Ehoads (D. C, Pa.), 3 Am. B. E. 380, 98 Fed. 399; In re Dobson (D. C, 111.), 3 Am. B. E. 420, 8 Fed. 86; In re Lesser (D. C, N. Y.), 3 Am. B. E. 815, 100 Fed. 433; In re Kemp (D. C, Col.), 4 Am. B. R. 242, 101 Fed. 689; Brown v. Case (Sup. Jud. Ct., Mass.), 6 Am. B. E. 744, 61 N. E. 279; In re Benedict, 8 Am. B. E. 463, 37 N. Y. Misc. 230, 75 N. Y. Supp. 165; Mohr v. Matox (Sup. Ct., Ga.), 12 Am. B. E. 330, 120 Ga. 962; McKenney v. Cheney (Sup. Ct., Ga.), 11 Am. B. E. 54, 45 S. E. 433, in which case the court expressly dissented from the holding of Judge Thomas in the case of In re O'Connor, 95 Fed. 943, and held that a proper construction of subsection f requires the holding that it is applicable to both cases of voluntary and in- voluntary bankruptcy. Mencke v. Eosenberg, 9 Am. B. E. 323, 202 Pa. St. 131. And see Mat- ter of Southern Arizona Smelting Co. (C. C. A., 9th Ci*.), 36 Am. B. E. 827, 231 Fed. 87, where ' the court concludes that the language and pur- pose of the two ■ subsections clearly Indicate that it was intended that they should apply to both voluntary and Involuntary proceedings. liiens obtained by judgment notes which gave the holder the power of attorney €o enter on judgment were considered to be annulled and rendered void by the adjudication, where the notes had been given before the statutory period, or the entry of the judgment had been made within that time. In re Richards (C. C. A., 7th Cir.), 3 Am. B. E. 145, 96 Fed. 935. So, in the case of In re Hlgglns (D. C, Ky.), 3 Am. B. B. 364, 97 Fed. 775, an attachment issued ivithin four months, though the case In which the 6r-c, f.] Liens Theough Legal Peoceedings. 1079 of all bankruptcy laws. Illustrative cases under the former law will be found in the foot-note. ^^* The concluding clause of subsection c is doubtless expressive of the law. It extends to liens through legal proceedings"* the rule of subrogation stated in subsection 6. The fact that to be voidable under subsection c a lien must arise in a proceeding begun within the four months' period should also be noted. e. Insolvency essential. — Here the distinction between liens through legd proceedings and other liens has already been pointed out. JSTone of tha former are dissolved by bankruptcy unless the lienee was insolvent at the time they were perfected.^^** If the debtor was insolvent at the time the liens through legal proceedings were obtained, a court of bankruptcy has power to effect an avoidance of such liens in summary proceedings ; but the insolvency of the debtor at the time such liens were acquired is an indispensable condi- tion of the existence and of the exercise of the power.^^^ If the lien consists of an attachment levied within four months of the adjudication, the solvency of the bankrupt at the time the levy was made does not save the lien; the adjudication is conclusive as to the insolvency of the debtor.^*^ f. Four months prior to the filing of the petition. — Liens through legal proceedings acquired more than four months before the bankruptcy are not affected. ^*^ This section has no application to judgments, levies, attachments, or other liens obtained after the filing of a voluntary petition in bank- ruptcy f^ nor does it affect the claim of a sheriff for fees for services rendered attacIiiiKnt was issued was begun long before, was annulled. See also lu re Vaughan (D. C, N. y.), 3 Am. B. E. 302, 97 Fed. 560, in which many cases are collected. 276. See in re Tune (D. C, Ala.), 8 Am. B. E. 285, 115 Fed. 906. Wherever thei-e is any inconsistency betweep. the provisions of paragraphs c and f, the lat- ter controls and supersedes the former under the well-known rule of statutory construction, as the last statement of the legislative will. In re Bhoads (D. C, Pa.), 3 Am. B. E. 380, 98 Fed. 399. 278. For instance, "Within four months prior to filing the petition," "Eeasonable cause to believe that the defendant was Insolvent," " In contemplation of bankruptcy," "Obtained or permitted" and "Insolvency" have been con- sidered in the discussion under Section Sixty of this work. 8«. Act of 1867, § 35, E. S., S 5128. 278. Wagner v. Hall, 16 Wall. 584; Buchanan T. Smith, 16 Wall. 277 ; Toof v. Martin, 13 Wall. 40. 279. In re Moore (D. C, Vt), 6 Am. B. E. 175, 107 Fed. 234; In re Hlggins (D. C, Ky.), 3 Am. B. E. 364, 97 Fed. 775. 280. Simpson v. Van Btten (D. C, Pa.), 6 Am. B. E. 204, 108 Fed. 199; Keystone Brewing Co. V. Schermer (Pa. Sup. Ct.), 31 Am. B. E. 279, 88 Atl. 657; Mowbray Pearson Co. v. Pershall (Wash. Sup. Ct.), 37 Am. B. E. 622, 159 Pac. 682; Farmers' Nat. Bank v. Slaton (Ky. Ct. of App.), 41 Am. B. E. 650, 203 S. W. 565. 281. Stone Ordean Wells Co. v. Mark (C. C. A., 8th Clr.), 35 Am. B. E. 663, 227 Fed. 975 (citing text) and holding also that the burden Is on him who claims a lien Is void under sec- tion 67-f to plead and prove the insolvency of the person against whom It was obtained at the time it was secured. Martin v. Oliver (C. C. A., 8th Cir.), 43 Am. B. E. 739, 260 Fed. 89, citing Collier on Bankruptcy (10th Ed.) 963. 282. Insolvency when attachment was levied Immaterial.— Subdivision "c" of section 67, de- claring in effect that a lien acquired by at- tachment shall be dissolved by the adjudication if it appear that such lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, is repugnant to the pro- visions of subdivision "f" of said section, whereby all attachments levied against a per- son insolvent at any time within the four mouths' period are deemed null and void in case adjudication is had, and the latter provisions will prevail, so that an attachment levied within four months prior to the filing of the petition is rendered null and void by bankrupt's adjudi- cation, and, the question of bankrupt's insolv- ency within that period being determined by the adjudication, his insolvency at the time the attachment was levied is immaterial. Cook v Eobinson (C. C. A., 9th Cir.), 28 Am. B. E. 182 194 Fed. 785. See also In re Eichards (C. c! A., 7th Clr.), 3 Am. B. E. 145, 96 Fed. 935, 37 C. C. A. 634; Matter of Southern Arizona Smelting Co. (C. C. A., 9th Cir.), 36 Am. B. E. 827, 231 Fed. 87. Contra. Farmers' Nat. Bank v. Slaton (Ky. Ct. of App.), 41 Am. B. E. 650, 203 S. W. 565. 283. In re Blumberg (D. C, Tenn.), 1 Am. B. E. 633, 94 Fed. 476; Fairlamb v. Smedley Const. Co., 36 Pa. Super Ct. 17, 22 Am. B. E. 824, 36 Pa. Super Ct. 17; Matter of Schow (D. C, Conn.), 32 Am. B. E. 494, 213 Fed. 514; Broach V. Mullis (D. C, Ga.), 35 Am. B. E. 841, 228 Fed. 551; Gray v. Bank of Hartford (Ark. Sup. Ct.), 43 Am. B. E. 166, 208 S. W. 302. See Am. Bankr. Dig. § 431. Suit by general creditors to set aside fraudu- lent conveyance. — General creditors, who more than four months prior to bankruptcy, file a bill to cancel a fraudulent conveyance of their debtor, acquire a specific lien on the property coneyed, and gain thereby a priority in the dis- tribution of the fund recovered. Boyd v. Arr- old (Ark. Sup. Ct.), 32 Am. B. E. 859, 146 S. W 118 Judgrment against husband and wife. — Vlere a Judgment was entered against a husband and wife more than four months before the husband was adjudicated a bankrupt it is a valid lien against property held by the entirety and is 1080 Liens, [§ 67-c, f. prior to bankruptcy on an execution levied within the four months' period.^®'" Where the valid lien has been secured more than four months prior to the bankruptcy, proceedings to enforce the same do not conflict with the bank- ruptcy law, and may be instituted and prosecuted to the end.^" When the question is one of hours, only whole days are counted.^*'' But it is the accrual of the lien, not the entry of a judgment not amounting to a lien, from which the time runs.^* Where the lien was created or existed prior to the four months' period, a judgment obtained within such period for the enforcement thereof in legal proceedings instituted for such purpose is not invalid or ineffective-.^^* If the lien exists from the date of the summons, the lien does not accrue as against the defendant's trustee if the summons was served within the four months' period. ^^^ The fact that a lien has been dormant for a long peiiod, as where the sale under an execution issued more than four months before bankruptcy was postponed, with the consent of the creditor, for a num- ber of times, does not necessarily render it unenforceable againsit the trustee.^'^ The effect where the lien is inchoate before the four months' period and does not become fixed until followed by a judgment vdthin the period is considered, post. g. Miscellaneous invalid liens through legal proceedings. — (1) By judg- MEis'T AND EXECUTION. — An important distinction must be noted here. A mere judgment is often not a lien. Until it becomes such, as by issue of execution or docketing in a register's office, it is not affected by this sub- Sieetion ;^^^ and this in spite of the use of the word " judgment" in the first not affected by tlie husband's discharge In bankruptcy and may be enforced against such property after the death of the wife. Frey v. McGaw (MS. Ct. of App.), 35 Am. B. E. 822. 2S4. In re Engle (D. C, Pa.), 5 Am. B. E. 372, MS Fed. S93. 285. Matter of Schmidt & Co. (C. C. A., 2d Cir.), 31 Am. B. R. 593, 165 Fed. 1,006. 286. In re Koslowski (D. C, Pa.), 18 Am. B. K. 723, 153 Fed. 823; In re Crafts-Riordan Shoe Co. (D. C, Mass.), 26 Am. B. R. 449, 185 Fed. 931; Matter of McCausland (D. C, N. J.), 37 Am. B. R. 519, 235 Fed. 173. Receiver in supplementary proceedings.— The title which a State receiver in supple- mentary proceedings acquires to the personal property of a judgment debtor relates back to the time of the institution of the pro- ceedings, and the title of a trustee in bank- ruptcy appointed within four months after the appointment of the receiver is subject to the title of the receiver where the proceed- ings was commenced more than four months prior to the appointment of the trustee. Arnold v. Greene Gold-Silver Co. (N. Y. Sup. Ct., Spec. T.), 24 Am. B. R. 846, m Misc. 449, 125 N. Y. Supp. 29. Where receivers, appointed in a creditor's suit commenced in a State court, have re- duced to possession property of one subse- quently adjudged bankrupt more than four months prior to the filing of the petition in bankruptcy, a court of bankruptcy may not take from their grasp the administration of the property so situated. Blair v. Brailey (C. C. A., 5th Cir.), 34 Am. B. R. 12, 221 Fed. 1. Where a mortgage on real property is fore- closed the lien against the property is not derived from the judgment of foreclosure, but from the original mortgage. Broach v. Mullis (D. C, Ga.), 35 Am. B. R. 841, 228 Fed. 551. 287. Jones v. Stevens (Sup. Ct., Me.), 5 Am. B. R. 571, 48 Atl. 170. See also under Section Thirty-one. 288. Compare Parmenter Mfg. Co. v. Stro- ver (C. C. A., 1st Cir.), 3 Am. B. R. 220, 97 Fed. 330. See also Metcalf v. Barker, 187 U. S. 165, 9 Am. B. R. 36, 47 L. Ed. 122, 23 Sup. Ct. 67. 289. Spadlin v. Kramer (Ga. Sup. Ct.), 38 Am. B. R. 821, 91 S. E. 409; Gray v. Bank of Hartford (Ark. Sup. Ct.), 43 Am. B. E. 166, 208 S. W. 302. 290. Fairlam v. Smedley Const. Co. 2S Am. B. R. 824, 35 Pa. Super. Ct. 17. 291. Matter of Zeis (C. C. A., 2d Cir.), 40 Am. B. R. 104, 245 Fed. 737, rev'g 36 Am. B. R. 581, 229 Fed. 472; Matter of Fraser (D. C, N. Y.), 44 Am. B. R. 572, 261 Fed. 558. Compare Matter of Rayford Truck & Trac- tor Co. (D. C, Pa.), 41 Am. B. R. 616, 250 Fed. 634. 292. In re Kenney (C. C. A., 2d Cir.), 5 Am. B. R. 355, 105 Fed. 897; Levor v. Seiter, 5 Am. B. R. 576, 34 N. Y. Misc. 382, 69 N. Y. Supp. 987. Compare In re Kavanaugh (D. C, Ky.), 3 Am. B. R. 833, 99 Fed. 928; Doyle V. Heath (Sup. Ct., R. I.), 4 Am. B. R. 705, 23 R. I. 213; In re Darwin (C. C. A., 6th Cir.), 8 Am. B. R. 703, 117 Fed. 407; Matter § 67-c, f.] Liens Through Legal Peoceedings. 1081 clause. ^^^ The law of each State determines when a judgment becomes a lien.^"* Under the former law, judgments, even when followed by execution and levy, were not affected by bankruptcy.^*" Now, if in fact liens and the element of insolvency appears, such judgment-liens are annulled by bank- ruptcy if the petition is filed within four months.^® But this is not so where the money collected has already been paid to the judgment creditor.^*'' Where property is sold under an execution on a judgment obtained within the four months' period, the proceeds being applied in payment of the debt, this subsection does not apply, as it does not operate to restore and then vacate a judgment or lien which no longer exists.^*^ The liens of all judg- ments, executions and levies, obtained within four months prior to the filing of the petition, are annulled upon adjudication ;^^*^ such annulment dates from the entry of the judgment and affects all proceedings based thereon,^^' The annulment of the lien of the judgment invalidates the sale made by virtue of a levy thereunder, and the trustee may recover the property sold, unless the purchaser shows that he is a bona fide purchaser for value without notice or reasonable cause for inquiry as to the insolvency of the bankrupt.^"** The term " all levies " is comprehensive enough to include a seizure of the prop- erty of an insolvent under replevin process.^"^ There is a " levy " when a of Schow (D. C, Conn.), 33 Am. B. E. 494, 213 Fed. 514; Coppard v. Gardner (Tex. Ct. of Civ. App.), 40 Am. B. R. 777, 199 S. W. 650. A judgment obtained more than four months before the adjudication creates no lien, and a levy within the four months is within . section 67-f of the act, and gives no priority, and does not relate back to the judgment to the extent of creating a lien by virtue of the fact that the judgment was rendered more than four months before the adjudication. Matter of S. Ah Mi (D. C, Hawaii), 18 Am. B. K. 138; see Keystone Brewing Co. v. Schermer (Pa. Sup. Ct.), 31 Am. B. E,. 279, 88 Atl. 657. 293. In re Pease (Ref., N. Y.), 4 Am. B. R. 547; In re Beaver Coal Co. (D. C, Or.), 6 Am. B. R. 404, 110 Fed. 630; affd. s. c, 7 Am. B. R. 542, 113 Fed. 889; In re Lesser (C. C. A., 2d Cir.), 5 Am. B. R. 326, 108 Fed. 201; s. c, in Supreme Court, 187 U. S. 165, 9 Am. B. R. 36, 47 L. Ed. 122, 23 Sup. Ct. 67. Contra: St. Cyr v. Daignault (D. C, Vt.), 4 Am. B. R. 638, 103 Fed. 854. Com- pare also Mauran v. Crown Carpet Lining Co. (Sup. Ct., R. L), 6 Am. B. R. 734, 23 E. L 324, 50 Atl. 331. 294. In re Blair (D. C, Mass.), 6 Am. B. E. 206, 108 Fed. 509; In re Darwin (C. C. A., 6th Cir.), 8 Am. B. R. 703, 117 Fed. 407; Matter of Schow (D. C, Conn.), 33 Am. B. E. 494, 313 Fed. 514. Under the law of Illinois, the delivery to the sheriff of executions upon judgments operates, without levy, to create liens on the property of the judgment-delitor within the county, which liens are paramount to rights in such property, possessed by a vendor under a contract of conditional sale. Rock Island Plow Co. V. Eeardon, 223 U. S. 354, 27 Am. B. R. 493, 56 L. E. 331, 33 Sup. Ct. 164. 295. In re Gold, etc., Co., Fed. Cas. 5,515; In re Winn, Fed. Cas. 17,876. 296. Compare In re Richards (D. C, Wis.), 2 Am. B. R. 518, 95 Fed. 258. See also In re Storm CD. C, N. Y.), 4 Am. B. R. 601, 103 Fed. 618; In re Stout (D. C, Mo.), 6 Am. B. R. 505, 109 Fed. 794; In re Benedict, 8 Am. B. R. 463, 37 N. Y. Misc. 230, 75 N. Y. Supp. 165; Ricks v. Smith (Ga. Ct. of App.), 40 Am. B. R. 25, 93 S. E. 116. 297. Levor v. Seiter, 8 Am. B. R. 459, 69 N. Y. App. Div. 33, 74 N. Y. Supp. 499, modi- fying s. c, 5 Am. B. R. 576, 34 N. Y. Misc. 382, 69 N. Y. Supp. 987; Matter of Pollman (Ref., N. Y.), 16 Am. B. R. 144; In re Bailey (D. C, Oreg.), 16 Am. B. E. 389, 144 Fed. 214; In re Resnet (D. C, Pa.), 31 Am. B. R. 740, 167 Fed. 574. Deposit with a third party for payment to the judgment creditor does not necessarily amount to payment to the judgment creditor so as to prevent title to the deposit from passing to the trustee in bankruptcy. Lesser V. New York Title Ins. Co. (N. Y. Sup. a.), 41 Am. B. R. 473. 298. In re Weitzel (D. C, N. Y.), 37 Am. B. R. 370, 191 Fed. 463; In re Bailey (D. C, Ore.), 16 Am. B. R. 289, 144 Fed. 314. 298a. Judgment against tenants bv entirety. — ^Ades v. Caplan (Md. Ct. of App.), 41 Am. B. R. 391, 103 Atl. 94. 299. Clark v. Larremore, 188 U. S. 486, & Am. B. R. 476, 47 L. Ed. 555, 33 Sup. Ct. 363; Matter of Fraser (D. C, N. Y.), 44 Am. B. R. 572, 261 Fed. 558, citing Collier on Bankruptcy (11th ed.) 1080, 1081. 1082 Liens. [§ 67-c,f. seizure of tie property is effected lay receivers appointed in a creditor's auit.*"^ It has been held that the provisions of § 67-f will not be ex- tended so as to affect a judgment obtained without the filing of a petition.^"^ A judgment, in an action to foreclose a mortgage upon the property of an alleged bankrupt, entered within the four months' period, being merely a decree by a court of competent jurisdiction, cannot be affected by bankruptcy pro- ceedings.^'*^ But under circumstances involving the interests of the bankrupt's estate and the rights of other creditors, a sale under the decree may be stayed and the property be sold by the trustee, the superior lien of the mortgage creditor being preserved.^*' A judgment or decree enforcing a pre-existing lien is not necessarily within the prohibition of subsection /^. since such subsection is confined to judgments which themselves create liens.^"* But if a judgment A judgment obtained and levy made ty a conditional vendor within four months prior to the filing of a petition against the vendee and while he was insolvent, are null and void and the property attached is released from the same. Matter of O'Brien, Jr. (D. C, N. J.), 33 Am. B. R. 347 215 Fed. 129. Judgment within four months of bank- ruptcy. — ^Where within four months prior to the filing of a petition in bankruptcy against a corporation, followed by an adjudication that it was a bankrupt, and while it was in- solvent, a creditor obtained a judgment against it, and in the bankruptcy proceedings there was no order for the preservation of the lien of the judgment for the benefit of the estate, such lien was, by section 67-f of the bankruptcy act rendered "null and void." Accordingly, it could not be levied on prop- erty of the bankrupt's estate which was sold by the trustee under order of the bankruptcy court. Finney v. Knapp Co. (Ga. Sup. Ct.), 37 Am. B. R. 37, 89 S. E. 413. 300. Dreyer v. Kichlighter (D. C, Ga.), 36 Am. B. R. 199, 228 Fed. 744; Coppard v. Gardner (Tex. Ct. of Civ. App.), 40 Am. B. R. 777, 199 S. W. 65©. 301. In re Hymes, etc., Co. (D. C. Mo.), 12 Am. B. R. 477, 130 Fed. 977 ; In re Haynes (D. C, Vt.), 10 Am. B. R. 715, 123 Fed. 1001; Matter of Weinger & Co. (D. C, N. y.), 11 Am. B. R. 424, 1S6 Fed. 875; Matter of Rudnick & Co. (D. C, N. Y.), 18 Am. B. R. 750, 158 Fed. 223, holding that a seizure in replevin may be vacated under section 67-f. 302. Blair v. Brailey (C. C. A., 5th Cir.), 34 Am. B. R. 12, 221 Fed. 1. 305. Kinmouth v. Braeutigan (Sup. Ct., N. J.), 4 Am. B. R. 344, 46 Atl. 769. 306. Matter of McKane (D. C, N. Y.), 18 Am. B. R. 594, 158 Fed. 647; Reed v. Equi- table Trust Co., 8 Am. B. R. 242, 115 Ga. 780. 307. In re Vastbinder (D. C, Pa.), 13 Am. B. R. 148, 132 Fed. 718. When sale in suit to foreclose mortgage enjoined. — ^Alleged bankrupts gave a mort- gage upon their stock of merchandise, which mortgage contained no provision whereby the lien thereof should attach to substitution or accessions to the stock or to after-acquired property and gave no authority or power to the mortgagors to sell the merchandise. Thereafter three-fourths of the merchandise which comprised the stock when the mort- gage was given, was sold in the usual course of trade by the alleged bankrupts, and other merchandise was added to the balance of the stock and intermingled and confused with it. Within four months of the filing of the petition and while the alleged bankrupts were insolvent, in a suit to foreclose the mortgage brought in the State court, it was decreed by the court that the entire stock be sold to satisfy the claim of the mort- gagees. Held, that in order to give effect to section 67-f which declares null and void all liens obtained through legal proceedings against a person who is insolvent, at any time within the four months' period, the sale directed by the State court should be enjoined, but, if an adjudication of bank- ruptcy took place, the lien of the mortgage would be upheld to whatever extent it was valid. In re Oxley & White (D. C, Wash.), 25 Am. B. R. 656, 1S2 Fed. 1019. 308. Metcalf v. Barker, 187 U. S. 165, 9 Am. B. R. 36, 47 L. Ed. 122, 23 Sup. Ct. 67; Rader v. Star Mill & Elevator Co. (C. C. A., 8th Cir.), 43 Am. B. R. 754, 258 Fed. 121. Compare Matter of Chambers (D. C, Iowa), 43 Am. B. R. 22, 354 Fed. 506. Lien of pre-existing judgment, where a judgment had been recovered and docketed more than four months prior to the filing of a petition in bankruptcy by the judg- ment debtors, it was held that the lien thus impressed upon the real estate of the debtors could be enforced within such period either § 67-c, f.] Gaenishment Peoceedings. 1083 is rendered upon an unsecured claim within the four months' period it becomes null and void imder such subsection upon the debtor being adjudicated a bankrupt, in which case the invalidity of the judgment relates back to the time the judgment was rendered, and nullifies such judgment and all subse- quent proceedings thereon.*"® The lien of a judgment and execution, recovered within the four months' period, imposing a fine for illegal liquor selling, falls within this subsection, and is void, and the execution should be stayed pending bankruptcy proceedings.*^** The lien of the judgment is annulled regardless of the intent of the parties to the proceedings in which it was obtained; "reasonable cause to believe" that a preference would ensue, need not be shown; the subsection is entirely separate from § 60-b and is unaffected by amendment of 1910 to that section.*" (2) Gaenishmeitt peoceedings. — Garnishment proceedings instituted under a State statute against the bankrupt, based upon a judgment obtained within the four months' period are nullified.*^ A lien acquired by a writ of by a Bale of the land under execution or by an action in equity to obtain a decree ad- judging transfers made by the judgment debtors to have been void. Hiller v. Le Roy, 12 Am. B. R. 733, 179 N. Y. 369, 72 N. E. 237. Compare Mencke v. Rosenberg, 9 Am. B. E. 323, 202 Pa. St. 131, in which case it was held that under the Pennsylvania stat- ute, if a testatum fi. fa. is issued within the period of four months prior to the filing of the petition, a lien is created which is invalidated by subsection f. 309. Clark v. Larremore, 188 U. S. 486, 9 Am. B. R. 476, 47 L. Ed. 555, 23 Sup. Ct. 363; Mohr v. Mattox (Sup. Ct., Ga.), 12 Am. B. R. 33a, 120 60-c which provides that new credits may be set-off. Indeed, the courts have had little to do with set-offs undtir the act of 1898, save collaterallv to the animated controversy over the surrender of so-called innocent preferences.'' c. Section is not self-executing; general principles. — The provision as to set-off is permissive and not mandatory, and does not enlarge the doctrine, and may not be invoked in cases where the general principles of set-off would not justify it.* The determination is within the discretionary control of the bankruptcy court, to be exercised in accord with general principles of equity.' It has been held, however, that a State court, in an action by a trustee in bankruptcy, has jurisdiction to allow a set-off.'* 1. Doctrines ef set-off mot enlarsed. — Thus, in Sup. Ct. 636 ; Matter of Kyte (D. C, Pa.) , 25 Sawyer v. Hoag, 17 Wall. 610, 9 N. B. K. 145, It Am. B. E. 337, 182 Fed. 166. was said by the United States Supreme Court, 9. in the case of Cumberland Glass Mfg. Co. with reference to Revised Statutes, section 5,073 y. DeWitt, 237 U. S. 447, 34 Am. B. R 723 59 Act of 1S67, sec. 20), the section analogous to l. Ed. 1042 35 Sup. Ct. 636, the court said: the one now under consideration: "This sec- "The matter is placed within the control of tlon was not intended to enlarge the doctrine tije bankruptcy court, which exercises its dls- of set-oft, or to enable the party to make a set- cretlon in these cases upon the general prin- oft In cases where the principles of legal or clples of equity. Hitchcock v. RoUo, 3 Biss. equitable set-ott did not previously authorize It. 267, Fed. Cas. No. 6,535. The section was taken The debts must be mutual ; must be In the same almost literally from § 20 of the Act of 1867. right." Morris v. Windsor Trust Co. (N. Y. jq re Sawyer v. Hoag, 17 Wall. 610, 21 L. Ed. Ct. of App.), 33 Am. B. R. 283, 106 N. E. 753. 731^ j^ considering that section of the Act of 2. Eng. Act of 1883, § 38. I867, this court said: 'This section was not in- «a. Can. Bankr. Act flf 1919, S 28. tended to enlarge the doctrine of set-off or to 8. Act of 180O, § 42. enable a party to make a set-off In cases where 4. Act of 1841, § 5. the principles of legal or equitable set-off did 6. Act of 1867, § 20. not previously authorize it.' While the opera- «. R. S.. § 5073. c!o„fiAn QWtTT nf thi. tion of this privilege of set-otC has the effect to wo'k^^b mer'Tet-?/ of f suSseq^ueil cfedu'" P»y one creditor more than another, it is a pro- T Cumberland Glass Mfg. Co. v^ DeWItt, 237 ision based upon the general recognized right U. S. 447, 34 Am. B. R. 723, 59 L. Ed. 1042, 35 of mutual debtors, which has been enacted as 1092 Set-offs and Coujs'teeclaims. [§ 68. The section is not automatic. It does not give rise to a positive right existing independent of judicial action or determination. Its benefit is to be had upon the action of the District Court when it is properly invoked, and that court has the primary duty of determining for itself whether there are "mutual debts or credits" that should be set off one against the other according to the true intent and meaning of the bankruptcy act.^** The section under con- sideration does not create the right of set-off, but recognizes its existence and provides a method by which it could be enforced even after bankruptcy. ^^ d. Mutual debts or mutual credits. — These words or equivalents are found in the set-off clauses in all bankruptcy laws. Indeed, the words, "mutual creditors" seem to be pecidiar to such laws.-^^ High authority has declared that " mutual credits " are something different from " mutual debts." ^^ To the lay mind, the distinction is one without a difference for a mutual credit, as, for instance, the delivery of collateral to collect and apply in the end becomes a debt and is set off as such.-^* Indeed, in effect, at least under the present law, there can be practically no difference. In ultimate analysis a mutual credit is not unlike an unliquidated debt, and such debts are now provable.^" There are, however, some exceptions to the rule of mutual credits. Thus, if the credit will not terminate in a debt,^® or if a creditor intrusted by his debtor with goods has not the right to sell them until after the bank- ruptcy," or if such goods are delivered to the creditor for a specific purpose,^^ a mutual credit does not arise, and there can be no set-off. These distinctions are, however, not important. The claim to set-off is usually made on mutual debts, the creditor owing the bankrupt a sum of money and the bankrupt, and, therefore, his estate, being liable to the creditor for a larger sum. In such a part o( the bankruptcy act, and when relied claiming set-off must in general. In point of upon should be enforced by the court. New fact, own and control it, so that his suing cred- Yorlv County Nat. Bank v. Massey, 192 V. S. 138, Itor is, as to that claim, his debtor; and he is 11 Am. B. E. 42, 48 L. Ed. 380, 24 Sup. Ct. 190. bound to prove the same facts in relation to the It hence appears that the object of this sec- set-off as though he had brought his action tion was to give the district court the right to upon it. Moulton v. Perkins (Me. Sup. Ct.), 40 apply the established principles of set-off to Am. B. E. 34, 100 Atl. 1020. mutual credits, when its action was invoked for 13. Rose v. Hart, 8 Taunt, 499; s. c, In Smith the purpose." See also Whaley v. King (Tenn. Leading Cases, Vol. 2, p. 330, holding that Sup. Ct), 42 Am. B. E. 488, 206 S. W. 31. where cloth was deposited with a fuller to 9». Gill V. Farmers & Merchants' Bank (Mo. dress, by a party who afterward became a Ct of App), 41 Am. B. E. 806, 193 S. W. 538. bankrupt, there was a case of mutual credit to 10. Cumberland Glass Mfg. Co. v. DeWitt, the value of the services for dressing the cloth, 237 U. S. 447, 34 Am. B. E. 723, 59 L. Ed. 1042, but not for a general balance due from the 35 Sup. Ct. G30; Matter of American Paper Co. baukrupt. And in this case the general rule (C. C. A., 3d Cir.), 41 Am. B. E. 141, 246 Fed. was laid down that the credits Intended by the 790. act were only such as must, in their very na- il. Studley v. Boylston Nat. Bank, 229 U. S. ture, terminate in cross debts, 523, 30 Am. B. E. 161, 57 L. Ed. 1313, 33 Sup. 14. In re Dow (Ex parte- Whiting), Fed. Cas., Ct. 806; Fourth Nat. Bank of Wichita v. Smith 17,573; Myers v. Davis, 22 N. Y. 489; Aldrich v. (C. C. A., 8th Cir.), 38 Am. B. E. 771; Lehigh Campbell, 70 Mass. 284; Medomak Bank v. Cur- Valley Coal Sales Co. v. Maguire (C. C. A., 7th tis, 24 Me. 36. Cir.), 42 Am. B. B. 319, 251 Fed. 581. 15. See Bankr. Act, § 63-b. 12. In re Dow (Ex parte Whiting), Fed. Cas. 16. Eose v. Hart, 8 Taunt. 499; Groom v. 17,573. Compare also Libby v. Hopkins, 104 U- West, 8 Ad. & E. 758. S. 303, 26 L. Ed. 769, where the Supreme Court 17. In re Dow (Ex parte Whiting), Fed. Cas. laid down the rule that the term "mutual 17,573. credit" includes only such where a debt might 18. Libby v. Hopkins, 104 U. S. 503; Alsager have been within the contemplation of the par- t. Currie, 12 Mees. & W. 751 ; Lehigh Valley ties. Coal Sales Co. v. Maguire (C. C. A., 7th Cir.), The term "mutual credits" In the bankruptcy 42 Am. B. E. 319, 251, Fed. 581. act has a more comprehensive meaning than the Money held by creditor In flduciary capacity. term "mutual debts" in the statutes of set-off, — Money received by a creditor from property The term "credit" is synonymous with trust, delivered to him by the debtor to Indemnify and the trust need not be of money on both him against loss on a suretyship bond is not a Bides, but if one party instrusts the other with mutual credit as against a debt of the bank- goods or value, it will be a case of mutual rupt to such creditor. Alvord v. Eyan (C. C, credit. In re Catlin, Fed. Cas. 2,519. A., 8th Cir,), 32 Am. B. E. 1, 212 Fed. 83. Must be between same parties. — A defendant § 68.] Time Whjsw Set-off to be Made. 1093 ease, a balance is struck and the claim is allowed for the balance, provided the facts do not fall within subsection b}^ But mere payments on account before bankruptcy are not mutual debits or credits within the meaning of this sec- tion,^'' nor may an assigned claim be set-off in an action against the creditor.^"* e. Time when set-off may be made. — The time when the right of set-off may be exercised is not restricted to the adjudication but may be valid, if otheirwise unassailable, at any time within four months prior to bankruptcy.^^ The set- off may be made by a bank at any time before a petition is filed, and even with full knowledge that the depositor was insolvcnt.^^ The fact that at the time of a set-off the obligation was not due does not prevent the creditor from m:.l;ing the set-off. ^^ There is nothing in this section which prevents the parties from voluntarily doing before the petition is filed, -what the law itself requires to be done after proceedings in bankruptcy are instituted.^* 19. Progressive Wallpaper Corp. (D. C, K y.), 39 Am. B. E. 557, 240 Fed. 807; Walther v. Williams Mercantile Co. (C. C. A., 6th Cir.), 22 Am. B. E. 328, 169 Fed. 270, holding that where an agreement, giving the business and possession of the goods of a mercantile company to bankrupts to operate for a year provided that upon its termina- tion the mercantile company should pay any inventory excess to the extent of $500, and that the bankrupts should be liable for any deficiency, and at the termination of the agreement the stock was appraised at $1,323.24 in excess of the original inventory value, and the bankrupt owed the company on the contract and incidental thereto the sum of $769.93, such items constitute " mutual debts " within the meaning of sec- tion 68 and are subject to set-ofif. Damages for breach of contract by bank- rupt may not be set off against claim for services and materials furnished by trustee. — ^Damages growing out of the failure of tbe receivers or trustees in bankruptcy to con- tinue a contract of the bankrupt are prop- erly claims against the bankrupt, but not against the receivers or trustees, as such, and where the trustees of a bankrupt sued upon a claim for services and materials, fur- nished by bankrupt and by themselves, as receivers and trustees in bankruptcy, a counterclaim, based upon bankrupt's failure to perform a contract subsequent to bank- ruptcy, may not be set up by defendant as against the trustees, although such a claim would, under section 68-a of the bankruptcy act, constitute a proper set-off against any claim of the bankrupt set up by the trustees. Brown v. Hannagan (N. Y. App Div.), 27 Am. B. R. 294, 96 N. E. 714, citing Collier on Bankruptcy (8th Ed.), p. 792. Money due partner against joint liability of bankrupt firm. — Executors of the wife of a member of a bankrupt partnership, upon the presentation of a claim for money loaned to the firm, may credit or set-off under sec- tion 68 of the Bankruptcy Act money due the member of the firm under the will of his wife, even though the indebtedness of the bankrupt is a joint liability. Matter of Neaderthal and Flappinger (Eef., N. Y.), 33 Am. B. E. 152. 20. PaymeuLS on account. — Payments in money intended to be applied upon an ex- isting open account constituting a preference do not create a case of mutual debits and credits between the bankrupt and the cred- itor. In re Christensen (Eef., la.), 4 Am. B. E. 202; In re Eyan (D. C, 111.), 5 Am. B. E. 396, 105 Fed. 760, the judge said: "I am of the opinion that the mutual debits and credits contemplated by section 68-a, Bankr. Act, do not include cash payments on account within four months of the filing of the peti- tion against the bankrupt, and that the ref- eree's finding herein that creditors should be permitted to have an accounting of all trans- actions belv.-cc:i them and the bankrupt, both prior to and during such four months, and to have their claims allowed for the balance shown by such accounting, is not sustain- able." 20a Moulton v. Perkins (Me. Sup. Ct.), 40 Am. B. E. 34, 100 Atl. 1020. 21. Studley v. Boylston Nat. Bank. 229 U. S. 533, 30 Ai-j. B. E. 161, 57 L. Ed. 1313, 33 Sup. Ot. 806; Putnam v. U. S. Trust Co. (Mass. Sup. Ct.), 36 Am. B. E. 658, 111 N. E. 969. 22. Fourth Nat. Bank of Wichita v. Smith (C. C. A., 8th Cir.), 38 Am. B. E. 771; Dun- lap V. Seattle Nat. Bank (Wash. Sup. Ot.), 38 Am. B. E. 937, 161 Pac. 364. 23. Fourth Nat. Bank of Wichita v. Smith (C. C. A., 8th Cir.), 38 Am. B. E. 771. 24. Studley v. Boylston Nat. Bank, 229 U. S. 523, 30 Am. B. R. 161, 57 L. Ed. 1313, 33 Sup. Ot. 806. 25. Toof V. City National Bank (C. C. A., 6th Cir.), 30 Am. B. E. 79, 206 Fed. 250. Valuatioli of stock. — Where bankrupt stockbrokers had enough stock to fill their orders, but it had been pledged, the cus- tomer is entitled to a set-oflF equal to the purchase-price if the order was never exe- cuted, or to the value of the stock when sold, if later converted, and the value of the stock may be fixed as of the date of bank- ■ ruptcy, in the absence of evidence to the 1094 Set-offs and Counterclaims. [§ 68. f. Time when rigrht to set-off is determined. — Strictly, the time when the right to set-off is determined is the time the petition is filed.^^ But it makes no difference whether the debts are payable in fiduro or in praesenti.^^ "Debt" means any debt, demand, or claim provable in bankruptcy."^ To determine, therefore, whether the holder of a claim is entitled to the benefit of § 68, it is necessary only to inquire whether his claim is one provable in bankruptcy.^* Thus, unliquidated claims may be set off against liqui- dated,^ and, it is thought, under the present law, even liabilities sounding in tort against those purely ex contractu. But this doctrine as to time is fubject to the exception stated in subsection h (2), considered post; a further exception in cases of mutual credits has already been noted. g. Nature of liability. — (1) In geneeai.. — It is not necessary that the debts or credits be of the same character. Thus the mutual debts need not arise out of the same transaction,^" or be for money owed the one to the other. The basic test is mutuality, not similarity, of obligation. Illustrative cases under the former law are cited in the foot-note.^^ Advancements made by a bankrupt to his daughter, during his insolvency, may be set off against a claim made by her against his estate in bankruptcy.*^ Where a treasurer of a cor- contrary. Matter of Pieraon, Jr. & Co. (D. C, N. Y.), 35 Am. B. R. 213, 225 Fed. 889. When right to set-off is determined; de- posit by bankrupt after filing of petition as set-off to his indebtedness to bank. — The time when the right to set-oif is determined under section 68 of the bankruptcy act is tlie date of the filing of the petition in bank- ruptay, and where a bankrupt deposited money in a bank, after an involuntary peti- tion in bankruptcy had been filed against him, and at a time when neither he nor the bank knew of the pendency of the petition, the bank is not entitled to retain the sum so deposited on the ground that it constitutes a set-off to a larger amount for which the bankrupt is indebted to them. In re Michae- lis & Lindeman (D. C, N. Y.), 27 Am. B. E. 299, 196 Fed. 718. See also Bramham v. Lanier Bros. (Tenn. Sup. Ct.), 41 Am. B. E. 215, 200 S. W. 830; Matter of United Grocery Co. (D. C, Fla.), 41 Am. B. R. 824, 253 Fed. 267. 86. In re City Bank, Fed. Cas. 2,742; Drake v. Rollo, Fed. Cas. 4,066; Collins v. Jones, 10 B. & C. 777 ; Taylor v. Nichols, 23 Am. B. R. 306, 134 N. Y. App Div. 783, 119 N. Y. Supp. 919, holding that where both a note surrendered to the maker and the claim of the maker against the bankrupt had ma- tured prior to tlie transfer of the assets to his trustee in bankruptcy, there was a right of set-off. Mandel v. Koerner (Mun. Ct., N. Y. C), 33 Am. B. R. 40, 149 N. Y. Supp. 455, quoting text with approval. 27. Bankr. Act, § 1 (11). Meaning of "debt." — It is well settled that this provision of tlie act applies to any debt provable in bankruptcy, even though not then due. Steinhardt v. Nat. Park Bank, 19 Am. B. K. 72, 120 N. Y. App. Div. 255, 105 N. Y. Supp. 23, revg. 18 Am. B. H. 86; In re Semmer Clusd Co. (C. C. A., 2d Cir.), 14 Am. B. K. 25, 135 Fed. 77. The word "debt" as used In sectiou I i-a in- cludes any debt provable in bankruptcy. And a debt is provable whether due or noi at the time of bankruptcy. Germania Sav. Bk. & Trust Co. V. Loeb (C. C. A., 6th Cir.), 26 Am. B. E. 238, 243, 188 Fed. 287, citing Collier on Bankruptcy (8th Ed.), p. 793; In re Percy Ford Co. (D. C, Mass.), 28 Am. B. R. 919, 199 Fed. 334; Matter of Pettier & Stymus (C. C. A., 2d Cir.), 44 Am. B. E. 469, 262 Fed. 955. 28. In re Semmer Glass Co. (C. C. A., 2d Cir.), 14 Am. B. E. 25, 135 Fed. 77; Mandel v. Koerner (Mun. Ct., N. X. C), 33 Am. B. E. 40, 149 N. Y. Supp. 455. A contingent liability of the bankrupt as in- dorser of notes of a creditor cannot be set-off against a claim of the creditor. Matter of American Paper Co. (C. C. A., 3d dr.), 41 Am. B. E. 141, 246 Fed. 790, affg. 40 Am. B. R. 121, 243 Fed. 753. 29. Compare Bell v. Carey, 8 C. B. 887, and even under the narrower doctrine of the English laws. Jack v. Kipping, 9 Q. B. D. 113. See also geueraUy under Section Sixty-nine. Set-off of unliquidated claims.— A bankrupt corporation wlilcli, prior to bankruptcy, was engaged in the business of manufacturing clotti for tbe defendant, had given the defendant a note for losses caused the defendant because the manufacturnig was not, at aU times, per- fectly done. Later the bankrupt and the de- fendant entered into an agreement whereby the defendant paid the bankrupt only eighty per centum of the manufacturing charge, reserving the other twenty per centum of each bill against counter-charges for imperfect work. The bankrupt, on finding itself unable to con- tinue the business, arranged with the defendant to take over the mill on a rental basis in order that the defendant might run out its own stock, after which the mill was closed. In an action by the trustee to recover the rent and so much of the twenty per centum as was not needed for countercharges it was held, that under section CSa of the Bankruptcy Act the defendant might set o£E the claim on the note. Clifford v. Oak Valley Mills (D. C, Mass.), 3G Am. li. 1;. 867, 229 Fed. 851. 30. In re Christensen (D. C, la.), 4 Am. B. E. 99, 101 Fed. 802. Consult also In re Brewster (Eef., N. Y.), 7 Am. B. K. 486; Matter of Col- weU Lead Co. (C. C. A., 7th dr.), 39 Am. B. E. 224, 240 Fed. 400. El. In re Petrie, Fed. Cas. 11,040; Ex parte Howard Nat. Bank, Fed. Cas. 6,764; Ex parte Pollard, Fed. Cas. 11,252. S2. Matter of Brewster (Eef., N. Y.), 7 Am. B. E. 486, i 68.]l Set-off by Baitk. 1095 poration, which had gone into voluntary dissolution, was indebted to th« corporation for money received by him, unaccounted for, the amount due may be set oflf against any sum due him as a stockholder of the corporation, upon the liquidation.^^ It seems that the rule with respect to set-offs is the same even though the claim of the creditor against the bankrupt is fully securod.'* Collections made by a delivery company for a department store may be applied on current bills due by the store for deliveiry charges.^*"' (2) Set-off by bank. — A question somewhat discussed is the right of a bank to set off its deposit debt against the unpaid note of a bankrupt depositor. This right has been denied in one case, because the bookkeeping entries were not actually made before the bankruptcy, and the set-off, therefore, amounted to a pref erence.^^ But every set-off is, in a sense, a preference, and the ancient rule permitting a banker so to charge a deposit against notes is undoubtedly thf rule under the present, as under the fonner law.^^ So that it is now well settled that where deposits are made by a depositor in good faith, in the regular course of business, and not for the purpose of enabling the bank to- secure a preference,^^^ the bank has a right to set-off a deposit against a claim held by it against the depositor who subsequently becomes bankrupt.^^ As 33. Marcus Shipping Assn. v. Barnes (Iowa Sup. a.), 34 Am. B. R. 682, 151 N. W. 525. 34. Steinhardt v. Nat. Park Bank, 19 Am. B. R. 72, 120 N. Y. App Div. 255, 105 N. Y. Supp. 23, revg. 18 Am. B. R. 86, holding that, in an action by a trustee to recover moneys of the bankrupt on deposit with a bank at the time the petition was filed the defendant is entitled to set off the amount of certain demand notes of the bankrupt which it then held but for which it held securities greater in value than the amount of the notes, though, by reason of their depreciation sev- enteen months thereafter when sold, the securities did not bring enough to pay the notes. Sight to set-off proceeds of surplus col- lateral against unsecured note. — ^Where a creditor, holding an unsecured note for which he had filed proof of claim as such, making no mention of any security available, there- after sold collateral which he held to secure another note, and realized a sum in excess of the amount of the secured note, he wa entitled to set off the amount of the surplus against his unsecured debt, there being nr estoppel because of a, failure to claim sue-; surplus in his proof of claim. In re Searles (D. C, N. Y.), 39 Am. B. R. 635, 200 Fed. 893. 34a. Matter of Bacon Co. (D. C, Mass.), 44 Am. B. R. 196, 261 Fed. 109. 35. In re Tacoma, etc., Co., 3 N. B. N. Rep. 9. 36. In re Kalter, 2 N. B. N. &64, and see In re Myer (D. C, N. Y.), 5 Am. B. R. 596, 106 Fed. 828. 36a. Matter of Fairburn Oil & Fertilizer C!o. (D. C, Ga.), 39 Am. B. R. 311, 240 Fed. 835. Moneys asHigned to secure a claim but de- posited in general account, Lyttle v. Fifth National Bank (D, C, N, Y,), 39 Am, B, E, 690. 37. Fourth Nat, Bank of Wichita v. Smith (C. C. A., Sth Cir.), 38 Am. B. E. 771; Dun:.-'.':- v. Seattle Nat. Bank (Wash, Sup. Ct.), 38 Am, B. E. 937, 161 Pac. 364; Johnson v. Gratiot County State Banlj (Micli. Sup, Ct), 38 Am. B, R, 518, 160 N. W, 544; German American State Bank v. Larimer (C, C. A., Sth Cir.), 37 Am. B. E, 556, 235 Fed, 501; Wilson v. Citizens Trust Co, (D. C„ Ga.), 37 Am, B. E, 86, 233 Fed. 697; Ameri- can Bank & Trust Co, v. Coppard (C, C. A., Sth Cir,), 35 Am, B. E, 742, 227 Fed. 597; Chlsholm v. First Nat. Bank of Le Roy (111, Sup. Ct,), 35 Am. B, R, 508, 109 N. E, 657; Am, Bank of Alaska v, Johnson (C. C, A,, 9th Cir,), 40 Am. B, R. 502, 245 Fed, 312; Matter of Looschen Piano Case Co. (D, C, N. J,), 43 Am, B, E. 733, 259 Fed, 931. See Am. Bankr, Dig, § 802,' A banker may set off the debt due to him on loans, overdrafts, or otherwise against deposits which are made with liim. In re George M. Hill Co. (C. C. A,, 7th Cir,), 12 Am. B, R, 221, 130 Fed. 315; In re Bank of Madison, Fed, Cas. 890, 9 N, B, E, 184 ; In re Petrle, Fed. Cas, 11,040, 7 N, B. R. 332; Denman v, Boylstou, 5 Cuch. 194. Upon the bankruptcy of one of its de- positors a bank is entitled to have the amount standing to his credit upon its books applied as an oCC-set upon its note against him, in the absence of collusion between them, and to have the balance of the note allowed as a claim against the bankrupt estate, provided the bank has not otherwise received a preference. In re Scherzer (D, C, la.), 12 Am. B. B. 451, 130 Fed. 631. Where an Insolvent person has money on deposit in a bank subject to check, and also owes the bank upon a promissory note, upon such insolvent person being adjudged a bank- rupt, the bank is entitled to have the amount of the bankrupt's deposit set oft against the sum due on the promissory note, and to prove its claim against the bankrupt for the balance. West V, Bank of Lahoma. 16 Am. B. E 733 16 Okl. 508; Whitaker v. State Bank (Sup Ct Okl.), 25 Am, B, R, 876, 110 Pac, 776, So if the banker has received drafts' for collection the proceeds of which afterward came into his hands he may offset them against debts due to him. In re Farnsworth, Fed, Cas. 4,673 14 N B, R, 148, Deposits may be set off against over- draftsi, Tomlinson v. Bank of Lexington (C, C, A„ 4th Cir.), 16 Am, B. E. 632, 145 Fed. 824. Money deposited to a bankrupt's credit, at the time of filing his petition in bankruptcy, may be set off against a debt due from him to the bank. In re Little (D. C, la.), 6 Am. B. E. 681, 110 Fed. 621. 1096 Set-offs and CoirafTEECLAiMs. [§ 68. stated by the United States Supreme Court : " The money deposited in a bank becomes a part of its general funds, to be dealt with by it as other moneys, to be lent to customers, and parted with at the will of the bank, and the right of the depositor is to have the deposit repaid in whole or in part by honoring the depositor's checks drawn thereon. Such deposit creates an ordinary debt, not a privilege or right of a fiduciary character. The amount of such a deposit may, therefore, be set off in bankruptcy against a claim against the depositor, allowing the bank to prove for the balance."^® A bank A bank, upon the ir solvency of one of its depositors, is entitled to retain and apply the amount of his deposit in part payment of his note then due and held by the ibank. Such delbts are mutual and the set-oflF, if made in good faith and not as a mere trick or device for the benefit of the indorser, is not a " transfer of property " nor .does it con- stitute a preference within the meaning of the bankruptcy act. Booth v. Prpte, 22 Am. B. E. 579, SI Conn. 696, 71 Atl. 938. Set-off of proceeds of check deposited for collection just prior to bankruptcy. — Where a bank accepts a check for collection, and receives the proceeds on the following day without having paid out in the meantime anything on account of the deposit, it can- not apply the proceeds of the check toward a debt due by the depositor, where it ap- pears that on the day the check was deposited for collection, but at a subsequent hour, a petition in bankruptcy was filed against the depositor. Moore v. Third Nat. Bank of Phila. (Super. Ct., Pa.), 24 Am. B. R. 5'68, 41 Pa. Super. Ct. 497. Effect of failure to offset. — In Traders' Bank v. Campbell, 14 Wall. 87, 6 N. B. rl. 3'5'3, it appeared that insolvents upon the eve of bankruptcy gave to their banker a check upon funds to their credit in that bank to apply upon the indebtedness due to the bank, although the banker and the bankrupts knew of the insolvency of the latter. The Supreme Court held the transaction to be a preference and voidable by the assignee in bankruptcy and that he had the right to recover the amount so paid, and further held that although possibly had the bankrupt stood upon its right of o^'set, that right might hajve been available to them, yet when they treated the money as the bankrupt's (uvn property, taking his check and crediting the amount as a payment on the indebted- ness, the transaction became a voidable pref- erence. Instruction to jury; usual course of busi- ness. — ^Where in an action by a trustee in bankruptcy to recover an alleged voidable preference it appears that the bankrupt within four months of bankruptcy and while insolvent sold his stock of mercliandise and store fixtures .and deposited the cheek there- for with the defendant bank to which it was indebted, the real question for the jury to decide is whether the deposit was in good faith in the usual course of business, and the bank is entitled to have the jury in- structed that if they find that the deposit was received in the usual course of business, the bank may apply it as a set-off against the indeibtedness of the bankrupt. German American State Bank v. Larimer (0. C. A., 8th Cir.), 37 Am. B. E. 556, 235 Fed. 501. 38. New York County National Bank v. ilassey, 192 U. S. 138, 11 Am. B. R. 42, 48 L. Ed. 3«0, 24 Sup. Ct. 199, revg. 8 Am. B. E. 51<5, 116 Fed. 342; Studley v. Boylston Nat. Bank, 229 U. S. 523, 30 Am. B. R. 161, 57 h. Ed. 1313, 33 Sup. Ct. 806; Con- tinental & Com. Trust & Sav. Bank v. Chi- cago Title & Trust Co., 229 U. S. 435, 30 Am. B. R. 624, 57 L. Ed. 1268, 33 Sup. Ct. 829; Whitaker v. State Bank (Sup. Ot., Okl.), 25 Am. B. E. 876, 110 Pac. 776. See also Matter of Levi (D. C, N. Y.). 9 Am.. B. E. 176, 121 Fed. 198; Matter of Semmer Glass Co. (Ref., N. Y.), 11 Am. B. R. 665; West V. Bank of Lahoma, 16 Am. B. E. 733, 16 Okl. 508, 86 Pac. 59; Matter of National Lumber Co. (C. C. A., 3d Cir.), 32 Am. B. E. 389, 212 Fed. 928. Money paid by a bank in ignorance of a general assignment, having been returned by order of the court, may be set off against the assignee's notes. In re Meyer & Dickin- son (D. C, N. Y.), 5 Am. B. E. 593, 107 Fed. 86. Set-off and proof of balance. — Where at the suggestion of the president of a bank in which a comipany, indebted to it upon certain notes, kept an account, it was agreed that he should 0. K. checks drawn against said account, but he did not attempt in any way to interfere with the management of the business of the company or seek to control it, and was not aware of its insolvency at the time the agreement as to the checks was made, the bank, upon the adjudication of the company, may set off its deposits against the notes, and prove its claims for the bal- ance. In re Medaris-Vine Carriage Co., 15 Am. B. E. 897, 15 Ohio Fed. Dec. 223. Pajnnent to bank from deposit account. — Where bankrupt had a deposit account with defendant bank, payments of discounted notes, made at the maturity of such notes within the four months' period by bankrupt's check drawn on the deposit account and by the bank charging up the amounts due against the deposit account with bankrupt's acquiescence, did not constitute preferences, it appearing that the deposits had been made honestly, and with no intention of enabling the bank to secuie an advantage over other § 68.]' Set-off by BAiiTK. 1097 is entitled to set off certain demand notes of a bankrupt where an action is brought by the trustee to recover moneys on deposit.^^ The liability of a depositor ;as an indorser on a note held by the bank may be set off against a deposit, although the liability of the indorser did not become absolute until after the petition in bankrr.ptcy was filed.*" But a bank has no right to set-off the unmatured notes of a bankrupt against its deposit until after the bankruptcy proceedings have commenced. ^^^^ The amount of a note held by a bankrupt bank may he set off against the amount on deposit in the bank to the credit of the maker of the note.*^ But deposits made after the petition against the bankrupt was filed belong to the trustee; the right to off-set only applies to deposits in the bank when the petition was filed, although the bank had no notice of it.*^ A response by a bank to an order of a referee to show cause why it should not pay over to the trustee moneys deposited with it by the bankrupt three days before the filing of the petition in bankruptcy, that the money was deposited without solicitation or agreement and that at the time of the deposit the bankrupt owed the bank on an over- draft and on past-due notes a certain amount which it claims to off-set against its liability to the bankrupt and the trustee, states an adverse claim and a good plea to the jurisdiction of the referee and the district court summarily creditors In the face o( threatened Insolvency. Studley v. Boylston National Bank of Boston (C. C. A., 1st Cir.), 29 Am. B. R. 649, 200 Fed. 249. Where a bank after it had discounted a note for a depositor, with knowledge of the latter's Insolvency, accumulated deposits and allowed other notes to be protested, until two days be- fore the bankruptcy of the depositor, when the deposit being sufficient a check was drawn to the order of the bank for the amount of the note, a preference was effected. Matter of Na- tional Lumber Co. (C. C. A., 3d dr.), 32 Am. B. E. 389, 212 Fed. 928. 39. Steinhardt v. Nat. Park Bank, 19 Am. B. E. 73, 120 N. Y. App Div. 255. 105 N. Y. Supp, 23, revg. 18 Am. B. K 86; Irish v. Citizens' Trust Co. (D. C, N. Y.), 21 Am. B. E. 39, 163 Fed. 880, holding that the right of a bank to set off overdue notes of a depositor against his general deposit is not a, lien in the sense of the bankruptcy act, and may not be exercised as to notes not yet due. Set-off of deposit against notes. — In the case of Germania Sav. Bk. & Trust Co. v. Loeb (C. C. A., 6th Cir.), 26 Am. B. R. 238, 188 Fed. 287, the bankrupt, prior to bank- ruptcy, had a deposit in claimant hank amounting to about $5,000 and the bank held notes of the bankrupt amounting to $20,000. Within four months of the bank- ruptcy, the bank, feeling itself insecure, caused a conference to he had between its attorney and the attorney for the bankrupt. Thereupon, the bankrupt's attorney, not realizing the financial condition of the bank- rupt, proposed that the bankrupt continue to make deposits, bub withdraw only up to the amounts deposited after the date of the conference, leaving the amount already deposited intact until the exact financial con- dition could be learned. Between the date of said conference and the bankruptcy about $4,500 more were deposited which were no: withdrawn. The bank claimed the light to offset the $5,000 and the $4,500 deposits against the claim. The trustee claimed that the $5,000 oflF set amounted to a preference and that the $4,500 deposit was a deposit in trust, or special deposit as to which there could be no oflF set. It was held that tHe $5,000 ofif set did not amount to a preferenei in the absence of fraud or collusion; tbat the evidence as to the conference befween Ithe attorneys did not indicate fraud or collusion; and that it was immaterial, under 68-a of the bankruptcy act, that the notes upon which the bank's claim was based had not matured. See also In re Percy Ford Co. (D. C, Mass.), 28 Am. B. R. 919, 199 Fed. 334. 40. Set-off of note not yet due. — In re Semmer Glass Co. (C. C. A., 2d Cir.), 14 Am. B. E. 25, 135 Fed. 77. In an action by a trustee to recover a debt due the bankrupt estate, the defendant may plead as a set-off the amount of a note against the bankrupt, even though it had not matured at the date of adjudication, but the defendant is not entitled to any affirmative judgment thereon. Frank v. Mercantile Nat. Bank. 14 Am. B. R. 125, 182 N. Y. 264, 74 N. E. 841. 40a. Fifth Nat. Bank v. Lyttle (0. C. A., 2d Cir.), 41 Am. B. R. 370, 250 Fed. 361. Liability of endorsersi; set-off prior to bankruptcy. — Where a bankrupt is continu- ally liable to a bank as an endorser on im- matured paper the bank cannot claim that money it applied in payment of that liability prior to bankruptcy should operate as a set- off. Heyman v. Third National Bank (D. C, N. J.). 32 Am. B. R. 716, 216 Fed. 685. 41. In re Shults (D. C, N. Y.), 13 Am. B. R. 84, 132 Fed. 573. 42. Toof V. City National Bank (C. C. A., 6th Cir.), 30 Am. B. R. 79, 206 Fed. 250; Eied V. Barnett National Bank (C. C. A., 5tli Cir.), 41 Am. B. R. 419, 250 Fed. 983. 1098 Set-offs and Codnteeclaims. [§ 68. 43 to determine the validity of that claim under § 23-b of the bankruptcy law The form in which the set-off is attained is immaterial.** h. Being in the same right. — To be mutual, debts between parties must be owing to and be due in the same rights and capacities.*^ Thus, a debt due one as an executor cannot be set off against a debt due from him individually; a tenant's unliquidated damages for the landlord's negligence in permitting water to come upon the premises may not be set off against the landlord's claim for rent;*^ a pledgee, after the' debt for which the pledge was given is paid, holds the property pledged in trust for the pledgor and cannot off-set against such pledgee another debt belonging to him in his own right ;*^ a creditor of a corporation cannot set-off his liability for unpaid subscriptions for its stock ;*' nor may the liability of a director of a corporation be set-off against a claim by said director as a creditor;*'* a claim based on individual promissory notes of a member of a bankrupt firm cannot be set off against a judgment recovered against the claimant on behalf of such firm by its trustee in a suit for unliquidated damages ex contractu f and, where the ownership of the claim is merely nominal, it cannot be set off against a debt due from such owner.^^ But the trustee in bankruptcy may set off claims which have vet3ted in him, even though they never vested in the bankrupt.^^ It has been held that a claim for unliquidated damages for false representations, inducing a contract for the sale and delivery of goods, may be set off against a claim arising upon the contract of sale.^^ A surety who, by paying the principal's debt, has be- come subrogated to the latter's rights may, of course, avail himself of a set-off in favor of the principal.^* Such debts are in the same right. 43. In re Gill (C. C. A., 8th Cir.), 26 Am. B. B. 883, 190 Fed. 706. 4*. Method of making set-off. — Whether a bank charges off the deposit of its customer and applies it on the iudebteduess which it holds against the customer, or whether it draws a check in the name of the customer, covering his deposit and applies it as a credit on the indebtedness, or whether It does neither of these things, but relies upon section 68 of the bankruptcy act to do the same thing in effect, is immaterial. Wilson t. Citizens' Trust Co. (D. C, Ga.), 37 Am'. B. E. 86, 233 Fed. 697. 45. In re Lesher & Son (D. C, Pa.), 25 Am. B. E. 218, ITr; Fed. 650, citing Collier on Bank- ruptcy (7th ed.), p. 796; West v. Pryer, 2 Bing. N. C. 455; Ex parte Bailey, 1 M. D. 263; Morris V. Windsor Trust Co. (N. Y. Ct. of App.), 33 Am. B. E. 283, 106 N. E. 753; Planters' Oil Co. V. Greshan (Tex. Ct. of Civ. App.), 42 Am. B. E. 29, 202 S. W. 145; Lehigh Valley Coal Sales Co. r. Maguire, (C. C. A., 7th Clr.), 42 Am. B. E. 319, 2ol Fed. 581 ; Atherton v. Beaman (D. C, Mass.), 42 Am. B. E. 631, 256 Fed. 871; Matter of Pottier & Stymus Co. (C. C. A., 2d Cir.), 44 Am. B. E. 469, 262 Fed. 955. 46. Bishop v. Church, 3 Atl. 691. 47. In re Becher (D. C, Pa.), 15 Am. B. E. 228, 139 Fed. 366. 48. Morris t. Windsor Trust Co. (N. Y. Ct. of App.), 33 Am. B. E. 283, 106 N. B. 753. 49. In re Goodman Shoe Co. (D. C, Pa.), 3 Am. B. E. 200, 96 Fed. 949; Sawyer v. Hoag, 17 Wall. 610; Jenkins v. Armour, Fed. Cas. 7,260; In re Eoyce Dry Goods Co. (D. C, Mo.), 13 Am. B. E. 258, 133 Fed. 100; Babbitt v. Eead (C. C, N. Y.), 23 Am. B. E. 254, 173 Fed. 712, hold- ing that bondholders, who are also stock- holders, are not entitled to set-off the amount of their bonds against a claim established against them in a suit to enforce the liability as stockholders. Matter of Howe Mfg. Co. (D. C, Ky.), 27 Am. B. R. 477, 193 Fed. 524, citing Collier on Bankruptcy (8th ed.), p. 796; Mat- ter of La Jolla Lumber & Mill Co. (D. C, Cal.), 40 Am. B. E. 273, 243 Fed. 1004; Moise t. Scheibel (C. C. A., 8th Cir.), 40 Am. B. E. 311, 245 Fed. 546; Matter of Mfgs. Box & Lumber Co. (D. C, N. J.), 41 Am. B. K. 763, 251 Fed. 957; Whaley v. King (Tenn. Sup. Ct.), 42 Am. B. E. 488, 206 S. W. 31; Boatmen's Bank v. Laws (C. C. A., 8th Cir.), 43 Am. B. E. 683, 257 Fed, 299; Matter of Caledonia Coal Co. (D. C, Mich.), 43 Am. B. E. 93, 254 Fed. 742. See also, Clark V. Johnson (C. C. A., 8th Cir.), 40 Am. B. E. 330, 245 Fed. 442 ; Morse v. Scheibel (C. C. A., 8th Cir.), 40 Am. B. E. SJl, 245 Fed. 546. 49a. Matter of La Jolla L. & M. Co. (D. C, Cal.), 40 Am. B. E. 273, 243 Fed. 1004. 60. In re Lesher & Son (D. C, Pa.), 25 Am. B. E. 218, 176 Fed. 650, citing Collier on Bank- ruptcy (7th ed.), p. 796. Debts and credits not in same rights. — In a suit by a trustee In bankruptcy of a corpora- tion to recover money alleged to have been paid to defendant as commissions under contracts Invalid under section 439 of the New York Penal Law, the defendant cannot set-off an indebted- nes growing out of a deficiency judgment in an action upon bonds of the bankrupt and also based upon drafts accepted and paid by the defendant for account of the bankrupt, be- cause such indebtedness is not in the same right and does not fall within the provisions of section 68 of the bankruptcy act. Palmer v. Doull Miller Co. (D. C, N. Y.), 37 Am. B. E. 617, 233 Fed. 309. 61. In re Lane, Fed. Cas. 8,043. Compare Boyd V. Mangles, 16 Mees. & W. 336. 618. In re Crystal, etc. (D. C, Vt.), 4 Am. B. E. 55, 104 Fed. 265. 63. In re Harper (D. C, N. Y.), 23 Am. B. B. 918, 175 Fed. 412. 64. Compare Bankr. Act, SS 16 and 57-i. See also In re Bingham (D. C, Vt.), 2 Am. B. B. 223, 94 Fed. 786; Morgan v. Wor- § '68-b, (1).] When Not Allowed. 1099 i. Joint and several claims. — Here the general rule is that a joint claim, aa that of a partnership, cannot be set oft' against the debt of one of the individuals jointly claiming.'® The reason for this is that the individual partner should not in justice to his associates, be permitted to pay his debts out of partnership property. The copartnership estate is separate and distinct from the indi- vidual estates of the partners; so where a bankrupt partnership owes its cred- itor a certain amount, and such creditor owes one of the partners a less amount, the debts are not mutual, and there may be no off-set.'* A further exception is stated in a case,"^ where the joint credit was given on account of a separate debt, this being strictly an instance of " mutual dealing." '* j. Waiver of set-off. — If a creditor proves his debt, without claiming set-off, he will generally be deemed to have waived it."* And if he accepts dividends on composition without invoking his right of set-off, he will not be permitted to set up his claim as a defense. '° At the same time, inadvertence or mistake is usually a sufficient excuse for leave to withdraw and amend. There are no cases under the present law yet reported.'^ k. Practice. — This section seems to contemplate that, if a creditor's claim against the bankrupt is greater than the bankrupt's claim against him, he shall only prove for the balance; and if the creditor's claim is less than the bankrupt's claim against him, the time for a set-off would seem to be when the creditor is sued, and the place the forum in which the suit is brought.® Where a creditor files a proof of claim, the burden of proof is upon the trustee to establish a counterclaim thereto. "* IL WHEN NOT ALLOWED, a. Not provable against the estate. — Subdivision 1 of subsection h requires the debt, sought to be set off or counterclaimed, to be provable against the bankrupt's estate.** There is a difference between the former and the present dell (Sup. Ct., Mass.) 6 Am. B. R. 167, 178 partners, as the debts are not "mutual," within Mass. 350, 59 N. E. 1037. the meaning of this section. o„4. „« v., -,.»„+„ „* „o,.~=-+ „_ „„•_„) 67. In re Crystal, etc., Co. (D. C, Vt), 4 Am. Set-off by surety of payment on princi- ^ e_ gg^ iq^ Fed. 265; Gray of Rollo, 18 Wall. pal's debt— In the case of In re Dillon (D. 629, 21 L. Ed. 927, holding that a separate debt C, Mass.), 4 Am. B. E. 63, 66, 100 Fed. 637, cannot be set-oft against a Joint debt In bank- the judge said: "The right of set-off, how- duptcy unless growing out of a transaction or ■" ° J. J ■ J li it. 4.T. under circumstances establishing that the joint ever, may not_ depend altogether upon the eredit had been given on accouSt of a separate form required m proving the debt. A debt debt, provable only in the name of A may perhaps 68. The words occur In the English section be availed of in set-off by B. To hold this ""/^t""'- „ ^ „, „ ,^^ , , , . ,, ' , . ,, 69. Russell v. Owen, 61 Mo. 185. would not contravene the language of the eo. Cumberland Glass Mfg. Co. v. De Witt, present act. The rule that a surety may 263 U. S. 288, 34 Am. B. R. 723, 59 L. Ed. 583, generally set-off a payment made on his 35 Sup. Ct. 377. nriTipinal'a rlpM, jicrain«+ hU HpW rtiio tn +Vip *!• Cases Under the law of 1876 are: Hunt v. principals aeDt against nis aew due to tne Holmes, Fed. Cas. 6,890; Brown v. Farmers' prmcipal does not seem to be based upon the Bank, 6 Bush (Ky.), 198; Standard Oil Co. v. technical form of proof, but upon broad prin- Hawkins, 74 Fed. 395. ciples applicable generally in bankruptcy." „«2. 1° je^Jf^'j" t.^°^,J^- S-,,?*-^- ^5 Am. ... ^ T> f, .„ Txr „ „»„..;. B. E. 218, 176 Fed. 650, citing Collier on Bank- 55. Gray v. Bollo„ 18 Wall. 629; Ex parte ruptcy (7th ed.), p. 796. Twogood, 11 Ves. 516; Ex parte Oaldicott, H the trustee enters a waiver with Respect to 25 Ch. D. 716. A debt due from a bankrupt *''* , \^^''!r„ ^^m^.^ ,l'^^lf^° proceed ftirther . 'j'-ji i c li.o'^ against the creditor, the referee has jurisdiction to an individual partner of a solvent firm to enter upon the consideration of the entire cannot be set-off against a debt due to the counterclaim, merely for the purpose of de- estate from the partnership. In re Shults termining whether or not the amount actually CD f; TJ V ^ H Am B T! R4 1^9 Tfort •i7^ ^"^ thereon is sufficient to otE-set, in whole or \.Li. <^., iN. 1.), Id Am. D. ±1. 84, id^ n&a. 57d. j^ p^j.^. jjjg ^^^^^ actually allowed In favor of 66. Tucker v. Oxley, 5 Cranch, 34. See Mat- the creditor. Matter of Continental Producing ter of Neaderthal (C. C. A., 2d Cir.), 34 Am.,B. Co. (D. C, Cal.), 44 Am. B. E. 216, 261 Fed. E. B42, 225 Fed. 38, revg. 33 Am. B. E. 152, 627, citing Collier on Bankruptcy (11th ed.), holding that money due to an individual part- 1099. ner under the will of his mother cannot be set- 63. In re Harper (D. C, N. Y.), 23 Am. B. E. off against an indebtedness of the bankrupt 918, 175 Fed. 412, firm to the estate of the mother for money bor- 64. Debt must be provable. — In re Har- rowed, although one of the notes given for the per (D. C, N. Y.), 23 Am. B. R. 918, . 931, money borrowed was endorsed by the Individual 175 Fed. 412, the judge said: "This is not 1100 Set-offs and Counterclaims. [§ 68-b, (2). law here, which has given rise to some speculation.*^ Formerly, to entitle to set-off, a debt must have been " provable in its nature ;" now, it must be "provable." Under the law of 1867, it was held that a debtor of the estate holding a claim on which he had attempted to secure a preference might still use it as a set-off, because it was provable in its nature."* The distinction seems rather tenuous. Thus, under the present law, which denies allowance to claims whose owners have been preferred, the word "provable" was held to mean the same as "provable in its nature" and, the case being one of mutual credit, the set-off was allowed, in spite of a preference making it technically not provable.*'' Subject, however, to exceptions based on equitable principles like those applied in Morgan v. Wordell, supra, the general rule is that no claims tainted with a preference may be asserted by way of set-off, except those within the terms of § 60-e. The lattei is new. It has already been discussed.** b. Purchased after bankruptcy or within four months before. — (1) In GENEHAi,. — Subdivision 2 of subsection b prevents the set-off or counterclaim of a claim which was acquired after the filing of the petition, or within four months before such filing, "with a view to such use and with knowledge or notice that such bankrupt was insolvent, or had committed an act of bankruptcy." This clause differs from that in the law of 1867 only in denying set-off to claims purchased within the four months' period; this that law did not do. The necessity of the rule is apparent. The doctrine of set-off would foster preferences of the worst kind, if a well-informed debtor of an insolvent could buy up claims against him either within four .months of the bankruptcy or after the" filing of .the petition. For instance, if property was sold by the bankrupt within the four months' period to one of his cred- itors, partly for cash and partly on credit, the amount due on the sale should not be offset against the creditor's claim against the estate.*® This provision prevents the set-off, against the amount due by a bankrupt to a creditor, of orders issued by employees of such creditor within the four months' period directing the payment of a part of the wages earned by them on account of a limitation or restriction on the right of the be one of a character provable in bankruptcy trustee to set up, prove, and use any claim in case the one liable thereon had been ad- he has and -which he may enforce against a judicated a bankrupt." creditor of the bankrupt presenting a claim G5. See In re Dillon (D. C, Mass.), 4 Am. against the estate he represents, provided it B. R. 63, 100 Fed. 627, in which case the be a ' delbt ' awing by such creditor to the court said : " The language of the different bankrupt estate within the meaning of sec- statutes of bankruptcy doubtless diflFers, and tion i68-a. The plainly disclosed policy of the provision of section CS-b of the act of the Act is that where a person is indebted to 1898, that a set-off, to be allowed, must be the bankrupt estate, and the trustee seeks provable against the estate, is not found in to enforce the indebtedness, the debtor to the all bankrupt acts, and apparently was not estate may set up as an off-set or counter- the law under the Act of 1800 . . . The claim only such just demands as he has right of set-off, however, may not depend against the estate which are provable in bank- altogether upon the form required in prov- ruptcy as a claim against the estate . . . ing the debt. A debt provable only in the The debtor- is limited to claims provable in name of A may perhaps be availed of in bankruptcy. There is no provision or sug- set-off by B." gestion in the Act that a claim against a 66. Clark v. Iselin, 21 Wall. 360. creditor of the bankrupt in the hands of -the 67. Morgan v. Wordell (Mass. Sup. Ct.), trustee, and which came to him by operation 6 Am. B. R. 167, 78 Mass. 350. Compare In of law on his appointment, cannot be used as re Kingsley, Fed. 'Cas. 7,819. an off-set to or counterclaim against the claim 68. See under Section Sixty of this work, of such creditor of the bankrupt estate, un- 69. In re White (C. C A., 7th Cir.), 24 less such claim in the hands of the trustee Am. B. R. 197, 177 Fed. 194. § 68-b, (2).J "When Not Allowed. 1101 supplies furnished by the bankrupt.™ The mere fact of insolvency or mere knowledge of such insolvency is not alone sufficient to take away a bank's right of set-off.''^ (2) " With a view to such use and with knowledge," etc. — The words here were not in the original law of 1867.''^ The idea expressed by the words "with a view to such use" was incorporated by the amendatory act of 1874, but only as to involuntary cases; the words "with knowledge or notice," etc., to the end of the subsection, are new. The use of the conjunc- tion " and " should be noted ; those opposing a claim to set-off on the ground specified in subdivision 2 must show, not only its purchase within the time specified, but that such purchase was with a view to its use as a set-off and with knowledge or notice that the bankrupt was insolvent, or had committed an act of bankruptcy.''^ Such proof will not be difficult if the purchase ante- dates the bankruptcy; it may, if within the four months' period. The cases under the former should be read with the date of the amendatory act of 1874 carefully in mind.''* 70. Western Tie & Timiber Co. v. Brown, 196 U. S. 502, 13 Am. iS. R. 447, 49 L. Ed. 571, 25 Sup. Ot. 339. 71. Matter of Wright Dana Hardware Co. (C. C. A., 2d Cir.), 31 Am. B. R. 816, 212 Fed. 3197, inodg. 31 Am. B.R. 192, 207 Fed. 636. As said in Studley v. Boylston JNPational Bank, 229 U. S. 5123, 30 Am. B. R. 161, 57 L. Ed. 13113, 33 iSup. Ot. 806, " there is nothing in the statute which deprives a bank, with whom an insolvent is doing business, of the rights of any other creditor taking money without reasonable cause to believe that a preference will result from the payment. The bankruptcy act contemplates that by remain- ing in business and at work an insolvent may become able to pay ofiF his debts. It does not prevent him from continuing to trade, de- positing money in hank, drawing checks and paying debts as they mature, either to his own bank or any other creditor. It does pro- vide, however, that if bankruptcy ensues all payments thus made, within the four months' period, may be recovered by the trustee, if the creditor had .reasonable cause to believe that a preference would be thereby effected." 72. In re City Bank, Fed. iCas. 2,742. Com- pare Hitchcock V. RoUo, Fed. Cas. 6^535. 73. See Tomlinson v. Bank of Lexington (C. C. A., 4th Cir.), 16 Ata. B. R. 632, 14)5 Fed. 824; Mason v. Herkimer Co. Bank (C. C. A., 2d Cir. ) , 22 Am. B. R. 733', 172 Fed. 529, revg. 21 Am. B. R. 98. Burden of proof. — Where a claim made up and based upon a certificate of deposit issued by the bankrupts, engaged in the business of private bankers, payable to the order of the claimaint's wife and assigned to him, is sought to be used as an off-set against Ms indebtedness to the bank when it closed its doors, the burden of showing that the certifi- cate was transferred before the bank sus- pended payment and without knowledge of its insolvency is upon the claimant. In re Shults (D. C, N. Y.), 14 Am. B. R. 278, 135 Fed. 623. 74. Hovey v. Insurance Co., Fed. Cas. 6,743; Hunt v. Holmes, Fed. Cas. 6,890; In re Perkins, Fed. Cas. 10,982; Bashore v. Rhodes, 16 N. B. R. 72. Compare also Smith V. Hill, 8 G-ray, 572; iSmith v. Brinkerhoff, 6 N. Y. 305; also the numerous English cases on the same subject. SECTION SIXTY-NINE. POSSESSION OF PROPERTY. § 69. Possession of Property. — a A judge may, upon satisfactory proof, by affidavit, that a bankrupt against whom an involuntary petition has been filed and is pending has committed an act of bank- ruptcy, or has neglected or is neglecting, or is about to so neglect his property that is has thereby deteriorated or is thereby deterio- rating or is about thereby to deteriorate in value, issue a warrant to the marshal to seize and hold it subject to further orders. Before such warrant is issued the petitioners applying therefor shall enter into a bond in such an amount as the judge shall fix, with such sureties as he shall approve, conditioned to indemnify such bankrupt for such damages as he shall sustain in the event such seizure shall prove to have been wrongfully obtained. Such property shall be released, if such bankrupt shall give bond in a sum which shall be fixed by the judge, with such sureties, as he shall approve, conditioned to turn over such property, or pay the value thereof in money to the trustee, in the event he is adjudged a bankrupt pursuant to such petition. Analogous provisions: In TT. S.: Act of 1867, J 40„ R. S., § 5024. In Eng.: Act of 1883, none. In Can.: None. Cross-references: To the law: Jurisdiction of court to appoint marshal to take custody of property, § 2(3). Bond to be filed upon application to take possession of property, § 3-e Referee to exercise power of judge in respect to taking possession of property. § 38-a(.3). To the General Orders: Indemnity for expenses of marshal, X. Accounts of marshals, with vouchers, XIX. To the Forms: Special warrant to marshal to take possession of property. No. 8. Bond of petitioning creditor, No. 9; bond to marshal. No. 10. SYNOPSIS OF SECTION. I. Seizure of Bankrupt's Property, 1103. o. Cross-references, 1103. b. /Scope of section, 1103. c. Bond of 'petitioning creditors, 1103. d. Bonding the property back, 1104. e. Remedy where property is claimed by a third person, 1104. f. The marshal's liability, 1104. g. Practice, 1105. [1102] § 69.J Seizuee of Bankrupt's Property. 1103 I. SEIZURE OF BANKRUPT'S PROPERTY. a. Cross-references. — The value of this section is not apparent; § 3-e, in connection with § 2 (3) and § 2 (15), is much broader.^ It is difficult to conceive of a case within the terms of § 69 which is not also within those of the sections just mentioned. Further, a seizure under this provision can be authorized only by the judge, save in the contingency stated in § 38-a (3) ; while, under the earlier sections, property may be taken possession of by a receiver acting under the order of a referee. A similar practice was author- ized by the law of 1867;^ it included the arrest and detention of the debtor, but did not authorize the court to release the property to him on filing a new bond. b. Scope of section. — The section divides itself naturally into three parts: (1) the authority to seize on a showing of specified facts, (2) a provision as to the bond to he given and its conditions and (3) a provision permitting the bankrupt to regain possession on filing a similar bond. A creditor desiring to seize property under this section must satisfy the judge that an alleged involuntary bankrupt either (1) has committed an act of bankruptcy, or (2) has so neglected or is so neglecting, or is about so to neglect his property that it has deteriorated or is deteriorating or will deteriorate in value. If so, on a specified bond being filed, the judge must issue the warrant to the marshal, but not to another; and the marshal must seize and hold the property subject to further orders. The application may be made only in involuntary cases, but not before the bankruptcy petition is filed or after the adjudication.* The remedy is, therefore, provisional. Its pur- pose is clearly to prevent deterioration or waste in the often long interval between the filing of an involuntary petition and an adjudication or dismissal. e. Bond of petitioning creditors. — It is the obvious purpose of this section and of § 3-e to require indemnity to be given to an alleged bankrupt before his property shall be seized or taken from his possession in behalf of the petitioning creditor or creditors before there has been an adjudication. With- out such indemnity a person not a bankrupt, or who has committed no act of bankruptcy, would not be adequately protected. Upon a dismissal of the petition for his adjudication he could in an extreme case probably maintain an action for malicious prosecution and recover in such action incidentally such damages as he may have sustained by the loss of the use of his property pending its restitution to him by the marshal. It would also be open to him to apply to the court and obtain an order directing a restitution of his prop- erty to him. It is the purpose of this provision to spare him the expense and trouble of seeking either of these remedies, by requiring the party or parties who seek to dispossess him of his property in advance of an adjudication to furnish him with a security adequate for his complete protection.* Before a warrant is issued the creditors petitioning therefor must give a bond in an amount and with such sureties as may be required by the judge, to indemnify the bankrupt for "such damages as he shall sustain in the event such seizure shall prove to have been wrongfully obtained." The words here, unlike the 1. See under Section Three of this work. whom an involuntary petition has been filed a. Act of 1867, § 40, R. S., § 5924. and is pending." 3. This follows from the words "against 4. Matter of Hafl (C. C. A., 2d Cir.), 13 Am. B. K. 354, 135 Fed. 742. 1104: Possession of Peopeett. [§ 69. fiection itself, are somewhat broader than those employed in § 3-e. It is thought that they mean substantially the same thing. "Damages" doubtless includes " costs " and " expenses." ' The discretion given the judge as to the eureties is no more than is allowed him by general statutes.® d. Bonding the property back. — This is equivalent to the reclaimer of a defendant in replevin. The judge has like discretion as to the amount of the bond and the sureties. The condition of the bond is specified in the statute.'' e. Remedy where property is claimed by a third person. — Manifestly, this eeetion applies only to cases where the property is physically in the posses- sion of the bankrupt or his agent.* The remedy is summary, as is that where a bankrupt, after adjudication, refuses to turn over property to his trustee.* But, where the property is held adversely, even if fraudulently, the usual remedy of a plenary suit must be resorted to.^* This does not exclude the provisional remedy of injunction in cases where such a remedy is essential until an officer representing the court, and the creditors can bring such suit. f. The marshal's liability. — The marshal must decide what is, and what is not, the property of the bankrupt. If he seizes the property of another, he 5, A claim for damagres tinder section 69-a, for a wrongful seizure of the baniirupt's property, Is dismissed, wliere a judgment has already been awarded against the petitioning creditors and obligors upon the bonds filed In their be- half, as provided by section 3-e, for counsel fees, costs, disbursements and expenses, In- curred in the proceeding. Nixon v. Fidelity & Deposit Co. of Maryland (C. C. A., 9th Cir.), 18 Am. B. H. 174, 150 Fed. 574. See also Kennedy T. Nat. Jeweler's Board of Trade (Sup. Ct., N. Y.), 39 Am. B. E. 85, 175 App. Div. 735. 6. See Tinder Section Three of this work. 7. lOompare In re Harthill, Fed. Oaa. 6,16il. 8. ISee In re Hammond (D. C, Mass.), 3 Am. B. R. 466, 474, 98 Fed. 84S; In re Ward (D. C, Mass.), 5 Am. B. E. 215, 104 Fed. 9S5; Btyan v. Bernhedmer, 181 XT. S. 188, 5 Am. B. E. 623, 629; In re Moody (D. C, la.), 12 Am. B. R. 718, 721, 131 Fed. 525. The filing of a petition in bankruptcy does not confer summary jurisdiction over property transferred to and in possession of a trustee for creditors. Morning Telegraph Puh. Co. V. Hutchinson Co. (Sup. Ct., Mich.) , 17 Am. B. R. 425, 146 Mich. 3'8. Seizure of property claimed by third per- son unauthorized. — " Section 69 is intended to authorize the court to prevent the waste, deterioration, or loss of the bankrupts prop- erty in his possession, pending the hearing on the petition for adjudication, but it is not intended to authorize the taking away from third parties property to which they assert title" Thus, a warrant should not be issued to seize property claimed by virtue of a, chattel mortgage and possessed prior to the filing of the petition. In re Rockwood (D. C, la.), 1 Am. B. R. 272, 91 Fed. 363. A warrant directing the marshal to seize property in the possession of third persons, under claim of title, is wholly unauthorized by the (bankruptcy act, even though it is claimed that the party holding the property received it by a transfer which is voidable or null under the act. In re Kelly (D. C, Tenn.), 1 Am. B. R. 306, 91 Fed. 504. 9. In such a ease, a recusant bankrupt is, however, reached by contempt process. 10. See, generally, under Section Twenty- three of this work. Note also the method of avoiding preference^ and fraudulent trans- fers considered under Section Sixty, Sixty- seven and Seventy. All these remedies are generally availalble only after adjudication. Property in possession of marshal. — Where the marshal, under the order of the bank- ruptcy court directing him to seize the estate of the bankrupt, peacaibly and quietly be- comes possessed of property as the property of the bankrupt, although the latter was holding it merely as the agent for his mort- • gagee, whose mortgage is on record, but of which the marshal had no actual notice at the time, the court will not turn over the property so seized by the marshal to the mortgagee claimant. In re Bender (D. C, Ark.), 5 Am. B. R. 682, 106 Fed. «73. Property held adversely. — In Matter of Andre ('0. €. A., 2d Cir.), 13 Am. B. R 132, 135, 68 C. IC. A. 374, the court, in con- struing sections 2 and 69, said : " We con- clude that it is only in cases in which the property of the bankrupt is in the possession of a party not an adverse claimant that the courts of bankruptcy have authority un- der these sections to interfere with it unless the adverse claimant chooses to consent, but that these courts have jurisdiction to enter- tain proceedings to ascertain whether there is an adverse claimant and that the mere refusal of a person in possession to surrender the property does not constitute him an ad- verse claimant." Where, prior to his adjudicetion in bank- ruptcy, an insolvent debtor had made a gen- § 69.] Seizure by Maeshal; Liability. 1105 is liable to that other.^^ It is elementary that his warrant is not operative outside of his district. g. Practice. — This remedy will rarely be resorted to. The requirement of a bond against damages will halt most petitioning creditors. Besides, there are the equivalent remedies of a receiver or an injunction, or the two com- bined." When resort is had to it, the practice is simple. The applica- tion is made by motion based on affidavits, usually accompanying and per- haps referring to the involuntary petition, but always separate and distinct from such petition.^* The affidavits should be positive in their averments, not mere statements of opinions or conclusions, and establish all the essential facts.^* In short, they should amount to a proven prima facie case. The form of the bond is suggested by Form No. 10, though the latter is intended for use by the alleged bankrupt in reclaiming the property. It is thought that affidavits for the justification of sureties should be added; this, that the court may be satisfied as to their responsibility without further inquiry. A surety company bond can be used. If the affidavits and bond are sufficient, the war- rant issues in the form prescribed by Form No. 8. The procedure thereafter is the same as that on any seizure by a Federal marshal. A marshal of seizure will not be issued under this section except upon a compliance with all the conditions prescribed therein ; there can, therefore, be no waiver of the required affidavits and bond.^* The alleged bankrupt has two remedies; to move to vacate the warrant on the insufficiency of the affidavits or bond, or both, or to reclaim the property by filing a new bond. The latter method is more direct and is usually followed.^' eral assignment for the benefit of his cred- or in equity. In re Aibraham (C. C. A., iters and subsequent to the filing of a peti- 5th dr.), '2 Am. B. R. 2fi6, 93 Fed. 967. tion in bankruptcy against the assignor, the 11. In re Miller, Fed. Cas. 9,913; In re assignee had sold the property of the bank- Marks, Fed. Cas. 9,096 ; Marsh v. Armstrong, rupt, and where, upon the petition of cred- 20 Minn. 81. This doctrine is sulbject to itors of the bankrupt, the court of bankruptcy exceptions. In re Vogel, Fed. Cas. 16,982; issued an order directing the marshal to In re Havens, Fed. Cas. 6,230. seize the property so sold, and granted a 12. Compare Blake v. Valentine (D. C, rule directing the purchaser to appear before Cal.), 1 .An. B. E. 372, 89' Fed. 691. See the court and prove his title to such prop- also, generally, § 2(3) (15) and § 11-a, ante. erty, it was held that the court of bank- 13. In re Kelly (D. C, Tenn. ), 1 Am. B. ruptcy did not have jurisdiction by a sum- R. 306, 91 Fed. 504. mary proceeding to order the marshal to 14. Id. seize' the property. The proper proceeding 15. In re Sarsar (D. C, Tenn.), 9 Am. B. in such a case is a plenary action at law E. .376, 120 Fed. 40. 16. See Form No. 10. 70 SECTION SEVENTY. TITLE TO PROPERTY § 70. Title to Property. — a The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or suc- cessors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all (1) docu- ments relating to his property; (2) interests in patents, patent rights, copyrights, and trade-marks; (3) powers which he might have exer- cised for his own benefit, but not those which he might have exercised for some other person; (4) property transferred by him in fraud of his creditors; (5) property which prior to the filing of the petition he could by any means have transferred or which naight have been levied upon and sold under judicial process against him: Provided, That when any bankrupt shall have any insurance policy which has a cash surrender value payable to himself, his estate, or personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the com- pany issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, other- wise the policy shall pass to the trustee as assets; and (6) rights of action arising upon contracts or from the unlawful taking or detention of, or injury to, his property. h All the real and personal property belonging to bankrupt estates shall be appraised by three disinterested appraisers; they shall be appointed by, and report to, the court. Real and personal property shall, when practicable, be sold subject to the approval of the court; it shall not be sold otherwise than subject to the approval of the court for less than seventy-five per centum of its appraised value. c The title to property of a bankrupt estate which has been sold, as herein provided, shall be conveyed to the purchaser by the trustee. d Whenever a composition shall be set aside, or discharge revoked, the trustee shall, upon his appointment and qualification, be vested as herein provided with the title to all of the property of the bankrupt as of the date of the final decree setting aside the composition or revoking the discharge. [1106] § 70.] Analogous Provisions. 1107 e The trustee may avoid any transfer by the bankrupt of his prop- erty which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value. For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any State court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction* f Upon the confirmation of a composition offered by a bankrupt, the title to his property shall thereupon revest in him. Analogous provisions: In U. S. As to property in general passing to the trustee. Act of 1867, S 14, E. S., § 5044; Act of 1841, § 3; Act of 1800, §§ 10, 11, 17, 27, 50; As to patents, copyrights, rights of action and the like. Act of 1867, § 14, R. S., § 5046; Act of 1841, § 3; 'Act of 1800, §§ 13, 17; As to sales by the trustee. Act of 1867, §§ 15, 25, R. S., §§5062, 5062B, 5063, 5064, 5065, 5066; As to sales of incumbered property, Act of 1867, § 20, E. S., § 5075. In Eng.: As to property passing to tlie trustee, Act of 1883, §§ 43, 44, 59; As to burdensome property, Act of 1883, § 55; Act of 1890, § 13; As to sales by the trus- tee. Act of 1883, §§ 56(1), 70. In Can.: Act of 1919, §| 6, 20, 25, 33. Cross-references: To the law: "Document" includes book, deed or instrument in writing, § 1(13). Appointment of receivers to preserve property of estate, § 2(3) . Collection of estates and distribution among creditors, § 2(7). Bond where creditors ask for appointment of receiver prior to adjudication, § 3-e. Fraudulent transfer as act of bankruptcy, § 3-a. Partnership property, disposition of proceeds, etc., § 5. Bankrupt to execute necessary papers to convey title, § 7-a(4) (5). Exemptions; duties of trustees in respect to- setting apart, § 6. Suits or proceedings in which stays may be granted, § 11. Composition; confirmation; effect on titles, § 12; when to be set aside, % 13. Discharge; application for; when granted and revoked, §§ 14, 15. Jurisdiction of United States courts in respect to actions to recover property of estate, § 23-b. Trustees, duties in respect to estate; rights in respect to property belonging to estate, § 47-a(2). Preferences, what constitute; recovery by trustee, § 60. Liens, void and voidable; recovery of property for benefit of estate, § 67. To the General Orders: Trustee to make inventory of property belonging to estate, XVII. Sales of property regulated, XVIII. Compounding claims against estate, XXVIII. To the OfScial Forms: Appointment, oath and report of appraisers. Form No. 13. Sale of property; petition and order, Ko. 42; for sale subject to lien, No. 44; for private sale. No. 45; for sale of perishable property. No. 46. * This sentence was added by the amendatory act of 1903. 108 Title to Peopebtt. [§ 70. SYNOPSIS OP SECTION. TITLE TO PROPERTY. I. Section in General, 1111. a. Comparative legislation, 1111. b. Scope of section, 1111. c. Conflict between bankruptcy act and State law, 1111. n. Trustee Vested with Title of Bankrupt, 1112. a. In general, 1112. b. When title vests, 1112. (1) In general, 1112. (2) Title vests at date of adjudication relating back to date of filing petition, 1113. c. Bankrupt's title between petition filed and (1) adjudication and (2) appointment of trustee, 1114. d. What vests, 1115. (1) In GENERAL, 1115. (2) Property acquired after filing petition, 1116. e. Subject to all claims, liens and equities, 1117. (1) In general, 1117. (2) Disposition of property subject to lien or incumbrance, 1120. (3) Property in possession of bankrupt, 1121. (4) Effect of amendment of 1910 to § 47-a (2), 1122. m. Title to Specific Property, 1122. a. In general, 1122. b. Documents relating to bankrupt's property, 1122. c. Patents, copyrights, and trade-^marks, 1123. d. Personal powers, 1123. e. Property fraudulently transferred, 1124. (1) In general, 1124. (2) Property affected; character of transfer, 1124. (3) Actual or implied fraud, 1124. (4) Voluntary transfers; transfers to wife or children, 1125. (5) Effect of a general assignment, 1125. (6) Receivership; dissolution of corporation, 1126. (7) Assignment of claims against the United States, 1126. f. Property which might hxwe been transferred or levied upon, 1127. (1) In general, 1127. (2) Test to be applied, 1127. (3) Property pledged, 1128. (4) Stock brokerage transactions, 1129. (5) Property included generally, 1130. (6) Property in which others have an interest, 1131. (7) Equities in property, 1132. § 70.J Stitopsis of Section. 1109 m. Title to Specific Property — Continued; f. Property which might have been transferred or levied upon — Continued: (8) Remainders and contingent interests, 1133. (9) Trttst interests and property in trust, 1133. (I) Resulting or constructive trusts, 1133. (II) Express trusts; interest of beneficiary, 1134. (Ill) Mingling trust funds; following such funds, 1135. (10) Dower and curtesy rights, 1136. (11) Licenses, franchises, and personal privileges, 1137. (I) In general, 1137. (II) Personal contracts, 1137. (III) Franchises and licenses, 1137. (IV) Seat in stock exchange, 1138. (12) Life insurance policies, 1139. (I) In general, 1139. (II) Cash surrender value, 1139. (III) Effect of assignment, 1141. (IV) Payable to wife or designated beneficiaries, 1141. (V) Bankrupt as beneficiary, 1144. (13) Fire insurance policies, 1144. (14) Property sold to the bankrupt on condition, 1145. (I) In general, 1145. (II) Lease with privilege of purchase, 1147. (III) Goods consigned for sale, 1148. (IV) Option to purchase or return, 1150. (15) Property affected by fraudulent representations, 1150. g. Reclamation proceedings, 1151. (1) In general, 1151. (2) Time within which petitions should be filed, 1151. (3) Sale or bailment; agency, 1152. (4) Purchase of goods without intent to pay, 1153. (I) Concealment of insolvency or false representation as to solvency, 1153. (II) Intent not to pay, 1155. (III) When right exercised; who may defeat right, 1155. (IV) Proof of insolvency, or of intent riot to pay, 1155. (5) Property sold subject to approval; rental contracts^ 1156. (6) Payment on delivery; stoppage in transit, 1157. (7) Proof of identity, 1158. (8) Practice, 1158. h. Rights of action, 1158. (1) In general, 1158. (2) Actions for personal injuries; torts affecting property OF bankrupt, 1159. (3) Actions by corporations, and against stockholders, direct- ors, AND officers, 1160. 1110 Title to Peopeety. [§ 70. IV. Burdensome and Exempt Property, 1162. a. Burdensome property and contracts, 1162. (1) In general, 1162. (2) Executobt contracts and leases, 1162. (3) Practice, 1163. b. Exempt property, 1164. (1) In general, 1164. (2) Conflict between § 6 and § 70-a (5), as to rights of bene- ficiaries UNDER LIFE INSURANCE POLICIES, 1164. (3) Title vests subject to charge for support of widow and minor children, 1165. V. Appraisers and Appraisal, 1165. a. In general, 1165. b. Practice, 1166. VI. Sales of Property, 1166. a. In general, 1166. b. Practice on sales; conduct of sales, 1166. (1) In general, 1166. (2) Jurisdiction of referee as to sales, 1167. (3) By WHOM CONDUCTED, 1167. (4) Property to be sold, 1168. (5) Conduct of sale; bids; rights and obligations of bidders, 1168. (6) Confirmation or approval of sales, 1170. c. Sales at public auction or by private sale under general order XVIII, 1171. d. Sales of incumbered property, 1171. (1) In general, 1171. (2) Sales free of dower, 1173. (3) Proceeds of sale subject to liens; rights of lienors, 1173. (4) Payment of taxes, 1174. (5) Payment of expenses of sales, 1174. (6) Determination of validity, priorities or amounts of liens, 1175. (7) Sales subject to incumbrances, 1176. (8) PRAeTiCE on sales of incumbered property, 1176. e. Resale; when granted, 1176. Vn. Transfer of Trustee's Title to Purchaser, 1176. Vin. Title of Trustee where Composition is set Aside, Discharged or Revoked; Effect of confirmation, 1176. a. Setting aside, discharging or revoking composition, 1176. b. Effect of confirmation of composition, 1178. IX. Transfers Fraudulent under State Laws may be Avoided by Trustee, 1178. a. In general, 1178. b. The saving clause, 1181. c. The amendment of 1903, 1181. § 70. J Scope; Conflict of Laws. 1111 I. SECTION IN GENERAL. a. Comparative legislation.— The analogous provisions of the English law are referred to in the Synopsis. The main differences are that title vests as of the date of the commission of the first act of bankruptcy/ and the propei'ty divisible among creditors includes not only what the debtor had at the com- mencement of the proceeding, but also what is acquired by or devolves on him before his discharge.^ In Canada the title passes to the trustee on the makin« of the receiving ordeo-.^^ Each of our laws has had clauses regulating the vesting of title and indicating what vests.^ That of 1867 is most nearly like the sec- tion under discussion.* Specific differences are considered in appropriate para- graphs, post. The differences between the old method of evidencing the vesting of title and that now the law have already been considered.^ b. Scope of section. — This section is chiefly important (a) for its provisions fixing what property of a bankrupt vests in his trustee and the time when it vests, and (&) as adopting as a part of the bankruptcy eystem the respective State statutes providing a remedy against fraudulent transfers.® It also includes nearly all that is in the law relative to the method of selling a bank- rupt's property. Besides, it provides for the appointment and reports of appraisers. The other subdivisions, c, d and /, haA'^e to do either with minor matters of practice or else refer directly to and would have been more appro- priately incorporated in sections previously discussed.'' c. Conflict between bankruptcy act and State law. — Where the trustee in bank- ruptcy and a transferee of the bankrupt both claim certain property which once belonged to the bankrupt, it may be difficult to decide how far the title to the property in question depends upon the State law which determines the effect of the bankrupt's conveyance, and how far upon the bankrupt act which declares what property the trustee shall take. The one law regulates the passage of title from the bankrupt, and is interpreted by the State court. The other law regulates its passage to the trustee, and is interpreted by the federal court.^ Where there is conflict of jurisdiction, the exclusiveness of the jurisdiction of the court of bankruptcy will depend upon the possession, cither actual or implied, of the property in question. If a petition has been filed and there has been an adjudication in the bankruptcy court, the property of the bankrupt, wherever situated, is brought into the control of the bank- ruptcy court and must be administered therein.® So that where a petition 1. Eng. Act of 1883, f 43. niptcy and those of an assignee in insolvency »■ ^/?^' ■^^ ?^ ^^^\' h ^ir. I « under the statute of Massachusetts are de- 2a. Can. Bankr. Act or 1919, 5 8. /•j--'ii xxij. i g. Sec "Analogous Provisions" at head of »"«" '" similar langurage, yet a statute mak- section. ing a certain transfer void as against the 4. For cases under that law, see In re Rosen- latter eo nomine does not make it void as berg. Fed. Cas. 12,055; In re Wynne, Fed. Cas. nMinat tho former" 18,117; Markson V. Heauey, Fed. Cas. 9,098. against tne tormer. 6. See discussion under Section Twenty-one »• Bailey v. Baker Ice Machine Co. 239 TJ. of this work. Compare, also, law of 1841, where S. 268, 35 Am. B. R. 814, 60 L. Ed. 275. the decree itself divested the bankrupt's title. 35 Sup. a. 50; Lazarus v. Prentice, 234 U' e. See under this section, post, subtitle o „(./ ,„ a„ p p ccn co t TTrl i9n>; "Transfers Fraudulent Under State Laws May ^- 2&3, 6i Am. U. K. 559, 58 h. id. 1305, Be Avoided by Trustee." 34 bup. Ut. 851; Robertson v. Howard. 229 7. As to d, see discussion under Sections U. S. 254, 30 Am. B. R. 611, 57 L. Ed. 1174, Thirteen and Fifteen of this work. As to f, 33 Sup. Cfc. 854; Acme Harvester Co. v. see discussion under Section Twelve. Beekman Lumher Co., 222 U. S. 300, 27 Am. 8. In re Littlefield (C. C. A., 1st Cir.), 19 B. R. 362, 56 L. Ed. 208, 32 Sup. Ct. 9fi: Am. B. R. 18, 155 Fed. 838,, holding that Mueller v. Nugent, 184 U. S. 1, 7 Am. B. " although the rights of a trustee in bank- R. 224. 46 L. Ed. 405, 22 Sup. Ct. 269 ; 1112 Title to Peopeety. [§ 70-a. has been filed against an alleged bankrupt, a State court has no right to seize or attach property admittedly belonging to the bankrupt, without the consent of the bankruptcy court, regardless of whether actual possession of the prop- erty has been taken by its officers.^" 11. TRUSTEE VESTED WITH TITLE OF BANKRUPT. a. In general. — Subsection a is the most important of all the subsections of this section. Under it the trustee is vested with the title of the bankrupt to all property possessed by him at the date of the adjudication, being within the classes therein enumerated, " except in so far as it is to property which is exempt." He takes an absolute title which, of coursei, carries with it the right of possession.^"^ He is vested with such title only for the purpose of administration and distribution of the estate among the bankrupt's creditors." He represents both the bankrupt and creditors. He succeeds to the right and title of the bankrupt for the benefit of his creditors, and in this capacity occa- sionally has rights not possessed by the bankrupt, as for instance, the right to recover assets which the bankrupt has conveyed in fraud of his creditors.-'^ b. When title vests. — (1) In geneeal. — ^ Under the previous law, the trus- tee's title vested by relation as of the date of the commencement of the proceed- ing. This casts doubt on the validity even of liona fide transactions between petition filed and adjudication; in short, made business by an alleged, but not yet adjudicated, bankrupt practically impossible. Under the act of 1841, there seems to have been a similar doubt.-'^^ The words " as to the date he was adjudicated a bankrupt " seem to have been inserted to meet these difiicul- Matter of Continental Coal Corp. (C. 0. A., 6tli both the bankrupt and the creditors. As such Cii-.), 38 Am. B. E. 168, 238 Fed. 113; Board o( he succeeds in right and title to the bankrupt's Eoad Commissioners t. Kell (C. C. A., 6th Clr.), estate for the benefit of his creditors. He may, 44 Am. B. E. 259, 259 Fed. 70; Matter of as a general rule, maintain all actions, both at Diamond's Estate (C. C. A., 6th Cir.), 44 Am. B. law and in equity, for the recovery and pre- E. 268, 259 Fed. 70; Koger t. Clark (Tex. Ct. of servation of the assets, both real and personal, Civ. App.), 44 Am. B. E. 512, 216 S. W. 434 of the bankrupt's estate that the bankrupt him- See discussion under § 23, ante. self, but for the bankruptcy, could have main- Property in cnstodia legls.— AU the bank- tained. Even more, he may maintain an ae- rupt's property, title to which is not held ad- tion the bankrupt could not, where, as in the Tersely by a third person, Is, upon the filing of present case, he seeks to avoid conveyances the petition In bankruptcy, placed in custodia made by the bankrupt in fraud of his creditors. legis. M.itter of Larkey (D. C, N. J.), 32 Am. In this latter instance it cannot be said that B. E. 287, 214 Fed. 867. the trustee is a representative of the bank- 10. Matter of Wellmade Gas. Mantle Co. (D. rupt, for he (the bankrupt) could uot maintain C, Mass.), 36 Am. B. E. 354, 230 Fed. 502, atfg. such a bill, nor in any legal or equitable pro- 36 Am. B. E. 62 ; Matter of HufCman-Salvar ceeding become a beneficiary of his own fraudu- Eoofling Paint Co. (D. C, Ala.), 37 Am. B. E. lent act." 426, 234 Fed. 798. Rights of trustee as asainst committee of 10a. Harlin v. American Trust Co. (Ind. App. creditors. — Where after bankrupt had ab- Ct.), 41 Am. B. E. 401, 119 N. E. 20. sconded, a committee of creditors, prior to 11. Blacklee Co. v. O'Connor, 24 Am. B. E. bankruptcy, took charge of his property with- 499, 122 N. T, Supp. 710, 67 N. Y. Misc. 599 ; out authority, selling and disposing of the same Eeilley v. Buffalo German Insurance Co. (Sup. paying the claims of alleged lienors, and de- Ct. Spec. T., N. Y.), 32 Am. B. E. 728, 86 N. Y. positing the balance, which was afterwards Misc. 69, 147 N. Y. Snpp. 1086; Chambers v. turned over to bankrupt's trustee, and it ap- Kirk (Okla. Sup. Ct), 32 Am. B. E. 175, 139 peared that the bankrupt never ratified the Pac. 986. transaction nor was informed thereof prior to 12. Matter of Place (D. C, N. Y.), 35 Am. B. his adjudication, the acts of the committee con- E. 426, 224 Fed. 778. stituted a conversion of bankrupt's property, Effect of discharge. — The title of a trustee In and bankrupt's trustee had the right to re- bankruptcy continues till the estate is closed, pudiate the transactions and follow the prop- and It is not affected by the discharge of the erty, or, waivng the tort, sue the committee for bankrupt. Matter of Levy (D. C, Pa.), 44 Am. the value. In re Thomas (D. C, N. Y.), 29 Am. B. r.. 24S, 201 Fed. 432. B. E. 045, 199 Fed. 214. Representative of creditors In action to set See discussion under heading "Transfers aside fraudulent conveyance. — In the case of fraudulent under State law^," post. Cartwright v. West (Ala. Sup. Ct.), 26 Am. B. 13. Compnre Ex parte Foster, Fed. Cas. 4,960; K 831, 55 So. 917, the court said : " The trustee Ex parte Newhall, Fed. Cas. 10,159 ; In re Bust, In bankruptcv in a sense is representative of Fed. Cas. 12,171. 70-a.J When Title Vests. 1113 ties.'^* They are not antagonistic to the words found later in subdivision (5). The former refer to the time of vesting; the latter to what vests. ^^ (2) Title vests at date of adjudication relating back to date of FILING petition." — Under the present law the trustee's title is that only which exists at the date of the adjudication/® although such title relates back to the time of filing the petition." The purpose of the law was to fix the line of cleavage with reference to the condition of the bankrupt estate as of the timo at which the petition was filed, and that the property which vests in the trustee at the time of adjudication is that which the bankrupt owned at the time of the filing of the petition.-'® The filing of an involuntary petition does, not, ipso facto, take from the alleged bankrupt his dominion over his property; while his disposition of his property may be invalidated and set aside under certain circumstances, such property remains under his control until the adjudication. The remedy of the petitioning creditors, in case this freedom to trade is abused, is by the appointment of a receiver under § 2 (3) (15), or an appropriate proceeding under § 3-e or § Q9}^ The trustee must exercise 14. See House Report No. 1,228, 54tli Congress. The reason given in the text for the use of the language is sustained in the case of Matter of Zotti (C. C. A., 2d Cir.), 26 Am. B. E. 234, 186 Fed. 84, in which the court said : " It was because of the act of 1867 threw doubt upon the validly of honest transactions that the words 'as of the date he was adjudicated a bankrupt,' were inserted by the act of 1898." (Citing Collier, 8th ed., p. 807.) 16. In re Pease (Eef., N. Y.), 4 Am. B. E. 578; In re Barrow (D. C, Va.), 3 Am. B. E. 414, 98 Fed. 582; In re Burka (D. C, Mo.), 5 Am. B. E. 12, 104 Fed. 326; In re Elmira Steel Co. (D. C, N. y.), 5 Am. B. K. 484, 109 Fed. 456. Com- pare In re Harris (Eef., 111.), 2 Am. B. R. 359, and In re Mussey (D. C, Mass.), 3 Am. B. E. 592, 99 Fed. 71. 18. Matter of Zotti (C. C. A., 2d Cir.), 26 Am. B. R. 234, 186 Fed. 84; In re Hurley (D. C, Mass.), 26 Am. B. E. 434, 185 Fed. 851; Williams v. Noyes & Nutter Mfg. Co. (Maine Sup. Ct.), 33 Am. B. E. 865, 92 Atl. 482; Barber v. Wiemer (la. Sup. Ct.), 40 Am. B. E. 752, 165 N. W. 440; Matter of Soltmann (C. C. A., 2d Cir.), 41 Am. B. R. 42, 249 Fed. 455; Brown v. Crawford (D. C, Ore.), 42 Am. B. E. 263, 252 Fed. 248; Mat- ter of Arctic stores (D. C, N. J.), 43 Am. B. E. 543, 258 Fed. 688; Neuberger v. Felis (Ala. Sup. Ct.), 43 Am. B. E. 703, 82 So. 172. Payment of check after adjudication. — Edison Elec. Ilium. Co. v. Tibbetts (C. C. A., 1st Cir.), 39 Am. B. E. 640, 241 Fed. 468. 17. Everett v. Judson, 228 TJ. S. 474, 30 Am. B. E. 1, 57 L. Ed. 927, 33 Sup. Ct. 568, afEg.( 27 Am. B. E. 704, 102 Fed. 834; Toof v. City National Bank (C. C. A., 6th Cir.), 30 Am. B. E. 79, 206 Fed. 250; Carter etc.. Transfer Co. V. Robertson (Tex. Ct. of Civ. App.), 40 Am. B. R. 628, 198 S. W. 791; Archenhold Co. v. Schaefer (Tex. Ct. of Civ. App.), 42 Am. B. E. 232, 205 S. W. 139 ; Neuberger v. Felis (Ala. Sup. Ct.), 43 Am. B. E. 703, 82 So. 172; Matter of Diamond's Estate (C. C. A., 6th Cir.), 44 Am. B. E. 268, 259 Fed. 70, Title vests as of date of adjudication. — In the Matter of Mortens (C. C. A., 2d Cir.), 15 Am. B. R. 362, 368, 142 Fed. 445, 75 C. C. A., 548, Judge Wallace, speaking for this court, said: "By the present act, the title of the trustee is vested in the estate of the bankrupt 'as of the date he was adjudged a bankrupt.' We are of opinion that until the date of the adjudication b lienor or pledgee is at liberty to perfect any title which the nature of the Hen permits. Un- der the act of 1867, no lien could be acquired after the filing of the petition in bankruptcy, because the title of the assignee vested as of the commencement of the proceeding in bankruptcy. Now the trustee takes the property of the bank- rupt in the condition in which he finds it at the date of the adjudication, unless it has been ncumbered fraudulently or in contravention of some of the provisions of tne act." The principle here declared is in conflict with the rule laid down by the Supreme Court in Everett v. Jud- son, 228 U. S. 4T4, 30 Am. B. E. 1, 5T L. Ed. 927, 33 Sup. Ct. 568. IS. Matter of Continental Coal Corp. (C. C. A., 6th Cir.), 38 Am. B. R. 168, 238 Fed. 113; Arnold V. Hoorigan (C. C. A., 6th Cir.), 38 Am. B. E. 174, 238 Fed. 39; Emerson-Brantingham Co. v. Lawson (D. C, Iowa), 38 Am. B. E. 344, 237 Fed. 877; Duncan v. Watson (Ala. Sup. Ct.), 38 Am. B. R. 613, 73 So. 448; Brewer v. Brown (lU. Sup. Ct.), 38 Am. B. E. 890, 109 N. E. 264; Fairbanks Steam Shovel Co. v. Wills, 24» U. S. 642, 36 Am. B. E. 754, 60 L. Ed. 841, 36 Sup. Ct. 466, affg. Matter of Federal Contracting Co. (C. C. A., 7th Cir.), 32 Am. B. E. 381, 212 Fed. 688; Bailey v. Baker Ice Machine Co., 239 U. S. 268, 35 Am. B. E. 814, 60 L. Ed. 275, 36 Sup. Ct. 50; Everett v. Judson, 228 U. S. 474, 479, 30 Am. B. E. 1, 57 L. Ed. 927, 33 Sup. Ct. 568; Zavelo v. Reeves, 227 U. S. 625, 29 Am. B. E. 493, 57 L. Ed. 676, 33 Sup. Ct. 365; Acme Harvester Co. v. Beekman Lumber Co., 222 U. S. 300, 27 Am. B. E. 262, 56 L. Ed. 208, 32 Sup. Ct. 96; Petty v. Wllkins (Ark. Sup. Ct.), 40 Am. B. E. 259, 196 S. W. 453; Bramham v. Lanier Bros. (Tenn. Sup. Ct), 41 Am. B. R. 215, 200 S. W. 830; Matter of Mitchell (D. C, N. Y.), 42 Am. B. R. 658; Matter of Swift (D. C, Ga.), 44 Am. B. E. 211, 259 Fed. 612. Rights determined as of date of filing: pe- tition. — ■When not otherwise specially provided, the rights, remedies, and powers of the trustee are determined with reference to the condi- tions existing when tlie petition is filed. It is then that the bankruptcy proceeding is intiated, that the hands of the bankrupt and his creditors are stayed, and that his estate passes actually or potentially into the control of the court. Bailey v. Baker Ice Machine Co., 239 U. S. 268, 35 Am. B. E. 814, 60 L. Ed. 275, 36 Sup. Ct. 50. The rights of a trustee in bankruptcy, as against a mortgagee under an unfiled chattel mortgage, are determined as of the day the 1114: Title to Peopeett. [§ 70-a. his option to accept within a reasonable time or he will be held to have waived his rights.^ c. Bankrupt's title between petition filed and (1) adjudication and (2) appoint- ment of trustee. — It follows that, under the present law, the title remains in the bankrupt at least to the date of adjudication ; perhaps even to the date of the appointment of the trustee.^^ Thus, the bankrupt is not divested of his title until the appointment and qualification of the trustee. ^^ A suit for the infringement of a copyright may be prosecuted,^^ and lands sold for taxes may be redeemed by the bankrupt after a petition has been filed and before the appointment of a trustee.^* But after the adjudication the bankrupt has no standing in court as to his property which is not exempt. ^^ Prior to adjudica- tion, fraud being absent, it may be transferred ; hut, being liable to be divested, no permanent lien can attach to it.^® When, however, the trustee is appointed, his title goes back by relation to the date of the adjudication,^'^ although for jurisdictional purposes rights in the property will relate back to the date of the commencement of the proceeding.^ Illustrative cases under the former petiton Is flled. Lake View State Bank y. Jones (C. C. A., 7th Cir.), 40 Am. B. R. 148, 242 Fed. 821. 19. In re LaPlume Condensed Milk Co. (D. C. Pa.), 16 Am. B. R. 729, 145 Fed. 1,013; American Trust Co. v. Wallis (C. C. A., 3d Clr.), 11 Am. B. R. 360, 126 Fed. 464. 20. Smitli T. Gordon, 6 Law Rep. 313. See Am. Bankr. Dig. I 413. Estoppel to asBist title. — Where a trustee in bankruptcy without asserting his claim thereto within a reasonable time, having knowledge of all the circumstances, allows third parties, in the prosecution of their legal rights, to acquire an interest in any part of the unclaimed as- sets of the bankrupt, he may be held to have waived his claim thereto. Mesirov v. Inuis Sperden & Co. (N. J. Sup. Ct.), 37 Am. B. R. 201, 97 Atl. 160. Failure of trustee to assert title. — The fact that a trustee in bankruptcy, after an attachment of property within four months of bankruptcy, fails to assert title for some time, does not eaitop him from subsequently asserting title or from interfering with a sale under the attachment. Matter of Gil- sonite Mines Co. (D. C, Pa.), 37 Am. B. E. 473. ai. Though the better view is that, after adjudication, it is in custodia legis. Keegan V. King (D. C, Ind.), 3 Am. B. R. 79, 96 Fed. 738; 'March v. Heaton, Fed. Cas. 9,061; In re Rosenberg, Fed. Cas. I;2,05i5; Reilly V. Insurance Co. (N. Y. Sup. Ot., Spec. T.), 32 Am. B. R. 728, 86 N. Y. Miac 69, 147 N. Y. Supp. 1086. 22. Rand v. Iowa Central R. Co., 16 Am. B. R. 6i92, li86 JST. Y. 58, 78 N. E. 574, revg. 12 Am. B. R. 164, 96 N. Y. App. Div. 413, 89 N. Y. Supp. 212; Fuller v. New York Fire Ins. Co., 184 Mass. 12, 67 N. E. 879; Gordon V. Mechanics & Traders' Ins. Co., 22 Am. B. R. 649, 120 La. Ann. 441, 4>5 So. 384; In re Thomas (D. C, N. Y), 29 Am. B. R. 945, 199 Fed. 214; In re Banks (D. C, N. Y.), 31 Am. B. R. 270, 207 Fed. 662. Cancellation of executory contract of sale to bankrupt between adjudication and ap- pointment of trustee. — During the interval between the adjudication in bankruptcy and the appointment of a trustee, the vendor in an executory contract for the sale of land to the bankrupt may serve notice upon the bankrupt for the termination and cancella- tion of the contract for default in payment of the purchase price^ and the notice so served is valid and effectual unless the re- sult of fraud or collusion with the bankrupt and for the purpose of defeating the rights of creditors. Christopherson v. Harrington (Minn. Sup. Ct.), 32 Am. B. R. 842, 136 N. W. 289. 25. Myers v. Callaghan, 5 Fed. 726. 24. Hampton v. Rouse, 22 Wall. 263, 22 L. Ed. 755 26. Pickens v. Roy, 187 U. S. 177, 9 Am. B. R. 47, 47 L. Ed. 128, 23 Sup. Ct. 78, a£Eg. Pickens T. Dent (C. C. A., 4th Clr.), 5 Am. B. R. 644, 106 Fed. 653; Edison Elec. Ilium. Co. v. Tib- bitts (C. C. A., 1st Clr.), 39 Am. B. E. 640, 241 Fed. 468. 26. In re Engle (D. C, Pa.), 5 Am. B. R. 372, 105 Fed. 8i93; State Bank of Chicago V. Cox (C. C. A., 7th Cir.), 16 Am. B. R. 32, 143 Fed. 91. Compare In re Corbett (D. C, Wis.), 5 Am. B. R. 224, 104 Fed. 872. Purchasers in good faith. — Those ac- quiring rights to a bankrupt's property sub- sequent to his adjudication, who have knowl- edge of sufficient facts to put them on in- quiry, are not bona fide purchasers. Hull v. Burr (Fla. Sup. Ot.), 26 Am. B. R. 897, 55 So. 852. 87. Hiscock v. Varick Bank, 206 XJ. S. 28, 18 Am. B. R. 1, 9, 51 L. Ed. 945, 27 Sup. Ct. 68a, affg. IS Am. B. R. 362, 142 Fed. 445; French v. White, 18 Am. B. R. 905, 78 Vt. 89, «2 Atl. 35; Matter of Morse {D. C, N. Y.), 32 Am. B. R. 207, 210 Fed. 900; Christopherson v. Harrington (Minn. Sup. Ct.), 32 Am. B. R. i84l2, 136 N. W. 289. Upon the appointment and qualification of a trustee, his title relates back to the timo of the adjudication, and his rights and rem- edies as to property previouslv disposed of are definitely defined and limited bv the bankruptcy act. In re Letson (C. C. A., 8th Cir.), 19 Am. B. R. 506, 157 Fed. 78. 28. In re Appel (D. C, Neb.), 4 Am. B. R. 722, 103 Fed. 931. Compare In re § 70-a.J What Vests. 1115 law, which, however, for reasons above stated, should be read with caution, will be found in the foot-note.^® d. What vests. — (1) In genebal. — In respect to the property which vests the present statute deals in particulars, where in the former general words were used.^'* It is not thought that they differ in meaning. The various subdivisions are considered seriatim later. Stated broadly, the rule is that the trustee takes all the property of the bankrupt, whether in possession or in action, at the time the petition was filed,^^ subject, of course, to the new rule as to vesting just considered. Whether the bankrupt was in possession and the owner of the property at the time, must be determined by the circum- stances; the determination of such question will depend upon the same facts as though 'bankruptcy had not intervened.^^ The trustee does not take title to money and property in possession of third persons which did not 'belong to ithe bankrupt prior to his adjudication. The question of ovmership is one Cramond (D. C, N. Y.), 17 Am. B. R. 23, 145 Fed. 966, Iiolding that the amount due to a bankrupt upon a paving contract with a city, when he files his petition, is properly paid to his trustee. Matter of Hooks Smelt- ing Co. (D. C, Pa.), 15 Am. B. R. 83, 138 Fed. 954, holding that trustee is entitled to combination of safe belonging to bankrupt at time of filing petition; Whittlesley v. Becker & Co., 25 Am. B. R. 673, 678, 143 N. Y. App. Div. 313, 136 N. Y. Supp. 1046, citing text; Corbett v. Riddle {C. C. A., 4th Cir.), 31 Am. B. R. 330, 209 Fed. 811. And see cases cited under preceding headin" "When title vests." 29. Connor v. Long, 104 U. S. 228, 36 L. Ed. 733; Chapman v. Brewer, 114 U. S. 158, 29 X. Ed. 83, 5 Sup, Ct. 799; Howard v. Comp- ton. Fed. Cas. 6,758; Babbett v. Burgess, Fed. Cas. 693; Miller v. O'Brien, Fed. Cas. 9,586; In re Lake, Fed. Cas. 7.,993; Stevens V. Bank, 101 Mass. 109. 30. Compare Act of 1867, § 14, R. S., § 5044. 31. In re Pease (Ref., N. Y.), 4 Am. B. R. 578; In re Burka (D. C, Md.),, 5 Am. B. R. 13, 104 Fed. 336. For peculiar cases bearing on this general, doctrine, see In re Meyer (P. C, N. Y), 5 Am. B. R. 593, 106 Fed. 838; see also McFarland Carriage Co. v. SoJanas (D. C, La), 6 Am. B. R. 231, 108 Fed. 532; Matter of Sherman Mfg. Co. (Ref.„ Mass.), 15 Am. B. R. 740; In re Drigga (D. C, N. y.), 33 Am. B. R. 631, 171 Fed. 897, holding that wages or salary due at the time of filing the petition belong to the trustee un- less an exemption ia claimed, and cannot be reached under an execution issued within th« four months' period: In re Peacock (D. C, X Car.), 34 Am. B. R. 159, 178 Fed. 851; Toof V. City National Bank (C. C. A., 6th Cir.), 80 Am. B. E. 79, 206 Fed. 250; Matter of Com- mouwealth Lumber Co. (D. C, Wash.), 35 Am. B. R. 202, 223 Fed. 667; Matter of Place (D. C, N. Y.), 33 Am. B. R. 426, 224 Fed. 778; Bynum T. Scott (D. C, N. Car.), 33 Am. B. R. 436, 217 Fed. 122; Jackson v. Jetter (Iowa Sup. Ct.), 32 Am. B. R. 667, 142 N. W. 431 ; Barber v. Wiemer (la. Sup. Ct.), 40 Am. B. E. 752, 165 N. W. 440; Neuberger v. Felis (Ala. Sup. Ct.), 43 Am. B. R. 703, 82 So. 172. Tbe effect of an adjudication In bank- ruptcy Is to transfer the title of the property of the bankrupt, whenever situated, and vest the same in the trustee, who has the right un- der the authority and control of the court to ad- minister the same. Robertson v. Howard, 229 U. S. 254, 30 Am. B. E. 611, 57 L. Ed. 1174, 33 Sup. Ct. 854; Koger v. Clark (Tex. Ct. of Civ. App.), 44 Am. B. E. 512, 216 S. W. 434. Bin of sale. — As a trustee in bankruptcy has the right of an execution creditor he has the title to property of the bankrupt which the latter has sold on a bill of sale but has not delivered possession. Herritt T. Clark (C. C. A., 3d Cir.), 41 Am. 232, 247 Fed. 100. Extent of title. — The effect of the adjudica- tion of bankruptcy to vest the trustee of the estate by operation of law with the title of the bankrupt, as of the date he was adjudicated a bankrupt, to all property not exempt, which prior to the filing of the petition he could by any means have transferred or which might have' been levied upon and sold under judicial process, is both expressly provided and well settled in meaning to this extent, that the estate is absolutely vested in the trustee until It has subserved the purpose of the bankruptcy proceedings, although the bankrupt is entitled to restoration of any residue which may re- main when that purpose Is fulfilled. Matter of Scott (C. C. A., 7th Cir.), 33 Am. B. E. 53. 32. Matter of Rawlins Mercantile Co. (D. C, Ga.), 42 Am. B. R, 218, 251 Fed. 164. Effect of ag:reezneiit of majority stockholder of bankrupt corporation as to its property. — San- born-Cuttlng Co. v. Paine (C. C. A., 9th Cir.), 40 Am. B. R. 525, 244 Fed. 672. Sufflciency of delivery of assets by bankrupt. — A written contract between the petltoner and the bankrupt, made more than a year before the adjudication, provided that petitioner was to purchase certain lumber sawed at the bank- rupt's mills at designated prices, which when sawed was to be piled at the mills according to detailed specifications, twice each month the petitioner to cause the lumber so piled to be estimated and branded with petitioner's Initials "O. C. & L. Co." and to make an advance pay- ment thereon of $10 per thousand, and that such acts should constitute a delivery of the same for all Intents and purposes. Held, that, having regard to the situation and condition of the property, the customs of business men adapted thereto and the Intent of the statute, such delivery was sufficient under a Missouri law providing that " every sale made by the vendor of goods and chattels in his possession or under his control, unless the same be accompanied by delivery in a reasonable time, regard being had to the situation of the prop- erty, and be followed by an actual and con- tinued change of possession of the things sold, 1116 Title to Peopebty. [§ 70-a. of fact.^* The property which passes is not confined to that described in the bankrupt's schedule; any property owned by him passes to the trustee on adjudication.^* Where, under a State statute, a stockholder's liability is enforceable only by creditors and not by the corporation, as for an overvalu- ation of property transferred in payment of a stock subscription, it is not property which passes to the trustee.^^ In those jurisdictions where tenanacy hy the entirety is recognized a trustee in bankruptcy of a husband or wife is clothed with the interest of the bankrupt in property held by the entirety, but his right to it must await the contingency of the bankrupt surviving his spouse.^® (2) Peopertt acquired aptee piling petition. — The trustee only acquires such property as 'belonged to the bankrupt at the time the petition was filed. Property not then owned but acquired before the adjudication,*'' and surely property acquired after it and before the discharge,^* does not vest in the trustee, but becomes the bankrupt's, clear of the claims of creditors, save those after the commencement of the proceedings or those who, for statu- tory reasons, are not affected by the discharge.^* This rule is especially applicable in case of earnings by labor and services performed subsequent to the filing of the petition.*" And where land remains in the possession of the bankrupt after the adjudication because of an exemption or of a statutory pro- vision giving such possession to the bankrupt as a special privilege, the crops growing thereon will be deemed " after acquired property," and do not pass to the trustee.*^ Property acquired between the filing of the petition and the adjudication is subject to the same rule as after-acquired property and shaU be held to be fraudulent and void as against the creditors of the vendor or subse- quent purchasers in good faith," and that peti- tioner's claim of title to lumber so estimated and marked should be allO"vved'. lu re Ozark Cooperage & Lumber Co. (C. C. A., 8th Cir.), 24 Am. B. It.. 835, 180 Fed. 105. See also Lovell V. Newman & Son (D. C, La.), 26 Am. B. K. 660, 188 Fed. 534. 33. Clay v. Waters (C. C. A., 8th Cir.), 20 Am. B. E. 561, 161 Fed. 815; Matter of McCord (C. C. A., 2d CiT.), 23 Am. B. R. 164, 174 Fed. 820. When trustee may recover savings of wife Irom business earnings of husband. — Savings by a wife from the business earnings of her husband are a part of his estate in bankruptcy, and may be reached by his trustee, unless an absolute gift under proper circumstances, while the husband was solvent, can be shown. Milk- man V. Arthe (D. C, N. Y.), 33 Am. B. R. 418, 221 Fed. 134. 34. Jones V. Barnes (Miss. Sup. Ct.), 35 Am. B. R. 64, 66 So. 212 ; Davis v. Findley (Ala. Sup. Ct.), 41 Am. B. R. 692, 78 So. 869; Raley v. Sullivan & Co. (Tex. Comm. of App.), 42 Am. B. R. 753, 207 S. W. 906; Newberger v. Felis (Ala. Sup. Ct.), 43 Am. B. B. 703, 82 So. 172. 35. Matter of Huffman-Salvar Eooflng Paint Co: (D. C, Ala.), 37 Am. B. R. 426, 234 Fed. 798; State Bank of Commerce v. Kennedy Band Instrument Co. (Minn. Sup. Ct.), 44 Am. B. R. 91, 173 N. W. 560. 36. Prey v. McGraw (Md. Ct. of App.), 35 Am. B. R. 822. See also Ades v. Caplau (Md. Ct. of App.), 41 Am. B. R. 401, 103 Atl. 04. 37. In re Harris (Eef., III.), 2 Am. B. R. 359; Matter of Morris & Rice (D. C, Mass.), 44 Am. B. E. 146, 258 Fed. 712. Iiegacies. — Where testator died in the morn- ing of the day on which a legatee filed a peti- tion and was adjudicated a bankrupt, the legacy vests in his trustee. In re McKeuna (D. C, N. Y.), 15 Am. B. E. 4, 137 Fed. 611. Other- wise where legacy takes effect after adjudica- tion. In re Woods (D. C, Pa.), 13 Am. B. E. 240, 133 Fed. 82, See also Matter of Swift (D. C, Ga.), 44 Am. B. E. 2U, 259 Fed. 612; Matter of Seal (D. C, N. Y.), 44 Am. B. E. 556, 261 Fed. 112. 38. In re Rennie (Ret, Ind. Terr), 2 Ara. E. R. 182; In re Stoner (D. C, Pa.), 5 Am. B. R. 402, 105 Fed. 752; In re West (D. C, Ore.), 11 Am. B. E. 782, 128 Fed. 205; Leitch v. Northern Pac. Ey. Co., 24 Am. B. E. 409, 103 N. W. 704; Matter of American Candy Mfg. Co. (D. C, N. Y.), 41 Am. B. E. 461, 248 Fed. 145. 39. See Bankr. Act, § 17. In re West (D. C, Oreg.), 11 Am. B. E. 782, 128 Fed. 205. Text cited and approved in Whltlock's License, 22 Am. B. E. 262, 39 Pa. Super. Ct. 34, holding that a liquor license granted to a bankrupt after his adjudication belongs to him and not his trustee. Matter of MitcheU (D. C. N. Y.), 42 Am. B. R. 658, citing Collier on Bankruptcy (10th ed.), 995. 40. In re Llneberry (D. C, Ala.), 25 Am. B. R. 164, 183 Fed. 338; Leitch v. Northern Pac. Ey. Co. (Minn.), 14 Am. B. R. 409, 103 N. W. 704; In re Home Discount Co. (D. C, Ala.), 17 Am. B. R. 168, 147 Fed. 538; Matter of O'Gillespie (D. C, N. Y.), 32 Am. B. R. 434, 209 Fed. 1003; Matter of Green (D. C, N. Y.), 32 Am. B. E. 433, 213 Fed. 542; Matter of Collins (D. C, N. Y.), 32 Am. B. R. 431, 213 Fed. 543; Progressive Bldg. & Loan Co. v. HaU (C. C. A., 4th Cir.), 33 Am. B. R. 313, 220 Fed. 45. Bonus on wages.— Matter of MitcheU (D. C, N. Y.), 42 Am. B. R. 658. 41. Matter of Miller (D. C, Mont.), 34 Am. B. R. 614, 221 Fed. 690, holding that where a voluntary bankrupt at the date of his adjudi- cation occupied a homestead upon public lands of the United States and had sown thereon 50 acres of winter wheat, which he harvested In due time, such growing crop did not vest in the trustee upon filing the petition in bank- ruptcy, and the bankrupt cannot be compeUed § TO-a.] Subject to Claims, Liens and Equities. 1117 belongs to the bankrupt.*^ A claim for a reward for information given against smugglers, which is not allowed until after the claimant's adjudication, does not pass to his trustee; the reward belongs to the bankrupt and does not pass upon his bankruptcy, and his failure to oppose his bankruptcy does not estop him from insisting that the reward is his own property.*^ e. Subject to all claims, liens, and equities. — (1) In geneeal. — It is well settled that the trustee takes not as an innocent purchaser, but subject to all valid claims, liens, and equities.** The validity of such claims, liens, and equities is to be determined, in the absence of federal statutes, by the local to schedule the same; Jackson v. Jetter (Iowa Sup. Ct.), 32 Am. B. E. 667, 142 N. W. 431. 42. In re Harris (D. C, 111.), 2 Am. B. E. 359, 99 Fed. 71; In re Pease (Eef., N. Y.), 4 Am. B. It. 578; lu re Burka (D. C, Tenu.), 5 Am. B. E. 12, 104 Fed. 326; In re Elmira Steel Co. (D. C, N. Y.), 5 Am. B. E. 487, 109 Fed. 456; Sibley v. Nason, 22 Am. B. E. 712, 196 Mass. 125, 81 N. E. 887, 12 L. R. A. (N. S.), 1173, 124 Am. St. Eep. 520; In re Judson (D. C, N. Y.), 26 Am. B. E. 775, 188 Fed. 702. 43. Matter of Ghazal (C. C. A., 2d Cir.), 23 Am. B. E. 178, 174 Fed. 809. 44. Chattanooga Nat. Bank v. Eome Iron Co. (C. C, Ga.), 4 Am. B. E. 441, 102 Fed. 755. The valid liens referred to are those valid as to creditors. In re Cramond (D. C, N. Y.), 17 Am. B. E. 22, 145 Fed. 96G ; Eeceivers, etc., v. Staake (C. C. A., 4th Cir.), 13 Am. B. E. 281, 133 Fed. 717. This case v?as affirmed in 202 U. S. 141, 15 Am. B. E. 630, 50 L. Ed. 967, 26 Sup. Ct. 580. Compare In re Standard Laundry Co. (D. C, Cal.), 7 Am. B. E. 254, 112 Fed. 126; Crosby v. MiUer (C. A., D. Col.), 16 Am. B. E. 805, 25 E. I. 172; In re IColin (C. C. A., 7th Cir.), 13 Am. B. E. 531, 134 Fed. 557; In re Platteville F. & M. Co. (D. C, Wis.), 17 Am. B. E. 201, 147 Fed. 828; Godwin v. Murchison Nat. Bank, 22 Am. B. E. 703, 115 N. C. 320, 59 S. E. 154; In re Scruggs (D. C, Ala.), 31 Am. B. E. 94, 205 Fed. 673, citing text; Matter of Scofield Co. (C. C. A., 2d Cir.), 32 Am. B. E. 817, 215 Fed. 45; Matter of HoUinS (C. C. A., 2d Cir.), 32 Am. B. E. 812, 215 Fed. 41 ; Matter of Elmore Cotton Mills (D. C, Aln.), 33 Am. B. E. 544, 217 Fed. 810; Matter of Johnson (D. C, Conn.), 33 Am. B. E. 104, 215 Fed. 660; Matter of Morse (D. C, N. Y.), 32 Am. B. E. 207, 210 Fed. 900; Hart- man V. Singer (D. C, W. Va.), 33 Am. B. E. 369, 215 Fed. 986: Harris v. Luxury Fruit Co. (Ga. Sup. Ct.), 32 Am. B. E. 652, 82 S. B. 447; Williams v. Noyes & Nutter Mfg. Co. (Maine Sup. Ct.), 33 Am. B. E. 865, 92 Atl. 482; Leslie Paper Co. v. Wheeler (N. Dak. Sup. Ct.), 32 Am. B. E. 688, 137 N. W. 412 ; Goodwin v. Barre Sav. Bank & Trust Co. (Vt. Sup. Ct.), 39 Am. B. E. 153, 100 Atl. 34; Border Nat. Bank v. Coupland (C. C. A., 5th Cir.), 39 Am. B. R. 165, 240 Fed. 355; Matter of McGarry & Son (C. C. A., 7th Cir.), 39 Am. B. E. 224, 240 Fed. 400; Matter of P. J. Sullivan Co. Inc. (D. C, N. T.), 41 Am. B. E. 189, 247 Fed. 139, atfd. 42 Am. B. E. 530, 254 Fed. 660; Matter of Gay v. Sturgis (D. C, Mass.), 41 Am. B. E. 569, 251 Fed. 420; Otto v. England (Wash. Sup. Ct), 41 Am. B. E. 808, 169 Pac. 964: Matter of North star Ice & Coal Co. (D. C, Tenn.), 42 Am. B. E. 76, 252 Fed. 301; Matter of Eoseboom (D. C, N. Y.), 42 Am. B. E. 437, 253 Fed. 136; American Bottle Co. v. Finney (Ala. Sup. Ct.), 43 Am. B. R. 685, 82 So. 106: Rader v." Star Mill & Elevator Co. (C. C. A., 8th Cir.), 43 Am. B. E. 754, 258 Fed. 121. The rlg:hts of a landlord against his bank- rupt tenant are fixed at the moment of adjudi- cation, at which time the bankrupt occupying the leased premises, his goods and chattels contained therein are impressed with the land- lord's lien. Lontos v. Coppard (C. C. A., 5th Cir.), 40 Am. B. E. 575, 246 Fed. 803. Trustee takes property subject to equities, etc. — The trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same plight and condition that the bankrupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt, except In cases where there has been a con- veyance or incumbrance of the property which is void as against the trustee by some positive provision of the act. Thompson v. Fairbanks, 196 U. S. 516, 13 Am. B. E. 437, 445, 49 L. Ed. 577, 25 Sup. Ct. 306. The trustee takes his inter- est of the bankrupt subject to such liens or in- cumbrances as would have afteetcd it had no adjudication in bankruptcy been made. Matter of Alden (Eef., Ohio), 16 Am. B. E. 362, 370. A trustee takes not as a bona fide purchaser for value, but as the bankrupt "held the prop- erty, subject to all valid claims, liens and equities. Zartman v. First Nat. Bank, 216 U. S. 134, 23 Am. B. E. 635, 54 L. Ed. 418, 30 Sup. Ct. 368, affg. 189 N. Y. 533, 82 N. E. 1126. Same plisrht or condition. — In re Gracewich (C. C. A., 2d Cir.), 8 Am. B. E. 149, 115 Fed. 87-89, 53 C. C. A. 510, 512, the rule is thus stated : " Under the present Bankruptcy Act, as under previous bankruptcy acts, the trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same plight and condition that the bankrupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt, except in cases where there has been a conveyance or incumbrance of the property which Is void as against the trustee by some positive provision of the Act." In First National Bank v. Staake 303 U. S. 141-149 15 Am. B. R. 639, 36 'Sup. Ct. 580, 50 L. Ed. 967, the Supreme Court ap- proves the following language of the Circuit Court of Appeals for the Fourth Circuit: " This rule that the trustee takes the estate of the bankrupt in the same plight as the bankrupt held it is not applicable to liens which, although valid as to the bank- rupt, are invalid as to creditors." See also In re Hurley (D. C, Mass.), 36 Am. B. R. 434, 185 Fed. 851. Character of trustee's title. — ^Trustees and receivers in bankruptcy, in the absence of frau(i. take the assets of a bankrupt, subject to all equitable liens in favor of third parties, to the extent that such assets havei been augmented by the wrongful act of the bankrupt. In re Dunn & Co. (D. C, Ark.), 28 Am. B. R. 127, 193 Fed. 213. Effect of attempt to enfitce liens.— In Pugh v. Loisel (C. C. A., 5th Cir.), 33 Am. B. R. 580, 819 Fed. 417, the court said: 1118 Title to Peopebtt, [§ 70-a. law as evidenced by the decisions of the State courts.*® Thus, he has no better title than the bankrupt had,*^ and is affected with every equity which would affect the bankrupt himself if he were asserting the same rights and " We think it is apparent that the bankruptcy act, as a whole, contemplates the taking pos- session and control of the bankrupt's estate by the court of bankruptcy acting through its trustee. The property is taken into custody in the condition in which it is found at the time of the filing of the petition, subject to all existing valid liens upon it. .The filing of petition, of course, does not displace or dis- turb such liens; but neither the existence of such liens nor attempts of the lienors to enforce them without resorting to the court of bankruptcy for that purpose constitute obstacles to the exercise by that court of the right to take into custody the bankrupt's estate and to control the administration of It. The court Is vested with ample power to proitqct the rights of llenholders otherwise than by permitting them to be enforced in some other court or courts." 45. In re Wade (D. C, Mo.), 26 Am. B. R. 169, 185 Fed. 664; Thompson v. Fairbanlis, 196 U. S. 516, 15 Am. B. K. 633, 49 L. Ed. 577, 25 Sup. Ct. 306; In re Standard Telephone & Elec. Co., 216 U. S. 545, 24 Am. B. E. '(61. 767, 54 L. Ed. 610, 30 Sup. Ct. 412; Matter of Fite (D. C. Pa.), 31 Am. B. E. 308, 61 Pittsburg Leg. J. 109; Matter of P. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affd. 42 Am. B. R. 530, 254 Fed. 660; Matter of American Candy Mfg. Co. (C. C. A., 2d Cir.), 43 Am. B. E. 77, 258 Fed. -87; Matter of Flint (D. C, N. Y.), 43 Am. B. R. 243. 4«. In re N. Y. Economical Pr. Co. (C. C. A., 2d Cir.), 6 Am. B. R. 615, 110 Fed. 514; In re Platteville Foundry & Machine Co. (D. C, Wis.), 17 Am. B. E. 291, 293, 147 Fed. 828, hold- ing that the trustee does not take property sold to the bankrupt by conditional sale with a reservation of title in the vendor; Matter of Hamil (D. C, N. Y.), 38 Am. B. R. 205, 236 Fed. 292, holding that a trustee occupies no different position as to a contract of conditional sale than the latter would have occupied if bankruptcy had not Intervened. The property is subject to all equities impressed upon it in the hands of the bankrupt; In re Snelling (D. C, Mass.), 29 Am. B. R. 818, 202 Fed. 259; Keefe v. Worcester Trust Co. (C. C. A., 1st Cir.), 42 Am. B. R. 297, 253 Fed. 536. Where a bankrupt asBlgng contracts held by him such contracts do not pass to his trustee in bankruptcy though notice of such assign-' ment is not given to the debtor In the con- tracts. Goodwin v. Barre Sav. Bank & Trust Co. (Vt. Sup. Ct.), 39 Am. B. R. 153, 100 Atl. 34. In Pennsylvania the vendee under a contract for a sale of land is regarded as the real owner and the vendor has no lien thereon aside from his legal estate, or the remedy which he has by reason thereof; so where the vendee is adjudged a bankrupt before the purchase price is paid, the trustee succeeds to his interests and is entitled to the proceeds of the sale of cer- tain removable fixtures erected thereon by the vendee. In re Clark & Co. (D. C, Pa.), 9 Am. B. R. 252, 118 Fed. 358; Bush v. Export Stor- age Co. (C. C, Tenn.), 14 Am. B. E. 138, 136 Fed. 918. Covenant rnnning with land; effect on title acquired by trustee, see Hinchman v. Consoli- dated Arizona Smelting Co. (D. C, Me.), 29 Am. B. E. 893, 198 Fed. 907. Trade flxtnrcs may be removed by trustee under a lease providing for surrender of premises in good order, with all improve- ments, etc. MonteUo Brick Co. v. Trexler (C. C. A., 6th Cir.), 21 Am. B. R. 8«6, 167 Fed. 482. See rule in Pennsylvania as laid down in Matter of Beeg (D. C, Pa.), 26 Am. B. R. 572, 184 Fed. 522. Title no better than that of bankruptcy. — Mr. Justice Peckham, speaking for the Su- preme Oourt in Security Warehousing Co. v. Hand, 206 U. S. 415, 19 Am. B. E. 291, 5-1 L. Ed. 1117, 27 Sup. Ct. 720, affg. 16 Am. B. R. 49, 143 Fed. 32, said: " K is no new doc- trine that the assignee or trustee in bank- ruptcy stands in the shoes of the bankrupt, aud that the property in his hands, unless otherwise provided in the bankrupt act, is subject to all the equities impressed upon it in the hands of the bankrupt. This has been the rule under former acts and is now the ruJe." The decision in this case received the at- tention 'of the Supreme Court in the case of In re Standard Telephone & Elec. Co.. 316 U. S. 545, 24 Am. B. E. 761, 767, 54 L. Ed. 610, 30 Sup. Ct. 412, where the court says: "But it is said the trustee in bankruptcy may not defend against these mortgages. It is con- tended that they are good as between tlio parties, and that as to them the trustee in bankruptcy occupies no better position than the bankrupt. This question was raised ami decided in Security Warehousing Co. v. Hand, 206 U. S. 415, 19 Am. B. E. 291, 51 L. Ed. 1117, 27 Sup. Ct. 720. That case arose in Wisconsin, and it was therein held that, under the Wisconsin law, an attempted pledge of property, without change of possession, was void under the laws of that State. In that case, as in this one, the question was raised as to whether the trustee in bank- ruptcy could question the transaction, and it was contended that, being valid as between the parties, the trustee took only the right and title of the bankrupt. The question was fully considered therein, and the previous cases in this court were reviewed. The principle was recognised that the trustee in bankruptcy stands in the shoes of the bank- rupti, and that the property in his hands is subject to the equities impressed upon it while in the hands of the bankrupt. " But it was held that the attempt to create a lien upon the property of the bank- rupt was void as to general creditors under the laws of Wisconsin. Applying § 70-a of tlie bankruptcy act, it was held that the trustee in bankruptcy was vested by opera- tion of the bankruptcy law with the title of tlie property transferred by the bankrupt in fraud of creditors, and also that the trustee took the property wliich, prior to the filing of the petition, might have been levied upon and sold by judicial process against the bankrupt. " It was therefore held that as there had been no valid pledge of the property, for want of change of possession, it could have been § 70-a.] Subject to Claims, Liens and Equities. Illy interests.*'^ A trustee in bankruptcy stands in the shoes of the bankrupt, and has no better title than he had at the time of the filing of the petition, except so far as the status is modified by fraud of the bankrupt,*^ or as conditions may have been changed by the amendment of 1910 of § 47-a (2), so far as the right of the trustee to attack fraudulent transfers or liens is concerned."* If special creditors have claims against specific property as against other creditors having alleged liens thereon, a trustee is clothed with the power and duty of protecting and preserving such claims.^" Where a right of action passes to the trustee any defense, legal or equitable, which might have been raised against the bankrupt's claim may be raised against the trustee. ^^ Where levied upon and sold under Judicial process against the bankrupt, at the time of the adjudication in bankruptcy and passed to the trustee in bankruptcy." See also In re Gebbie & Co. (D. C, Pa.), 21 Am. B. R. 604, 167 Fed. 609; Wood Co. v. Eubanks (C. C. A., 4th Cir.), 22 Am. B. K. 307, 109 Fed. 929. 47. In re Dow, Fed. Cas. 4,036, 6 N. B. H. 10, quoting from Bacon v. Heathcote, 1 Atl. 160 : " The ground that the court goes upon is this, that assignees of bankrupts, though they are trustees for creditors, yet stand in the place of the bankrupt, and they can take in no better manner than he could." 48. in re Blale (C. C. A., 8th Cir.), 17 Am. B. R. 668, 150 Fed. 279; In re Great Western Mfg. Co. (C. C. A., 8th Cir.), 18 Am. B. R. 259, 152 Fed. 123; In re Dunlop (C. C. A., 8tli dr.), 19 Am. B. R. 361, 367, 156 Fed. 945; In re Chantler Cloak & Suit Co. (D. C, B. I.), 18 Am. B. K. 498, 151 Fed. 952; Drede v. Gilley (N. Y. Sup. Ct.), 21 Am. B. R. 170, 61 N. ,Y- Misc. 530, revd. on other grounds 21 Am. B. R. 821, 132 N. Y. App. Div. 293, 47 N. Y. Supp. 5; In re De Long Furniture Co. (D. C, Pa.), 26 Am. B. R. 469; In re Thompson (D. C, N. J.), 30 Am. B. R. 64, 205 Fed. 556 ; Abele v. Meagher Co. (Mass. Sup. Jud. Ct.), 41 Am. B. R. 638, 116 N. B. 805; Matter of Moose River Lumber Co. (D. C, N. Y.), 42 Am. B. B. 242, 251 Fed. 409; Matter of American Candy Mfg. Co. (C. C. A., 2d Cir.), 43 Am. B: R. 77, 256 Fed. 87; Cust- ard V. McNary (W. Va. Sup. Ct. of App.), 45 Am. B. R. 105, 102 S. E. 210. Property in posBession of trustee not belong- ing to estate. — ^Matter of Amy (C. C. A., 2d Cir.), 45 Am. B. B. 15, 203 Fed. 8. Materials delivered under building contract. — Where a contract to construct a municipal high school entitled the board of education to talse possession of building materials upon a breach by the contractor and to use the ma- terials for the completion of the work, the board of education, having appropriated such material on the contractor's default, obtained a vested right therein and a trustee subse- quently appointed on the bankruptcy of the contractor cannot maintain an action in replevin or for the conversion of the material while such possession continued pursuant to the building contract. Wilds v. Board of Education (N. Y. App. Div.), 43 Am. B. R. 385, 186 App. Div. (N. Y.), 472. See also Matter of P. J. SulUvan & Co. (D. C, N. Y.), 41 Am. B. B. 189, 247 Fed. 139, affd. 42 Am. B. 11. 530, 254 Fed. 660. Character of trustee's title. — A trustee in bankruptcy takes the property of the bankrupt, not as an Innocent purchaser, but as the debtor had it at the time of the petition, subject to all valid claims, liens and equities. In re Inter- state Paving Co. (D. C, N. Y.), 28 Am. B. R 573, 197 Fed. 371. As to Teal estate held by the bankrupt as a tenant in common, the trustee takes the inter- est of the bankrupt, not as an innocent pur- chaser, but in the same plight and condition as the bankrupt held it and subject to all the equities that eiist in favor of his cotenant. In re McConnell (D. C, N. Y.), 28 Am. B. R. 859, 197 Fed. 482. ' Whatever rights a third party had against the property of a bankrupt before the adjudi- cation, that party, in the absence of fraud, or iixed liens created by State statutes in favor of others, has against his estate in bankruptcy. Atchison, etc., Ry. Co. v. Hurley (C. C. A., 8th Cir.), 18 Am. B. R. 3U6, 153 Fed. 503; Foerstnei- V. Citizens' Sav. & Trust Co. (C. C. A., 6th dr.), 26 Am. B. R. 377, 186 Fed. 1. Stock bought by a bankrupt broker for a customer with the customer's money belong to the customer and the certificates cannot bs retained by the trustee of the bankrupt. In re Meadow, Williams & Co. (D. C, N. Y.), 23 Am. B. R. 124, 173 Fed. 694, af£d. 24 Am. B. R. 251, 177 Fed. 1004; Cummlngs v. Synnott (C. C. A., 3d dr.), 25 Am. U. U.ii59, 184 Fed. 718; Matter of Mclntyre & Co. (C. C. A., 2d dr.), 24 Am. B. R. 626, 181 Fed. 955. Trustee takes property In same condition as bankrupt. — It has been often declared by the Supreme Court of the United States that under the present bankrupt act the trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same condition that the bank- rupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt. The trustee in a certain sense is the I)ankrupt. The bankrupt's title is bis title, whether it be to things In possession or to choses in action. This title cannot rise higher than that of the bankrupt, so as to infringe upon or destroy the Interest in or title to the property, good as against the bankrupt himself. Davis V. Compton (C. C. A., 3d Cir.), 20 Am. B. R. 53, 158 Fed. 735. Kigrht of pledge of mortgages on real prop- erty to collect rents. — A pledge of mortgages on real property as collateral security is not entitled to collect the rents as against the trustee in bankruptcy of the pledgor, where he is not in possession, although he has given notice of an asserted right to collect the rents. Matter of Sweeney (C. C. A., 3d Cir.), 32 Am. S. R. 302, 212 Fed. 1. 49. See discussion under 47-a (2), ante. 50. In re Martin (C. C. A., 8th Cir.), 33 Am. B. R. 151, 173 Fed. 597. 51. Jenkins v. Pierce, 98 111. 646. Fraud of bankrupt as defense. — Where the bankrupts agreed to build a locomotive for certain parties and notified them that it \^as completed and had been shipped, and theic- upon were paid the price, it appearing that no engine existed at the time it was repve- sented as having been shipped, but that subsequently two were built, either of which would answer the contract, it was heJd that the bankrupt and his assignee were both estopped by the fraud of the bankrupt from denying that one of the engines then m their possession was the property of the parties who had thus been defrauded. In re McKay & Aldu^ 3 N. B. R. 50, 1 Lowell. 1120 Title to Pkopeety. [§ 70-a. a bankrupt in due course of the transaction of its business, some time prior to bankruptcy, treats property as sold, and the proceeds thereof as due, and assigns the same as collateral security to a loan, the trustee will be bound by the bankrupt's acts and is estopped from asserting that there was no sale.^^ (2) Disposition of peopeety subject to lien oe incumbeance. — A lien or other incumbrance on real property belonging to the bankrupt attaches to such property in the hands of his trustee, and is effectual against such property to the same extent as though bankruptcy had not intervened, and will attach to such fixtures as from their nature and the circumstances of the case become a part of the freehold.^^ But a judgment rendered in a State court 345. Compare Kelly v. Scott, 40 N. Y. 595, citing Mitchell v. Winslow, 3 Story, 630. Wliere a party fraudulently induces an owner to part with his title to goods, the defrauded party having the right to disaflSrra the contract and to recover the goods, may assert that right against the trustee in bank- ruptcy as well as against the bankrupt him- self. Donaldson v. Farwell, 15 N. B. R. 277, Fed. Cas. 3 983, 5 Biss. 451, affd. 93 U. S. «31, 23 L. Ed. 993; In re Gany (D. C, N. Y.), 4 Am. B. K. 576, 103 Fed. 930; In re Spann (D. C, Ga.), 25 Am. B. E. 551, 183 Fed. 819; Gillespie v. Piles & Co. (C. C. A., 8th Cir.), 24 Am. B. R. 503, 178 Fed. 886. Where there was an action to foteclose a mortgage, and proceedings for the appoint- ment of a receiver of the rents and profits were instituted before the adjudication of the mortgagor as bankrupt, and there was a deficiency on the sale of the mortgaged premises it was held that the assignee in bankruptcy could not claim the fund in the receiver's hands, as against the mortgagee. Hayes v. Dickinson, 15 N. B. R. 350, 9 Hun (N. Y.), 277. 52. Property vesting in trustee; estoppel. — A bankrupt corporation had, sometime prior to bankruptcy, agreed as subcontrac- tors to furnish and set tile for several build- ings then in course of construction and had delivered tile to each of the buildings, after which it borrowed money from a trust com- pany giving its notes therefor and as col- lateral security for their payment executed assignments of the money due for material furnished. The assignments stated and it was orally represented to the trust company at the time of the loans that the money was then due. Before the work of setting the tile had been begun, the corporation went into bankruptcy and the trustee claimed title to the tile. Held, that the bankrupt having treated the tile as sold to the con- tractors, and the proceeds thereof as due, and having assigned the same as collateral security to the loans, neither it nor its trustee will be heard to assert the contrary as against the trust company. Aldine Trust Co. V. Smith (C. C. A., 3d Cir.),, 25 Am. B. E. 608, 182 Fed. 449, citing Fourth Street Bank v. Yardley, 165 U. S. 634, 17 Sup. Ct. 439, 41 L. Ed. 855. 53, liien of Judgment creditor upon machinery in factsry as part of the realty. — In Penusyl- vanla, as between judgment creditors and the general c1:editors in bankruptcy, machinery of a factory, whicli is a necessary part of it, and witliout whicli it would not be a fully equipped establishment, is a fixture to be regarded as a part of the freehold, subject to the lien of a judgment creditor as part of the realty. Held, that as certain chattels, machinery, utensils, etc., used in a sausage factory owned and occu- pied by the bankrupt, whether fast or loose, were indispensable in carrying on the business as a sausage factory, they became a part of the realty and were subject to the Hen of judgment entered long prior to the baultruptcy proceedings, and that the fact that there had been bills of sale of such machinery, etc., executed in some of the conveyances to the baulirupt and prior to his ownership thereof, did not alter the character of the property. Matter of Beeg (D. C, Pa.), 25 Am. B. E. 572, 184 Fed. 522. After insolvency has taken the debtor's real estate out of his hands, its income or product belongs to the lien creditors, who have thus become its virtual owners ; this rule applies to real estate in a court of bankruptcy. In re Torehia (C. C. A., 3d Cir.), 26 Am. B. R. 579, 188 Fed. 207; In re Industrial Storage Co. . B. E. 659, PhUUps (D. C, Mass.), 4 Am. B. E. 566, 103 134 Fed. 109. See Schedule B (6) In Form Fed. 190. See also sub nom. " Eeclamation No. 1. Proceedings," post. 67". Self-incriminating evidence; compel- 63. See particularly "Property which might y^g bankrupt to turn over books.— An oi- have \>eea transferred or levied upon," post, " * . -^ ^ ^^^u. w ■^,. uuun.^. a.^ «. and subheadings thereunder. ^er requiring bankrupt to deposit, in the 64. In re Hammond (D. C, Ohio), 26 Am. B. office of the receiver, books of account which E. 336, 188 Fed. 1020 ; Grand Eapids Trust Co. he claims contain matter that might tend r^s'^N'^.'-t. y^i:='-sL"^dis?u'ssit"n ""Zaef |V of to incriminate him there to remain in the this work. custody of bankrupt, the receiver to be per- 65. Marcus Shipping Assn. v. Barnes (Iowa mitted to inspect and use them for the civil Sup. Ct.), 34 Am. B. E. 682, 151 N. W. 525, in administration of the p^tnfp hi,- nn' fnv which it was held that certiflcates of shares aa™>nisirauon oi tne estate, bu. nou Joi of a corporation issued upon the dissolution B.ny criminal proceeding, provision being thereof, passed to the trustee subject to the made to give bankrupt an opportunity to equities of the corporation based upon a claim assert tVip mip-atinn nf li;= V„„.( ;f„t;.,..ol against the bankrupt for money received by !,w„n. J it quMtion of his conblitutional him as an officer of the corporation. Matter of privilege in case of process for ther produe- Greech Bros. Lumber Co. (C. C. A., 9th Clr.), tioa, is a proper exercise of authority on |§ YO-a (2), (3).] Title to Specific Pbopeett. 1123 or instrument in writing."'* These documents are regarded as personal property, the title to which, by operation of law, is vested in the trustee.* c. Patents, copyrights, and trade-marks. — Subdivision 2 passes to the trustee all "interests in patents, patent rights, copyrights and trade-marks." These, it would seem, should vest, irrespective of the statute. There can be no doubt about it now.™ But where, though application has been made, the letters-patent have not yet been granted, the trustee takes no interest,''^ although it has been held that rights accruing because of such an application may be deemed "property" within the meaning of subdivision 5, and that therefore the trustee would take the bankrupt's interest in the patent sub- sequently obtained." A trustee is under no obligation to accept a license under a patent which was transferred to the bankrupt -burdened with executory obligations. ''* The similarity between these classes of property and those known as " personal privileges " should be noted.'^* d. Personal powers. — Subdivision 3 provides that powers which the bank- rupt might have exercised in his own behalf pass to the trustee. This sub- division is expressive of a general rule of law. A power which is beneficial tbe part of the bankruptcy court and not an Infriufc'ement of his couatitutional right. In such case the auestion is not of forciuu bank- rupt to be a witness against himself in a criminal case, but of compelling him to yield possession of property to which he is no longer entitled. Matter of Harris, 221 U. S. 274, 20 Am. B. R. 302, 55 L. Ed. 732, 31 Sup. Ct. 557, aflg. 20 Am. B. E. 911, 164 Fed. 292. 68. Bankr. Act, § 1 (13). 69. In re Hess (D. C, Pa.), 14 Am. B. E. 559, 134 Fed. 109; In re Madden (C. C. A., 2d Cir.), 6 Am. B. E. 614, 110 Fed. 348. 70. An aggignment of a copyright rests title In the assignee which passes to his trustee in bankruptcy. In re Howley-Dresser Co. (D. C, N. Y.), 13 Am. B. E. 94, 132 Fed. 1002. Compare In re McBride (D. C, N. Y.), 12 Am. B. E. 81, 132 Fed. 285. See generally Am. Bankr. Dig. i 340. A conveyance of a trade-mark, unaccom- panied by any business whatever, gives no title to the assignee. In re Jaysee Corset Co. (D. C, N. Y.), 29 Am. B. E. 856, 201 Fed. 779. 71. In re McDonnell (D. C, Iowa), 4 Am. B. R. 92, 101 Fed. 239; In re Dann (D. C, HI.), 12 Am. B. E. 27, 129 Fed. 495. 72. Bights accruing from application for patent. — In the case of In re Cantelo Mfg. Co. (D. C, Me.), 26 Am. B. B. 67, 185 Fed. 276, the court said: "In the case of In re M'Donnell (D. C, la.), 4 Am. B. R. 92, 101 Fed. 239, Judge SMras, of the Northern District of Iowa, In a clear and well considered opinion, held that flection 70-a, subd. 2, can have reference only to letters patent actually issued at the date of the adjudication In bankruptcy ; and that the trustee in bankruptcy takes no title to the patent granted to the bankrupt after the date of the adjudicatio- 'n bankruptcy, although the application was made before bankruptcy, and was pending at the time of the adjudication. The case In re Dann (D. C, lU.), 12 Am. B. E. 27, 129 Fed. 4'J5, is to the same e-'fect, but goes further, and discusses subdivision 5 of section 70-a. " The case at bar is presented by the record in a somewhat stronger position for the trustee than is found in either of the cases which I have cited. It is for the court to say whether, under all the facts which the record discloses, it shall refuse to the trustee of the bankrupt corporation the use and benefit of the patent applications which had actually constituted a valuable asset to the corporation before bank- ruptcy. Clearly the trustee In bankruptcy should not be deprived of their benefit if, under a fair construction of the law, they may be held to be a part of the bankrupt estate. In spite of the well-considered opinion in the M Donuell case, 1 think it not altogether clear, but that the interest in the inventions which have become the subject of patent appUcatious may fairly be held to be an 'interest in pat- ents ' within the meaning of the law ; but, whether or not these inventions may be so held, it seems to me, under subdivision 5 of section 70-a, they may be held to be ' property ' which could be transferred. It affirmatively appears that upon these inventions the credit of the company was obtained; and that part of the claims provable in bankruptcy against the estate of the bankrupt were based upon such credit." See also s. c, 29 Am. B. E. 704, 201 Fed. 158. See In re Myers-Wolf Mfg. Co. (C. C. A., 3d dr.), 30 Am. B. E. 572, 205 Fed. 289; Ingle v. Landis Tool Co. (D. C, Pa.), 4S Am. B. E. 89, 262 Fed. 150. 73. Matter of Wisconsin Engine Co. (C. C. A., 7th Cir.), 37 Am. B. B. 106, 234 Fed. 281. 74. See discussion under this section, sub- title " Licenses, Franchises and Personal Privileges," poet. 76. Compare discussion under this section, post, subtitle " Properly which might have been transferred or levied upon." Power of bankrupt to appoint by will. — The bankruptcy act does not enable a trustee in bankruptcy to make an appointment under a power which was to be exercised by the bankrupt by wlU and by wiU only, whether tbe bankrupt is alive or dead. Montague v. SUsbee (Mass. Sup. Ct.), 32 Am. B. E. 873, 105 N. E. 611. 76. Fisher v. Cushman (C. C. A., 1st dr.), 4 Am. B. E. 646, 654, 103 Fed. 860. 77. In re Yukon Woolen Co. (D. C, Conn.), 2 Am. B. E. 805, 96 Fed. 326; In re McNamara (Eef., N. Y.), 2 Am. B. E. 566; English v. Bobb (D. C, Pa.), 15 Am. B. E. 370, 140 Fed. 630; In re Holbrook Shoe & Leather Co. (D. C., Mont.), 21 Am. B. E. 511, 165 Fed. 973; Cowan V. Burchflold (D. C, Ala.), 25 Am. B. E. 293, 180 Fed. 614; LoveU v. Latham Co. (D. C., Ala.), 32 Am. B. E. 191, 211 Fed. 374; McMahoa V. Pithan (Sup. Ct. Iowa), 33 Am. B. E. 125, 147 N. W. 920; Barrett v. Kaigler (Ala. Sup. Ct.), 40 Am. B. R. 161, 78 So. 320, citing Collier on Bankruptcy (10th Ed.), 987; Cooper Grocery Co. V. Penland (C. C. A., 6th dr.), 40 Am. B. B. 1124 Title to Peopeety, [§ 70-a (4)'. to a bankrupt donee vests in his trustee; not so a power in trust J" The powers here referred to are probably those known to the common law,^® although there may be some doubt about this. The English statute from which this clause was derived had reference to such technical powers, and it seems likely that the intent of congress was the same. e. Property fraudulently transferred. (1) In general. — By subdivision 4 property transferred by the bankrupt in fraud of his creditors passes to his trustee. This is the converse of the doctrine that trustees take title subject to equities ; they also take title to property which the bankrupt has fraudulently transferred,'" and in which, therefore, the creditors have equities. The trustee's interest in such property is stronger than was that of the creditors in whose stead he stands, for he has a title. The trustee is vested not only with the title of the property, but also with the creditors' rights of action with respect to property of the bankrupt fraudulently transferred or incumbered by him, and he may assail in their behalf all of such transfers and incumbrances to the same extent as though the debtor had not been declared a bankrupt. The trustee's remedy when title is claimed adversely is, as has been seen, usually a suit in the proper court. This subdivision should be read in connection with § 22, § 67-e and § 70-e.''« (2) Peopeett affected; chaeactee of tea-nsfee. — It is apparent that this provision applies to all property transferred by the bankrupt at any time in fraud of his creditors.''^ Where after the filing of an involuntary petition and before adjudication a creditor attaches the bankrupt's assets, the trustee may recover the proceeds of the attachment, even though they were less than the percentage to which the creditor would have been entitled in the bank- ruptcy proceedings.^" Money procured on a policy of insurance on buildings on land, conveyed to the insured in fraud of the grantor's creditors, is not the proceeds of the property, and cannot be recovered by the grantor's trustee in bankruptcy.*^ (3) Actual oe implied feaitd. — The fraud may be either actual or implied ; if the creditor obtained undue advantage because of the transfer, within the four months' period, although no actual fraud be shown, the trustee is entitled to the title and possession of the property.*^ If actual fraud be 589, 247 Fed. 480; Kiggs v. Price (Mo. Sup. Ct.), Ct., Ark.), 32 Am. B. E. 859, 146 S. W. 118; 43 Am. B. E. 413, 210 S. W. 420; Brown v. Barrett v. Kaigler (Ala. Sup. Ct.), 40 Am. B. Kossove (C. C. A., Sth Clr.), 43 Am. B. E. 40S, K. 161, 76 So. 320. 255 Fed. 806; Newberger v. Felis (Ala. Sup. Ct.), Sale in bulk. — Matter oj Clayton (D. C, N. 43 Am. B. E. 703, 82 So. 172. J.), 43 Am. B. E. 687, 259 Fed. 911; Matter of Insurable interest. — A trustee has an insur- Thompson (D. C, Wash.), 40 Am. B. E. 82, 2-!2 able interest in property fraudulently trans- Fed. 602. See also ante, section 67, V. e, (3) ferred where a decree of reconveyance has (IV) Sales of goods on account; bulk sales, been made, though an appeal has been taken. Execution against property fraudulently Underwood y. Winslow (Mass. Sup. Jud. Ct.), transferred. — The bankrupt cannot, after his 44 Am. B. E. 569, 125 N. B. 631. discharge, question the right of a judgment 78. In re Eodgers (C. C. A., 7th Cir.), 11 Am. creditor to proceed against property fraudu- B. E. 79, 125 Fed. 169; In re Butterwick (D. lently transferred as he is not in any way C, Pa.), 12 Am. B. E. 536, 131 Fed. 371; affected by such proceedings; and this is true Thomas v. Eoddy, 9 Am. B. H. 873, 876, 122 N. though the property proceeded against is held y. App. Div. 851, 107 N. Y. Supp. 4.73, holding by his wife. Deposit Nat. Bank v. Hay (Pa. that the fact that the complaint shows, or Sup. Ct.), 43 Am. B. E. 206, 105 Atl. 463. facts are alleged from which it may be fairly Property subsequently acquired br transfer Inferred, that at least some creditors who were and used in connection with that fraudulently In a position to attack the alleged fraudulent acquired does not pass to the trustee. McCabe conveyance at the time of the filing of the v. Guido (Miss. Sup. Ct.), 41 Am. B. E. 178, petition in bankruptcy, had filed their claims 77 So. 801. In the bankruptcy proceedings does not pre- 80. State Bank of Chicago v. Cox (C. C. A., vent the trustee from maintaining the action. 7th Cir.), 16 Am. B. E. 32, 143 Fed. 91. Barrett v. Kaigler (Ala. Sup. Ct.), 40 Am. B. 81. Trenholn* v. Klinker (Sup. Ct., Miss.), 33 E. 161, 76 So. 320; McCabe v. Guido (Miss. Sup. Am. B..E. 562, 66 So. 738. Ct), 41 Am. B. R. 178, 77 So. 801. 83. Matter of Webb Company (D. C, Pa.), 34 79. In re Kohler (C. C. A., 6th Cir.), 20 Am. Am. B. E. 785, 224 Fed. 258, holding that where B. E. 89, 159 Fed. 871; Boyd v. Arnold (Sup. a creditor, without notice or reason to suspect § 70-a (4):] Pbopeety Fraudulently Teansfeeeed, 1125 shown, as where a bankrupt while insolvent transfers real estate to his brother for an inadequate consideration, and the transfer was not recorded, the trans- fer may be set aside.*^ A conveyance of real estate by a debtor to another to be held wholly or partly in trust for him is a fraud on creditors whether sO' intended or not, and may be void both as to existing and subsequent creditors, the fraud being a continuing one and the property may be recovered by his trustee in bankruptcy.^* (4) VoLUKTAEY TEAKSFEES ; TEANSFEES TO WIFE OE CHILDEEN. A Volun- tary transfer is at least presumptively fraudulent as against creditors ; if made to a wife or child, however meritorious, it must be knovra. to be in good faith and without intent to defraud or injure creditors.^ Transactions between husband and wife to the prejudice of the husband's creditors will be closely scrutinized by the courts in New York, as elsewhere, to see that they are fair and honest and not mere contrivances resorted to for the purpose of placing the husband's property beyond the reach of creditors.®* But a transfer by a bankrupt to his wife made in good faith more than two years before bankruptcy r.nd while the bankrupt was solvent in payment of an antecedent debt is not fraudulent.®'' In a suit to set aside a transfer from a bankrupt husband to his wife, T7hile the husband is insolvent, the burden is upon the wife to show good faith.«» (5) Effect of a geneeal assignment. — A general assignment, within the four months' period, being not only a fraud on the act®* but an act of bankruptcy, seems to stand on a different footing from fraudulent transfers per se. The assignment being void by operation of law,®" no title passes, and the insolvency of a debtor and more than four months prior to bankruptcy, received an assign- ment of all moneys due to the debtor under a contract for the sale of fire apparatus, and thereafter with knowledge of the debtor's in- solvency and within the four months' period obtained from the debtor a transfer of -the apparatus . and took possession thereof, the trustee in bankruptcy of the debtor is entitled to the possession of the apparatus, as against the bank.' 83. Peterson v. Mettler (D. C, Wash.), 29 Am. B. E. 158, 198 Fed. 938. 84. McKey v. Cochran (Sup. Ct., lU.), 33 Am. B. E. 78, 104 N. E. 693, holding that although the general rule is that wbere the purchase money of land is paid by on person and the title taken in the name of another, such person holds the title in trust for him who paid the purchase money, the purchase by a husband in the name of his wife will prima facie be presumed to be an advancement or settlement and not a trust; but such presumption may be either supported or rebutted by proof of ante- cedent or contemporaneous act or facts so soon after the purchase as to be fairly considered a part of the transaction. 85. Tie law recognizes legal obligations to creditors as superior to the moral obligations one is under to a wife or child. That one engaged in hazardous pursuits owes a sacred duty to his wife and children to set apart a reasonable portion of his estate to secure them against the ills of poverty is not denied. But In the discharge of moral obligation to wife and children one is not at liberty to forget that he is under legal as well as moral obli- pations to his creditors. The law will not allow him to hinder, delay or defraud the latter. It is not that the law is oblivious to the moral obligations due from the husband to his wife. It is only that in discharging them he must not be dishonest. Klinger v. Hyman (C. C. A., 2d Cii-.), 34 Am. B. R. 338, 223 Fed. 257; McCrory v. Donald (Miss. Sup. Ct.), 43 Am. B. E. 181, 80 So. 643. The title to an insurance policy assigned by . a husband to his wife is not affected as against his trustee in bankruptcy by the fact that he paid preiiiiL.._j thereon, and that she had loaned the policy to him for the purpose of raising money, but it was reassigned to her three years prior to the bankruptcy. Long- bottom V. Emery (Fa. Sup. Ct.), 42 Am. B. E. 248, 104 Atl. 561. 86. Klinger v. Hyman (C. C. A., 2d Cir.), 34 Am. B. E. 338, 223 Fed. 257. The rule in the New York courts that a voluntary conveyance by one indebted at the time is presumptively fraudulent as against existing creditors. Is laid down in Smith v. Reid, 134 N. Y. 568, 31 N. E. 1082, and Kerker v. Levy, 206 N. Y. 109, 99 N. E. 181, the latter expressly overruling a contrary opinion expressed in Kain v. Larkin, 131 N. Y. 300, 30 N. E. 105; Shaver v. Mowry (Pa. Sup. Ct.), 43 Am. B. K. 101, 105 Atl. 505. 87. Johnson v. Wilson (D. C, Ga.), 33 Am. B. E. 518, 217 Fed. 99. An atnenuptial settlement, though made by fraudulent design by ' the settler should not be annulled without the clearest proof of the wife's participation in the intended fraud, for upon its annulment there can follow no disso- lution of the marriage which was the consid- eration of the settlement. Eobertson v. Schlotzhauer (C. C. A., 7th Cir.), 40 Am. B. E. 237, 243 Fed. 324. 88. Stroecker v. Patterson (C. C. A., 9th dr.), 34 Am. B. E. 287, 220 Fed. 21; Adams v. Osley (D. C, Ga.), 42 Am. B. E. 665, 255 Fed. 117; Shaver v. Mowry (Pa. Sup. Ct.), 43 Am. B. E. 101, 105 Atl. 505. Burden of proof. — The rule stated in the text relates only to creditors whose rights accrued at the time the wife acquired title and not to those whose rights accrued many years there- after. Longbottom v. Emory (Pa. Sup. Ct.), 42 Am. B. E. 248, 104 Atl. 561. 89. See In re Gray, 3 Am, B. R. C!7, 47 N. Y. App Div. 554, 62 N. Y. Supp. 618; Whittlesey v. Becker & Co., 25 Am. B. R. 672, 142 N. Y. App. DlT. 313, 126 N. Y. Supp. 1040, quoting language 1126 Title to Pbopeet"/. [§ 70-a (4). the general assignee does not become an adverse claimant, but at most but an agent of the assignor. Being such agent, his possession is that of hia principal, and he, therefore, does not hold adversely to the bankrupt or to the latter's trustee by the mere fact that he held in his hands funds or property received by him under the assignment.*^ Such funds or property may, therefore, be reached summarily by the method suggested in Bryan v. Bemheimer.*^ Under such an assignment, the title of the trustee in bank- ruptcy relates back to the date of the adjudication, and the assignee is there- after merely a custodian without title; after that time he may not lavi^fully sell the assets, and all his acts in relation thereto, other than custodial, aro null and void.*^ If the assignment was made prior to the four months' pariod, the only interest or title retained by the bankrupt which passes to his trustee is an equitable interest in the surplus remaining after the payment of the assignor's debt.** (6) Eeceiveeship ; dissoltjtion of coepoeation. — Where dissolution of winding up proceedings are instituted in a State court, within the period of four months prior to bankruptcy, the trustee in bankruptcy is entitled to the assets in the hands of the receiver appointed in such proceedings,'^ but the trus- tee should not take summary possession of them for such practice is not in accord with the comity existing between the State and National courts. *°* (7) Assignment op claims against the United States. — Section 3477 of the Eevised Statutes prohibits the assignment of a claim against the United States, prior to the allowance of such claim and the issuing of a wairant for the payment thereof. The voluntary assignment of such a claim by a bankrupt before bankruptcy, contrary to the provisional of this section, is absolutely void. Such claim remains an asset of the bankrupt estate, and of text. Matter of Neuburger, Inc. (C. C. A., trustee becomes subrogated to the rights of 2d Cir.), 39 Am. B. E. 139, 240 Fed. 947. See non-assenting creditors to avoid such convey- also Section Twenty-three of this work. ance by a plenary suit, In the absence of such 90. West Co. V. Lea, 174 U. S. 590, 2 Am. B. R. suit he is not entitled to restrain a sale of the 463, 43 L. Ed. 1098, 19 Sup. Ct. 836; Pelton v. property conveyed under attachment proceed- Sheridan (Sup. Ct, Ore.), 33 Am. B. E. 472, ings.. In re Shinn (D. C, N. J.), 25 Am. B. E. 144 Pac. 410; Matter of Einstein (D. C, N. Y.), 833, 185 Fed. 990; In re Bridge (D. C, Wash.), 40 Am. B. E. 507, 245 Fed. 189. 37 Am. B. E. 53, 230 Fed. 184; Stern v. Truai 91. Matter ol Hays (C. C. A., 6th Cir.), 24 (D. C, Wash.), 38 Am. B. E. 418, 236 Fed. 1014. Am. B. E. 691, 179 Fed. 222 ; Matter of Williams Eight to compel assignee for creditors to (D. C, Ohio), 38 Am. B. E. 762; Matter of Neu- account. — Where a voluntary bankrupt several berger. Inc. (C. C. A., 2d Cir.), 39 Am. B. E. months before filing his petition assigned the 139, 240 Fed. 947. property in his store to a trustee under an Rent moneys collected under an agreement agreement not constituting a general assign- that the agent would apply the moneys to the ment, and the assignee In good faith more " present indebtedness " of the bankrupt pass than four months before the bankruptcy sold to the trustee in bankruptcy and he may sue the property and paid the proceeds pro rata to for and collect tje same from the agent. Petty the assignor's creditors, except two who re- V. Portmaii (Pa. Com. PI.), 39 Am. B. E. 747, 63 fused to consent to the agreement, such Pittsb. Leg. J. 293. assignee Is not liable to the trustee In bank- 92. 181 U. S. 188, 5 Am. B. E. 623, 45 L. Ed. ruptcy for the shares of the non-assenting 814, 21 Sup. Ct. 557. creditors, which he had paid to the assignor. 93. Matter of Wellmade Gas Mantle Co. (C. Matter of Martinez (D. C, N. T.), 35 Am. B. E. C. A., 1st Cir.), 37 Am. B. It. 7, 2li3 Fed. 250; 100, 223 Fed. 433. An assignee for the benefit Matter of Neuburger (D. C, N. Y.), 37 Am. B. of creditors may be compelled to account In R. 248, 233 Fed. 701. See Am. Bankr. ■ Dig. the bankruptcy court although he has already § 379. accounted in the State court. Matter of Neu- 94. Bight to property conveyed by banlcrupt burger, Inc. (C. C. A., 2d Cir.), 39 Am. B. E. to a trustee for bencflt of creditora prior to 130, 240 Fed. 947. four months' period. — Where, prior to the four Common law assignment, — Where a general months' period before bankruptcy, a debtor assignment has been made by a debtor of his conveyed his property to another in trust for property that would have been available at the benefit of all his creditors, bis trustee In common law, or when made pursuant to a bankruptcy, under section 70-e of the bank- State statute, regulating the procedure, which ruptcy act and by reason of such conveyance, enactment does not provide for the debtor's did not take the legal title to such property, release, and hence is not an Insolvency ilaw, but only an equitable interest in the surplus such transfer is upheld, if not attacked in after payment of debts, no control ovn- c- federal bankruptcy proceedings within the interest in the property having beci reS3rveiI time limited therefor. Pelton v. Sheridan (Sup. by the debtor in the conveyance; and v/hiic, Ct., Ore.), 33 Am. B. E. 472. 144 Pac. 419. nuder section 70-e of the bankruptcy acl, the 9B. Matter of Mullings C!othi::g Co. (C. C. A„ § 70-a (5). J Peopebty Tbanfebbable. 1127 may be collected by the trustee and administered for the benefit of creditors, with other assets.*" f. Property whioh might have been transferred or levied upon. — (1) Ik GENEKAL. — Subdivision 5 passes to the trustee all "property v/hich prior to the filing of the petition he could by any means have transferred, or which might have been levied upon and sold under judicial process against him." It is the broadest and most comprehensive of all the subdivisions. It probably includes nearly, if not all, the kinds of property mentioned in the four that precede it, as well as that specified in subdivision 6. All of the other sub- divisions are silent as to time. Here, however, there is a distinct reference to "the filing of the petition," and the idea expressed in these words is, as to the enumerated kinds of property, doubtless implied. Thus, the doctrine that only property vested in the bankrupt at the time the petition is filed passes to the trustee, is emphasized. ' It will be noted that the words here are very general, and seem to include every vested right and interest attaching to or growing out of property.'^* (2) Test to be applied. — The test is simple and easily applied.*^ Could the property in question have "been (1) transferred by, or (2) levied on and sold under judicial process against, the bankrupt? If so, it passes to the trustee; if not, it does not. Whether the property has a market value is immaterial.®^ It may be a right to acquire property, as for instance a desert entry under the public lands law of the United States, which confers a right to acquire title to lands upon compliance with certain conditions, is trans- ferrable and therefore passes to the entryman's trustee in bankruptcy.** The "property which prior to the filing of the petition he [the bankrupt] could by any means have transferred" is property that he could by any means have transferred to another lawfully under the same terras that he transfers it by law to the trustee; that is to say, without consideration. If the property may have been transferred, it is immaterial that it could not have been levied on at the date of the bankrupt's adjudication, although ordinarily what may be transferred may be levied upon for the debts of the owner. ^*"' Whether or not the property, prior to the filing of the petition " 2d Clr.), 38 Am. B. E. 189, 238 Bed. 58; Hooks therein passed under the Bankruptcy Act to V. Aldrldge (C. C. A., 5th Cir.), 16 Am. B. E. their general creditors, to be disposed of as 658, 145 Fed. 865; In re Hecox (C. C. A., 8th directed by the Bankruptcy Act, Just as 1( Cir.), 21 Am. B. K. 314, 164 Fed. 823; Mauran there had been no attempt to transfer them to T. Crown Carpet Lining Co., 6 Am. B. E. 734, the banks. Any other holding will effect a 23 E. I. 324, 50 Atl. 331; Carter, etc. Transfer repeal of the statute by mere Judicial construc- Co. v. Eobertson (Tex. Ct. of Civ. App.). 40 tion. In disregard of the plain, unequivocal Am. B. H. 628, 198 S. W. 791. ntent of Congress, as indicated by the statute." 9!a. Brown v. Crawford (D. C, Ore.), 42 Am. See also Guarantee Title & Trust Co. v. First B. K. 677, 254 Fed. 146. National Bank (C. C. A., 3d Cir.J, 26 Am. B. 96. Claims against the United States.— In the E. 85, 185 Fed. 373; Matter of Hudford Co. (C. case of National Bank of Commerce v. Downie, C. A., 2d Cir.), 43 Am. B. E. 504, 257 Fed. 722. 218 TJ. S. 345, 25 Am. B. E. 199, 54 L. Ed. 1065, 96a. Brown v. Crawford (D. C, Oje.), 42 Am. 31 Sup. Ct. 89, affg. 20 Am. B. B. 531, the court B. E. 263, 252 Fed. 248. says: "The present cases are not assignments 97. Compare In re Burka (D. C, Mo.), 6 Am. which, by operation of law, created an interest B. E. 12, lOi Fed. 326; Herritt v. Clark (C. C. in the assignor's claims against the United A., 3rd Clr.), 41 Am. B. E. 232, 247 Fed. 100. States. They are clean-cut cases of a voluntary 98. Klnzsle v. Winston, Fed. Cas. 7,835. transfer of claims against the United States, Language of text quoted and applied, Gillaspy before their allowance, in direct opposition to v. International Harvester Co. (Miss. Sup. Ct.) the statute. If any regard whatever is to be 38 Am. B. E. 827, 67 So. 904. See as to market- had to the intention of Congress, as manifested ability, Pollack v. Meyer Bros. Drug Co. (C. C by its words,— too clear, we think, to need A., 8th Cir.), 36 Am. B. E. 835, 845; In re Wight construction, — we must hold such a transfer (C. C. A., 2d dr.), 19 Am. B. E. 454, 157 Fed. to be absolutely null and void, and as not, in B44. itself, passing to the alipellants any Interest, 99. Matter of Evans (D. C, Idaho), 38 Am. present or remote, legal or equitable. In the B. E. 361, 235 Fed. 956. claims transferred. The result is that when 100. Pollack v. Meyer Bros. Drug Co. (C. C Gamwell & Wheeler were adjudged bankrupts. A., 8th Clr.), 36 Am. B. E. 835, in which the they were atUl in law the owners of these court says : " There are many equitable inter- claima on the United States, and all interest esta which if owned by the bankrupt may be 1128 Title to Peopeett. [§ 70-a. could have been levied upon and sold under judicial process against the bank- rupt, must be determined by the local law.^"^ It must appear that the prop- erty in possession of the bankrupt is subject to claims or liens valid as against his creditors, otherwise it passes to his trustee. -^"^ For instance, the validity of a chattel mortgage or contract of conditional sale depends upon State statutes; ordinarily the title of the property mortgaged or conditionally sold is retained by the mortgagee or vendor, but if there is a failure to comply with a State law which affects the validity of the transfer, the property passes to the trustee of the mortgagor or vendee in the same plight and subject to the claims of general creditors, as though bankruptcy had not intervened.^"* Unfiled chattel mortgages, in States where they are declared void as against creditors for want of filing, do not prevent creditors from levying judicial process upon the property therein described, and consequently such property responds to the text to be applied under subdivision 5 of this subsection. ■^'** So where the legal title of land is in the bankrupt, but the actual title and possession was in another, a conveyance having been inadvertently omitted, the trustee takes, subject to the equities of the third party.^"^ Wqges earned prior to bankruptcy but paid thereafter pass to the trustee. •'"^^ (3) Peopeett pledged. — The title of a pledgee, under the ordinary con- tiact of pledge, is, in the absence of fraud, good as against all the world, except creditors who have acquired enforceable liens against the property while it was in the possession of the pledgor, and upon his bankruptcy it passes to his trusteo, subject to the superior title of the pledgee.-^*" It is the of value and Increase the assets of the estate, and yet not be subject to seizure on execution. But being transferrable, they wiU pass to the trustee." Growing crops as assets. — Since under thG Law of Tennessee, the ov."ner's interest in a growing crop is not exempt property but is property which he may sell or mortgage, title to such property pasGcs to the owner's trustee in bankruptcy, although under the statutes of such State such a crop may not be levied upon prior to a certain date. In re Burnett & Co. D. C, Tenn.), 29 Am. B. E. 872, 201 Fed. 162; Olmsted-Stevenson Co. v. MlHer (C. C. A., 9th Cir.), 36 Am. B. E. 816, 231 Fed. 60. 101. Matter of Barker (Kef., Colo.), 20 Am. B. 11. 674; Godwin v. Murchison Nat. Bank, 22 Am. B. E. 703, 145 N. C. 320, 59 S. E. 154; In re Waite-Eobblns Motor Co. (D. C, Mass.), 27 Am. B. E. 541, 192 Fed. 47; Matter of Berry (D. C, Mich.), 41 Am. B. E. 3S7, 247 Fed. 700. 102. In re Miller & Brown (D. C, Pa.), 14 Am. B. E. 439, 135 Fed. 8G8. And see Hewitt y. Berlin Machine Works, 194 U. S. 296, 11 Am. B. E. 709, 48 L, Ed. 986, 24 Sup. Ct. 690. 103. FaUure to execute movtesLge according to State statute; title of trustee of mortgragror. — Under sections 4106 and 4133 of the Eevised Statutes of Ohio which provide that a mortgage of real property shall be executed In the presence of two witnesses and when so exe- cuted shall be recorded and shall take effect from the time the instrument is left for record, a mortgage delivered for record, which had been signed by the mortgagor, but not ■wit- nessed pursuant to statute, confers upon the mortgagee merely a promise or agreement to give a mortgage which will create a lien, which to be effective must be followed by a suit in equity by the mortgagee for a reformation of the instrument; so that where property so mortgaged passes to a trustee in bankruptcy before any proceedings are taken to reform the instrument, the trustee, by virtue of sec- tion 70-a, of the bankruptcy act, takes it in the plight in which it then stood and the mortgage cannot be enforced against him. Foerstner v. Citizens' Savings & Trust Co. (C. C. A., 6th Clr.), 26 Am. B. E. 377, 186 Fed. 1. See also Davies v. Harlow (Md. Ct. of App.), 39 Am. B. E. 300, 100 Atl. 102, quoting Collier on Bankruptcy (9th ed.), 1005; Eader v. Star Mill & Elevator Co. (C. C. A., 8th Clr.), 43 Am. B. E. 754, 258 Fed. 121. 104. Foerstner v. Citizens' Savings & Trust Co. (C. C. A., 6th Cir.), 26 Am. B. E. 377, 384, 186 Fed. 1 ; Hewitt v. Berlin Machine Works, 194 U. S. 296, 11 Am. B. E. 709, 48 L. Ed. 986, 24 Sup. Ct. 690; Security Warehousing Co. v. Hand, 206 U. S. 415, 19 Am. B. E. 291, 51 L. Ed. 1117, 27 Sup. Ct. 720; In re Standard Tele- phone & Elec. Co., 216 U. S. 545, 24 Am. B. E. 761, 54 L. Ed. 610, 30 Sup. Ct. 412; Eitchle County Bank v. McFarland (C. C. A., 4th Cir.), 24 Am. B. E. 893, 183 Fed. 715. 105. Clark V. Snelling (C. C. A., 1st Clr.), 30 Am. B. E. 50, 205 Fed. 240, afCg. 29 Am. B. E. 818, 202 Fed. 259; Young v. Allen (C. C. A., 6th Cir.), 30 Am. B. E. 261, 207 Fed. 318. 105a. Matter of Evans (D. C, Tenn.), 42 Am. B. E. 448, 253 Fed. 276. 10«. Matter of Harvey (D. C, Ala.), 32 Am. B. E. 337, 212 Fed. 340, citing Collier on Bank- ruptcy (9th ed.), p. 1004. GriflBn v. Smith (CaU Sup. Ct.), 41 Am. B. E. 354, 171 Pac. 92; Ather- ton V. Beaman (D. C, Mass.), 42 Am. B. E. 631, 256 Fed. 871; Commercial Security Co. v. Hol- combe (C. C. A., 5th Cir.), 44 Am. B. B. 481. 262 Fed. 657; Connecticut Mut. Life Ins. Co. v. Allen (Mass. Sup. Ct.), 45 Am. B. E. 127, 126 N. B. 367 (assignment of life insurance policy) ; Howard v. Mechanics' Bank (D. C, N. Y.), 45 Am. B. E. 112, 262 Fed. 699. See Am. Bankr. Dig. § 384. Pledge of property already pledced. — Matter of Germantown Almegum Co. (D. C, Pa.), 41 Am. B. E. 598, 251 Fed. 755. Chattel mortgasres assigned as security. — Matter of Michigan Furniture Co. (D. C, N. Y.), 41 Am. B. E. 784, 249 Fed. 978. A life insurance policy validly pledged by B bankrupt passes to his trustee la bankruptcy § 70-a.J Stock Beokeeage Tbansactions. 1129 duty of tlie bankruptcy court to turn over all property in the possession of the bankrupt to the lawful pledgee thereof.^*" The validity of a contract of pledge must be determined under the laws of the State where made."^ The pledge is a lien, dependent upon possession of the pledged property by the pledgee, and if the lien is established the trustee in bankruptcy of the pledgee will succeed to the pledgee's title subject to terms of the pledge contract.^"* (4) Stock beokeeage transactions. — Where a broker purchases stock for a customer and retains the stock as security for the amount due thereon, the relationship of pledgor and pledgee exists between the parties; if the broker is adjudicated a bankrupt the owner of the stock is entitled to a delivery thereof upon payment of the amount due.-'^^ Where money is left with a stock- broker for the purchase of stock and is found in his possession, ear-marked for identification, upon his bankruptcy, the money should be returned to the depositor.^" It is unnecessary for the customer to place his finger upon the identical certificates of stock purchased for him; it is sufficient if the broker had at the time of his bankruptcy shares of the same kind, which are legally subject to the demand of the customer.^'^ Nor is it essential that the customer subject to the rights of the pledgee. Macter of Baird (D. C, Del.), 40 Am. B. E. 552, 245 Fed. 504. Title of trustee of pledgor under valid pledge. — Bankrupt, an automobile dealer, had in his possession when the petition was filed a demonstrating car which had been pledged to the claimant bank to secure bank- rupt's note, given pursuant to an arrange- ment whereby the claimant bank paid drafts, accompanied by bills of lading drawn on bank- rupt for the purchase price of automobiles, and bankrupt, giving his collateral note pledging the specific cars by numbers, retained posses- sion of the cars for the purpose of sale and was expected, though not bound, to pay $1,000 on his note for each car sold. The pledge was free from fraud and under the Pennsylvania law valid between the parties. UeM, that the trustee in bankruptcy under section 70-a (5) of the bankruptcy act took title subject to the superior right of the claimant bank. In re Twining (D. C, Pa.), 26 Am. B, R. 200, 185 Fed. 555. Pledge of unmined coal. — -Where the lessee of coal lands agreed to supply a railway company with all coal required on certain of Its lines at stated prices, payment to be made upon the 15th of each month for all coal delivered during the preceding calendar mouth, aud the lease, which was terminable by the railway company on the lessee's failure to comply with the con- tract, was, with the assent of the railway com- pany, assigned to a coal company, and while the contract was still in force and being executed, the assignee, becoming embarrassed and un- able to meet its pay-rolls, the railway company advanced the money therefor, under an oral agreement that it should be repaid by the sub- sequent delivery of coal at the contract price, and the coal company Is adjudicated a bank- rupt, the advances made by the railway com- pany amount to a pledge of the unmined coal to the extent of the advancement, and the trus- tees in bankruptcy, upon assuming the con- tract and continuing Its performance, are bound to furnish the railway company sufficient coal to cover the advances made by it. Hurley v. Atchison, etc., R. Co., 213 U. S. 126, 22 Am. B. E. 17, 53 L. Ed. 729, 29 Sup. Ct. 466. 107. Commercial Nat. Bank v. Hiller (C. C. A., 5th Clr.), 32 Am. B. R. 236, 211 Fed. 337. 108. Matter of Harvey (D. C, Ala.), 32 Am. B. R. 337, 212 Fed. 340; Atherton v. Beaman (C. C. A., 1st Clr.), 45 Am. B. R. 212, 204 Fed. 878. In New York there can be no valid pledge without delivery of the property pledged to the pledgee. Matter of P. J. Sullivan Co., Inc. (D. C, N. Y.), 41 Am. B. R. 189, 247 Fed. 139, aEd. 42 Am. B. R. 530, 254 Fed. 660. 109. Guarantee Title & Trust Co. v. First Nat. Bank (C. C. A., 3d Cir.), 26 Am. B. E. 85, 185 Fed. 373; In re Elm Brewing Co. (D. C, N. Y.), 12 Am. B. E. 623, 132 Fed. 2a9. 110. DuelT. Hollins, 241 U. S. 5:3, 37 Am. B. R. 1, 60 L. Ed. 1143, 36 Sup. Ct. 615, revg. 34 Am. B. R. 34, 219 Fed. 544; In re Berry & Co. (C. C. A., 2d Cir.), 17 Am. B. R. 467, 149 Fed. 176; Richardson v. Shaw (C. C. A., 2d Cir.), 16 Am. B. B. 42, 147 Fed. 659, aft'd. 209 U. S. 363, 19 Am. B. R. 717, 52 L. Ed. 835, 28 Sup. Ct. 512; In re Boiling (D. C, Va.), 17 Am. B. R. 399, 147 Fed. 786; In re Swift (C. C. A., 1st Cir.), 7 Am. B R. 374, 112 Fed. 315; Hutchinson v. LeHoy (C. C. A., 1st Cir.), S Am. B. R. 20, 113 Fed. 212; In re Meadows, Williams & Co. (D. C, N. Y.), 23 Am. B. E. 124, 173 Fed. 694, a£Ed. 24 Am. B. E. 251, 177 Fed. 1004; In re Brown & Co. (D. C, N. Y.), 22 Am. B. E. 659, 171 Fed. 254; lu re Brown & Co. (D. C, N. Y.), 25 Am. B. R. SOO, 183 Fed. 861; In re Mclntyre & Co. (Petition of Pippey) (C. C. A.. 2d Cir.), 24 Am. B. K. 626, 181 Fed. 955. See Am. Bankr. Dig. § 385. Stock deposited as margin. — A customer of a firm of stockbrokers indebted to him is en- titled upon their bankruptcy to receive back certificates of stock in their possession as mar- gin on his account. Boston Safe Deposit & Trust Co. V. Adams (Mass. Sup. Ct.), 37 Am. B. E, 609, 113 N. E. 277. 111. Matter of Wettengel (C. C. A., 3d Cir.), 38 Am. B. E. 444, 238 Fed. 798. 112.. Gorman v. Littlefleld, 229 V. S. 19, 30 Am B. R. 266, 57 L. Ed. 1047, 33 Sup. Ct. 690; Sexton V. Kessler & Co., 225 U. S. 90, 28 Am. B. R. 85, 56 L. Ed. 995, 32 Sup. Ct. 657. Sufficient stoclt to cover claims. — The rule in Gorman v. Littlefleld (229 U. S. 19, 30 Am. B. E. 266), as to the identification of stock upon the bankruptcy of a broker, should not £1130 Title to Pkopeety. ' [§ 70-a. show that at the time of the broker's bankruptcy he had in his possession a sufficient number of stock certificates of like kind to replace those pur- chased by the customer. ^^' Customers of bankrupt stockbrokers are entitled to a pro rata allotment of shares of stock of a corporation found in the possession of the bankrupt and purchased for them, although such shares are not the identical ones purchased, and are insufficient to fully satisfy all.^^* The right of the customer will depend largely upon the possession by the broker of the shares of stock at the time of the adjudication; if at that time they have been transferred or disposed of by him, the customer has no superior claim against other securities of a different kind in the broker's possession/^^ Where a broker repledges shares of stock deposited by customers, as security for a loan, and the shares are sold, the proceeds should be applied in payment of the loan, and the surplus be distributed pro rata among the customers, according to the value of their stock. If some of the stock is sold and part retained by the pledgee, there should be such a distribution of the proceeds as to make lall of the owners share ratably in the burden of the loan,"^ The fact that cer^ ,tain customers have failed to prove their claim for pro rata share of unconverted stock, doeai not enlarge the pro rata share of those who have traced their stoek.^''°' If the shares are repledged to different persons as security for separate loans made by each of them, and subsequently sold, each transaction must be taken separately, and the surplus proceeds in each case be paid to the owners of the shares deposited as collateral for each loan,-^^' (5) Pkopeety included geneeallt. — It was evidently intended by the word " property " as used in subdivision 5 to include in the term every vested right or interest attaching to or growing out of property. It is meant to embrace much of the property that is designated under the other subdi- be restricted to stock actuaUy In the box on by the bankrupt's pledgee. Matter of Stringer the day of the failure. The rationale of the (D. C, N. Y.), 37 Am. B. E. 44, 230 Fed. 177. decision is that if the receiver has enough or See rule laid down in Matter of HoUins & Co, more than enough of the particular stock to (C. C. A., 2d Cir.), 36 Am. B. B. 698. cover all customers who were long on the day Stock converted by bankrupt. — Where brok- of the failure, then the presumptions that he ers wrongfully pledged securities belonging to intended to keep their stock on hand is a their customers as collateral for a loan in their Bufflclent identification of the stock or of so bank, and upon their bankruptcy the bank un- much of It as is needed as theirs. If, however, der the terms of a collateral note applied the the stock on hand, though sufBcient to cover all deposit of the brokers upon the note and sold actual claims, is not sufficient to cover all the the securities, which left a balance, the owners long customers, no such presumption arises. of the securltes are subrogated to the rights The fact that some of the long customers make of the bank in the deposit and are entitled to no specific claim for stock In the surplus can- the possession thereof as against the trustee in not enlarge the rights of one who does. Matter bankruptcy of the brokers. Matter of Leavit & of Pierson and Fell (C. C. A., 2d Cir.), 37 Am. Grant (C. C. A., 2d Cir.), 33 Am. B. E. 63, 215 B. E. 10, 233 Fed. 519. Fed. 901. 113. Duel V. Hollins, 241 U. S. 523, 37 Am. B. Presumptions.— Where it can be shown that B. 1, CO L. Ed. 1143, 36 Sup. Ct. 615, revg. 34 stock has been legitimately used by a bankrupt Am. B. E. 34, 219 Fed. 544; As to necessity of stockbroker under the terms of an agreement Identification. In re Mclntyre & Co. (C. C. A., to cover short sales. It is a proper and fair pre- 2d Cir.), 25 Am. B. E. 93, 181 Fed. 960. sumption that the broker ntilzed only those se- 114. Duel V. Hollins, 241 U. S. 523, 37 Am. B. curities which he had a right to lend, leaving B. 1, 60 L. Ed. 1143, 36 Sup. Ct. 615, revg. 34 unaffected the securities paid for by cash cus- Am. B. E. 34, 219 Fed. 544 ; Matter of Mclntyre tomers. Matter of Wilson & Co. (D. C, N. Y.), (C. C. A., 2d Cir.), 34 Am. B. E. 487, 221 Fed. .42 Am. B. E. 350, 252 Fed. 631. But when a 232. stockbroker, for his own purposes, converts se- lls. Stock repledgred by pledgree. — Where curities of customers, it will not be presumed shares of stock are pledged with a broker by that he converted shares belonging to margin his customers as collateral and the broker, customers, because he owed the cash customers without authority and without substituting the highest duty not to deal wrongfully with other stock, hypothecates the customers' stock their securities. Matter of Wilson & Co. (D. and afterwards becomes bankrupt, and the C, N. Y.), 42 Am. B. E. 350, 252 Fed. 631. stock Is sold by his pledgee in the regular way, Identifying proceeds. — Where a customer of the sale conveys good title to the particular se- a bankrupt stockbroker traces property into a curities as against the customers of the bank- pledge with another stockbroker before in- rupt, although they might have claimed them solvency, and shows that the pledgee sold the from the bankrupt estate, if still in its pos- property and had the proceeds before insol- eession. and the customers have only a general vency, and that it remained with the pledgee claim agalnat the surplus paid to the trustee that is, was not paid to the pledgor or used '% ro-a,]: Peopekty op Othebe;. 1131 visions; it includes everything that can properly be the subject of a lawful transfer, whether it be corporeal or incorporeal.U3 An estate in real property by the entirety, being without possibility of severance, may not be transferred by the husband- without the coiisent of his wife and may not be levied upon by his creditors, and does "not therefore pass to his trustee in bankruptoy.119 A Federal homestead for which a receipt had been issued entitling the bankrupt to a patent, does not pass to his trustee, since until a final patent had been issued, the homestead was not subject to levy for the collection of the homesteader's debts.i20 (6) Pkopekty in which others have an inteke'st. — Property, within the meaning of such subdivision^ does not include the property of another, which the bankrupt is authorized to transfer only on the condition that he sells it for value, or sells it and holds its proceeds for its owner .121 Where under a State statute a plaintiff's interest in a pending action is assign- able, and is of such a character as to enable his creditors to obtain a benefit therefrom upon an administration of his estate, such interest has been held to be property within the meaning of this subdivision rather than a "right of action," under subdivision 6.122 The language of clause 5 is sufS.oiently broad to include not only the property belonging to the bankrupt absolutely, but also such property the title to which is, under a State law, held to be in him, as to his ereditors.123 As for instance where, under a State statute, delivery of chattels is essential to pass title as against certain judgment or lien oreditors,i24! or where it is provided that a trader who acquires and uses property in his business shall be deemed the owner of such property as against creditors, unless it appear by public declaration or notice that he is acting as agent, in which cases the property so retained or acquired passes to tke trustee in bankruptcy.i2B Special property, by way of lien, in securities deposited with the bankrupt as a pledge, is not property witliin the meaning of the act which passes to the trustee.i26 Materials delivered under a building contract by which they are to be treated as the property of the owner of the building as security for the performance of the contract by the contractor, do not pass to the trustee of the contractor.i26a But the title to stock, deposited by a bankrupt with a creditor as collateral, previous to his adjudication, vests in the trustee, as of the date of the adjudication.127 Deposits in a bank to the credit of a bankrupt at the time of adjudica- tion pass to the trustee, even as against a payee of a check who did not present it for payment until after such adjudication.i28 The title to grain and flour in the possession of a bankrupt by it after that time, he is entitled to reclaim Matter of WUson & Co. (D. C, N. Y.), 42 Am, B. E. 350, 252 Fed. 631. 116. Jones on Collateral Securities, 5 512 Matter of Mclntyre (C. C. A., 2d Cir.), 24 Am, B. E. 4, 176 Fed. 552; Matter of Jamison Bros. & Co. (C. C. A., 3d dr.), 38 Am. B. K. 972, 209 Fed. 541. See also Matter of Gay & Sturgis (D C, Mass.), 41 Am. B. E. 569, 251 Fed. 420. Com pare Johnson v. Bixby (C. C. A., 8th dr.), 42 Am. B. E. 396, 252 Fed. 103. Time of valuation of stock pledged. — Matter of Wilson & Co. (D. C, N. T.), 42 Am. B. R. 350, 252 Fed. 631. The provisions of a penal law providing a punishment for the unauthorized pledge, or disposition of stock of a customer cannot per ee affect the equities existing between the different customers to securities or their pro- ceeds. Matter of Wilson & Co. (D. C, N. Y.), 42 Am. B. E. 350, 252 Fed. 631. 116a. Matter of Wilson & Co. (D. C, N. Y.), 42 Am. B. E. 350, 252 Fed. 631. IIT. Matter of Jamison Bros. & Co. (C. C. A., 3d Cir.), 38 Am. B. B. 972, 209 Fed. 541. 118. In re Cantelo Mfg. Co. (D. C, Me.), 26 Am. B. E. 57, 185 Fed. 276, holding that an application for a patent constitutes property within the meaning of subdivision 5. Property passing to trustee. — This section does not define "property" in its broad sense, but it is merely a declaration, by way of enu- meration or schedule, of the rights, privileges, or things which, being possessed or enjoyed by the bankrupt, and being property, shall, as re- spects their title, devolve, by operation of law, upon a trustee; and being an enumeration of certain classes of property, is on its face a limi- tation within the larger field of property In general. Board of Trade v. Weston (C. C. A., 7th Cir.), 40 Am. B. E. 263, 243 Fed. 332. Bights under contract. — Matter of Berry (D. C. Mich.), 41 Am. B. E. 357, 247 Fed. 700. 119. In re Beihl (D. C, Pa.), 28 Am. B. B. 310, 197 Fed. 870. _ . „„ . „ „ 180. In re Cohn (D. C, N. D.), 22 Am. B. B. 761, 171 Fed. 568. 121. In re Dunlop (C. C. A., 8th Cir.), 19 Am. B. E. 361, 368, 156 Fed. 945. See In re Eeboulin Fils Co. (D. C, N. J.), 21 Am. B. E. 296, 165 Fed. 245; Wood Co. v. Van Story (C. C. A., 4th dr.), 22 Am. B. E. 740, 171 Fed. 375; In re Marx Tailoring Co. (D. C, Ala.), 28 Am. B. E. 147, 196 Fed. 243; International Agric. Corp. v. Sparks (D. C, S. C), 40 Am. B. R. 80, 250 Fed. 318. Checks left with bank for collection and de- posit. — Matter of Jarmulowsky (C. C. A., 2d Cir.), 41 Am. B. E. 39, 249 Fed. 319. 122. Cleland v. Anderson (Neb. Sup. Ct.), 10 Am. B. E. 429, 66 Neb. £73; First Nat. Bank v. Staake, 202 U. S. 141, 15 Am. B. E. 639, 50 L, Ed. 967, 26 Sup. Ct. 580. 123. Chesapeake Shoe Co. v. Seldner (C. C. A., 4th Cir.), 10 Am. B. E. 466, 122 Fed. 593; In re Tweed (D. C, Iowa),. 12 Am. B. E. 648, 131 Fed. 355. 124. See cases digested in Am. Bankr. Dig. { 390. Delivery of chattels is essential in Illinois to pass title or to create a lien as against execu- tion or attaching creditors, except only when dispensed with by reason of the pubUclty of the transaction. Hence pictures sold by the bankrupt or exchanged for others, but not re- moved from the bankrupt's store or seen at the time by the purchaser, and remaining in the bankrupt's possession at the time of the bankruptcy, pass to the trustee and tlie pur- chaser is not entitled to reclaim them. Matter of Eicketts (C. C. A., 7th Cir.), 37 Am. B. K. 124, 234 Fed. 285. 125. Gillaspy v. International Harvester Co. (Miss. Sup. Ct.), 38 Am. B. E. 827, 67 So. 904; Virginia Book Co. v. Sites (C. C. A., 4th dr.), 41 Am. B. E. 450, 254 Fed. 46. 12«. Matter of Berry & Co. (D. C, N. T.), 15 Am. B. B. 360, 146 Fed. 623. 12ea. Matter of Shelly (C. C. A., 3d Cir.), 39 Am. B. E. 519, 242 Fed. 251; Wilds V. Board of Education (N. T. Ct. of App.), 44 Am. B. E. 439, 227 N. y. 211. Compare Matter of Sullivan Co. 1132 Title to Peopeett. [§ 70-a. corporation passes to its trustee in bankruptcy, though it had issued grain and flour certificates as security for loans, calling for delivery of a certain quantity of flour on demand of the holders of the certificates.129 An estate by the entirety does not pass to the trustee of the husband or wife.i29a (7) Equities in Peopebty. — The equity of an individual in copartnership property, which is his separate estate, passes to his trustee in bankruptcy .130 liie equity of reJemption of mortgaged property passes to the trustee, and he may take and retain actual possession of the property.131 However, where the rule prevails that an equity of redemption, while assign- able by the mortgagor, is not subject to sale and execution, such equity of redemption although passing to the trustee, is not saleable by him, so as to transfer to the purchaser the statutory right of redemption.132 Any further attempt to differentiate the eases would be useless. Those appropriate to the subjects discussed in the next paragraphs are there collated. Others of a miscellaneous character will be found in the foot-note.i33 (C. C. A., 2d dr.), 42 Am. B. B. 530, 254 Fed. 660. 131. French v. White, 18 Am. B. B. 905, 7S Vt. 89, 62 Atl. 35; First Nat. Bank of Memphis v. Towuer (C. C. A., 6tli Clr.), 38 Am. K. B. 576. 128. Proceeds of check paid after adjudication of drawer. — Where a voluutary bankrupt, In good faitJi, two days before bankruptcy, de- livers a check to a light company in payment for service, and the payee, in good faith with- out knowled.ge of the bankruptcy, deposits the check iu another bank and it was not paid until after the adjudication of the drawer, the payee is not entitled as against the trustee in bankruptcy to retain the sum received on ths check, because the bankrupt's deposit came into the complete custody of the bankruptcy court npon the ad.1udication. Matter of Howe (D. C, Mass.), 37 Am. B. E. 601, 235 Fed. 9US. 129. In re Melbourne Mills Co. (D. C, Pa.), 20 Am. B. B. 746, 162 Fed. 9S8, affd. 22 Am. B. B. 442, 172 Fed. 177. Compare Central State Bank v. MeFarlin (C. C. A., Sth Clr.), 44 Am. B. E. 1, 257 Fed. 535. 129a. Matter of Berry (D. C, Mich.), 41 Am. B. B. 357, 247 Fed. 700. 130. New York Institution for the Instruction of the Deaf and Dumb v. Crockett, 17 Am. B. E. 233, 242, 117 N. Y. App. Div. 269, 102 N. Y. Supp. 412. 131. In ro Eoger Brown & Co. (C. C. A., 8th Cir.), 28 Aa. B. B. 336, 196 Fed. 758. Equity of redemption. — ^ Where the owner of an equily of redemption subordinates it in pro- ceedings in a State court to the rights of the unsecured creditors of a bankrupt corporation, the property passes to the trustee in bank- ruptcy, v."I-0 may execute the truste and subject the property to the payment of the claims. Brown v. Crawford (D. C, Ore.), 42 Am. 3. E. 677, 254 Fed. 146. isa. Luth V. Galloway (Joal Co. (Ala. Sup. Ct.), 32 Am. B. B. 866. 133. As ' to property of a partnersliip i In re Eudnick (D. C, Wash.), 4 Am. B. R. 531, 102 Fed. 750; In re Groetzinger (D. C, Pa.), 6 Am. B. E. 399, 110 Fed. 366. As to mortgaged realty: In re Kellogg (D. C, N. Y.), 7 Am. B. E. 623. 113 Fed. 120, affd. 10 Am. B. B. 7, 121 Fed. 333. As to proceeds of a sale under a void execu- tion still In the hands of the sheriff; In re Basley (D. C, Va.), 1 Am. B. E. 715, 93 Fed. 419; In re Kenney (D. C, N. Y.), 2 Am. B. B. 494, 95 Fed. 427; on reargument, 3 Am. B. E. 353, 97 Fed. 554, afCd. 5 Am. B. E. 355, 105 Fed. 897. Compare also In re Francis-Valentine Co. (D C, Cal.). 2 Am. B. E. 1S8, 93 Fed. 953; In re Kimball (D. C, Pa.), 3 Am. B. E. 161, 97 Fed. 29, and Levor, Trustee v. Seiter, 8 Am. B. E. 459, 69 N. Y. App. Div. 33, 74 N. Y. Supp. 499. As to property vested In a receiver in the State court; In re Meyers & Co. (Eef., N. Y.), 1 Am. B. E. 347; In re Tyler (D. C, N. Y.), 5 Am. B. E. 152, 104 Fed. 778; Hanson v. Stephens (Sup. Ct., Ga.), 11 Am. B. E. 172, 116 Ga. 722. As to exercise rf rlgrtit to redeem: In re Gold- man (D. C, N. Y.), 4 Am. B. R. 100, 102 Fed. 122; In re Novak (D. C, Iowa), 7 Am. B. E. 27, 111 Fed. 161. • As to unpaid legracy: In re May (Ref., Minn.), 5 Am. B. E. 1. As to rents: Iu re Cass (Eef., Ohio), 6 Am. B. 11. 721; In re Dole (D. C, Vt.), 7 Am. B. B. 21, 110 Fed. 926; In re Oleson (D. C, Iowa), 7 xYm. B. E. 22, 110 Fed. 796; Matter of Clark Realty Co. (C. C. A., 7th Cir.), 37 Am. B. E. 129, 234 Fed. 576 ; Matter of Doouer & Smith (D. C, N. J.), 40 Am. B. E. 116, 243 Fed. 984; Bindsell V. Liberty Trust Co. (C. C. A., 3d Cir.), 41 Am. B. E. 454, 248 Fed. 112; Matter of Brose (C. C. A., 2d Cir.), 42 Am. B. E. 543, 254 Fed. 664. As to purchase money notes for property sold by bankrupt on condition and assigned to third party without assignment of conditional sale contracts. Waterbury Trust Co. v. Weisman (Conn. Sup. Ct), 44 Am. B. E. 575, 103 Atl. 550. As to morteage on grrain Sn bins: Matter of Ballard (D. C, Te:;.), 44 Am. B. E. 651. As to trade fl.-;t'arcG: Matter of Myerson (D. C, Pa.), 42 Am. B. E. 337, 253 Fed. 510. As to paymoztts assigrncd hy bankrupts con- tractor to surety. Montgomery v. City of Philadelphia (D. C, Pa.), 42 Am. B. E. 498, 253 Fed. 473. As to property whicli bankrupt agrreed to make and deliver to purchaser who had ad- vanced the purchase price: The Greif Bros. Cooperage Co. v. MuUeuix (C. C. A., 8th Cir.), 45 Am. B. E. 265, 264 Fed. 391. As to agreement of vendor to release mort- Eage on certain lots: Matter of East Strouds- burg, etc., Co. (D. C, Pa.), 41 Am. B. E. 57, 248 Fed. 356. As to right to dividends. — Matter of Brant- man (C. C. A., 2d Cir.), 40 Am. B. R. 18, 244 Fed. 101. Kight of trustee of bani^rupt tenant to crops under lease: In re Luckenbill (D. C, Pa.) 11 Am. B. B. 455, 127 Fed. 984. As to property acquired by bankrupt's agent without authority: Matter of Partridge Lumber Co. (D. C, N. J.), 33 Am. B. E. 537, 215 Fed. 973. As to wife's Interest in property vested in her husband: In re Garner (D. C, Ga.), 6 Am B. B. 496, 110 Fed. 123. Compare In re Eooney (D. C, Vt.), 6 Am. B. E. 478, 109 Fed. 601. As to title of stocks bought by broker for customer: In re Swift (C. C. A., 1st Cir), 7 Am. B. E. 374, 112 Fed. 315. As to stocks pledged by bankrupt pledgee; Hutchinson v. LeEoy (C. C. A., 1st Cir.), 8 Am. B. E. 20, 113 Fed. 212. As to shares of stock frandnlently carried In the name of the bankrupt as trustee, and In the names of other parties for the purpose of con- cealment: Fowler v. Jenks (Sup. Ct., Minn.) 11 Am. B. E. 235, 90 Minn. 74. As to delivery sufficient to pass title as against debtor's trustee: Allen v. Hollander (C. C, Mass.), 11 Am. B. E. 753, 128 Fed. 159. 4s to delivery of locomotives remaining In pos- session of bankrupt vendor: In re Pease Car & 3'3l!T3fped^9°19'' ^°- ""■' "''• " ^"'- ^^ =• An oral agreement to Insure will operate as an equitable assignment of the proceeds of fire Insurance policies taken out In the mortgagor's own name. Harson v. Blnke f- Co fD r Mp 1 19 Am. B. B. 325, 153 Fed. 3-12: '' § 70-a.J Trust Inteeests. 1133 (8) Remainders and contingent interests. — Considerable difficulty is often experienced in applying the test fixed by subdivision 5 to contingent interests. Reference must usually be had to the State statutes and decisions. The following summary is, however, thought to be quite generally applicable : Remainders, either vested ^^* or contingent, pass to a trustee ;^^^ but do not where the contingency is one both of time of vesting and of person.'** Where the interest of the bankrupt depends on the exercise of a discretionary power in trust, it does not pass to his trustee.'^'' It has been held, that a devise of an equitable life interest in property, "free from the interference or control of creditors," does not pass to the trustee, although such interest was assign- able.-^^* But where a remainder is created dependent upon a life estate as to which the life tenant is vested with "full power to sell and convey any real estate," the remainderman's interest, although contingent as to amount and value, passes to his trustee in bankruptcy.'*' (9) Tritst interests and property in trust. — (I) Resulting or con- structive trusts. — If property in the hands of the bankrupt is impressed with As to proceeds of property belonging to another sold by a bankrupt: In re Wood 4; Malone (D. C, Ga.), 9 Am. B. R. 615, 121 Fed. 599. As to money paid upon stocks subscrip- tion, to be returned on certain conditions: In re North Carolina Car Co. (D. C, N. Car.), 11 Am. B. R. 488, 127 Fed. 178. As to bankrupt's interest in an unadministered estate: Osmun v. Galibraith (Sup. Ct., Mich.), 9 Am. B. R. 339', 131 Mich. 577. Money saved by the wife of a deceased bankrupt from a weekly allowance for maintenance and household expenses m^ade to her by her husband and deposited in the bank in her own name, will not be ordered turned over to the trustees of a bankrupt partnership of which the deceased was a member, where the station in life of the parties, the .solvency of the husband during the entire period, the economy of the wife in performing her household duties and dis- pensing with the assistance of servants, all point to the intention of the husband to relinquish possession, control and ownership of the various amounts and to vest her with title to the unexpended balance. In re Simon No. 2 (D. C, N. Y.), 28 Am. B. R. 616, lfl7 Fed. 102. Miscellaneous: In re Cobb (D. C. N. Car.), 3 Am. B. R. 129, 96 Fed. 821; In ve Hana & Kirk (D. C, Pa.), 5 An. B. R. 127, 105 Fed. 587; In re Swift (Ref., Mass.), 5 Am. B. R. 232; Duplan Silk Co. v. Spencer (C. C. A., 3d Cir.), 8 Am. B. R. 367, 115 Fed. 689, revg. s. c, 7 Am. B. R. 563, 112 Fed. 638; White v. Gray bill (la. Sup. Ct.), 42 Am. B. R. 392, 169 N. W. 135. lS4i In re Woodward (D. C, N. Car.), 2 Am. B. R. 339, 95 Fed. 260; In re McHarry (C. C. A., 7tli Cir.), 7 Am. B. R. 83, 111 Fed. 498. Com- pare In re Hosier (D. C, Vt.), 7 Am. B. R. 268, 112 Fed. 138. 135. In re Shenberger (D. C, Ohio), 4 Am. B. R. 487, 102 Fed. 978; In re St. John (D. C, N. T.), 5 Am. B. R. 190, 105 Fed. 234; In re Twadell (D. C, Del.), 6 Am. B. E. 539, 110 Fed. 145. As to when a contingent remainder in realty passes to the trustee, see Belcher v. Bernard, 106 Mass. 230. Bankrupt's interest as remainderman; sale of interest. — By virtue of an adjudi- cation in bankruptcy, the interest of bank- rupt in a remainder in real property passes to Ms trustee by devolution of law, so that no ' conveyance by bankrupt is necessary to vest the trustee with his rights therein. Where it does not appear that a trustee in bankruptcy can obtain a sufficient amount for bankrupt's remainder interest in real property to justify a direction that he sell such interest and pay off the lien of a judg- ment creditor, an order restraining such creditor from proceeding to collect his judg- ment other than in bankruptcy proceedings will be vacated subject to the right of the trustee, for the protection of other creditors, to join in any action the judgment creditor might take. In re Arden (D. C, N. Y.), 26 Am. B. R. 684, 188 Fed. 475. 136. In re Hoadley (D. C, N. Y.), 3 Am. B. R. 780, 101 Fed. 233; In re Gardner (D. C, N. Y.), 5 Am. B. R. 432, 106 Fed. 670. 137. In re Wetmore (D. C, Ba.), 4 Am. B. R. 335, 102 Fed. 290'; s. c, affd. 6 Am. B. R. 210, 108 Fed. 520. See also s. c, on application for discharge, 3 Am. B. R. 700, 99 Fed. 703. Compare In re Ehle (D. C, Vt. ) , 6 Am. B. ,R. 476, 109 Fed. 625. 138. Boston Safe Deposit & Trust Co. v. Luke, 34 Am. B. R. 321, 220 Mass. 484, 108 N. E. 64, affd. suh nom. Easton v. Boston Safe Deposit & Trust Co.. 240 U. S. 427, 36 Am. B. B. 701, 60 L. Ed. 723, 36 Sup. Ct. 391. See also, Hull v. Farmers' Loan & Trust Co. (U. S. Sup. Ct.), 40 Am. B. R. 594, 38 Sup. Ct. 103. 139. Matter of Dorgau (D. C, Iowa), 38 Am. B. R. 157, 237 Fed. 507; PoUock v. Meyer Bros. (C. C. A., 8th Cir.), 36 Am. B. R. 835, 233 Fed. 861, in which the majority opinion holds that in a trust fund set apart for the support and maintenance of Mary Pollock, under which she had the use of the income and such portions of the principal as 1134 TiTXE TO PeOPEBTT. [§ 70-a. a trust it passes to the trustee subject to the same trust.'** Where, though title is in the bankrupt, another is the real party in interest under the doctrine of resulting trust, the trustee in bankruptcy will be directed to oon- vey to the real owner."' Money paid to the bankrupt before adjudication under a mistake of fact is impressed with a constructive trust, which follows it into the hands of the trustee."^ Where a banker received deposits knowing that he was insolvent and on the day following made an assignment of his property, a trust was impressed upon the funds deposited in favor of the depositors, which must be recognized by the banker's trustee in bankruptcy.'*^ If property was consigned to a bankrupt for sale and the proceeds were used by the bankrupt in his business as his own, the relationship between the con- signor and the bankrupt is that of debtor and creditor and not that of trustee and beneficiary.^** (II) Express trusts; interest of beneficiary. — A trustee in bankruptcy takes the bankrupt's interest in property held in trust for him, whether the trust be open or secret,'**^ unless it is so devised as to be inalien- able by the cestui que trvM and not subject to the claims of his cred- itors.'*^ Under the -N^ew York statute'*'' tlie surplus income derived from was reasonably necessary for her support and maintenance, the remainder going to certain persons, including the bankrupt, the interest of the bankrupt passed to the trustee. 140. Taylor v. Plumer, 3 Maule St. Selw. 562. See, to the same effect. Cook v. Tullis, 18 Wall. 332; Hawkins v. Blake, 108 U. S. 422. Compare CummingB T. Synuott (C. C. A., 3d Clr.),.25 Am. B. E. 859, 184 Fed. 718. Bankrupt's interest in real estate purchased with funds of another. — Petitioner under an arrangement with bankrupt advanced the money with which to purchase a vacant lot to be divided up into building lots and resold, and the deed was taken to petitioner and bankrupt. It was understood that the purchase was a speculation and agreed that when the lots were sold the surplus, after payment to petitioner of the money advanced by her, was to be divided equally between them. Held, that petitioner was entitled to show her real interest in the property, and the rights of general creditors not being harmed, since they had no lien or claim superior to petitioner, growing out of the form of the deed in failing to disclose the actual interests of the parties, bankrupt's trustee was only entitled to one-half the sur- plus remaining aft**r reimbursing petitioner from the proceeds of a sale of the property. In re McConneU (D. C, N. Y.), 28 Am. B. E. 659, 197 Fed. 402; Jones v. Dugan (Md. Ct. of App.), 38 Am. B. E. 874, 92 Atl. 775. 141. In re Davis (D. C, Mass.), 7 Am. B. E. 258, 112 Fed. 129. See also In re Coffin (D. C, Conn.), 16 Am. B. K. 682, 146 Fed. 181; In ru Taft (C. C. A., 6th Cir.), 13 Am. B. E. 417, 133 Fed. 511; Young v. Allen (C. C. A., 6th dr.), 30 Am. B. K. 261, 207 Fed. 318; Scott v. Cline (C. C. A., 8th Cir.), 44 Am. B. E. 8, 257 Fed. 706. 142. Matter of Berry & Co. (C. C. A., 2d Cir.), 16 Am. B. E. S64, 146 Fed. 623. 143. Matter of Silver (D. C, Ohio), 31 Am. B. E. 106, 208 Fed. 797; In re Stewart (D. C, N. Y.), 24 Am. B. E. 474, 178 Fed; 463. .144. In re Emerson, Marlow & Co. (C. C. A., 7th Cir.), 29 Am. B. E. 173, 199 Fed. 95. Com- pare International Agric. Corp. v. Sparks (D. C, S. Car.), 40 Am. B. E. 80, 250 Fed. 318. 144a. Dry t. Van Every (Cal. Sup. Ct.), 45 Am. B. E. 282, — Pac. — . 145. HuU V. Farmers Loan & Trust Co. (U. S. Sup. Ct.), 40 Am. B. R. 594, 38 Sup. Ct. 103 ; Munroe v. Dewey, 4 Am. B. R. 264, 176 Mass. 184, 57 N. E. 340; Eaton v. Boston Safe Deposit & Trust Co., 240 U. S. 427, 36 Am. B. R. 701, 60 L. E. 723, 36 Sup. Ct. 391, in which it was held that the life in- terest of a beneficiary in trust, providing that the income to her is "to be tree from the interference or control of her creditors," does not pass to her trustee in bankruptcy, where the State law treats such restrictions as lim- iting the character of the equitable property and as inherent in it. Termination of trust by bankruptcy. — In the case of Nicholas v. Eaton, 91 U. S. 716, 23 L. Ed. 354, it appeared that real estate was devised to trustees who were directed to pay the income to one who was afterward adjudged a bankrupt, and the de- vise contained the condition and proviso that if the said beneficiary should become bank- rupt, the trust should cease; and thereafter the trustees in their discretion were to apply the income to the support of the beneficiary and to hia family, and the trustees were em- powered in their discretion to transfer any portion of the trust fund to the beneficiary. The court held that the bankruptcy termin- ated all of the bankrupt's legal and vested rights in and to the estate and left nothing to which hia assignee in bankruptcy could assert a claim, and that the discretionary power vested in the trustees to pay sums to the bankrupt could not be subjected to the control of the trustee in bankruptcy, the court saying: "No case is cited; none is known to us which goes so far as to hold that an absolute discretion in the trustee, a discretion which, by the express language of the will, he is under no obligation to exer- cise in favor of the bankrupt, confers such an interest on the latter that he or his as- signee can successfully assert it in a court of equity or in any other court." 146. N. Y. Real Property Law, § 103. § TO-a.J Teust Inteeests. 1135 a trust to receive and apply the rents and profits of real property is inalienable and does not pass to the trustee of the bankrupt beneficiary."'' But if the beneficiary's interest is in the nature of an annuity it is subject to levy and will pass to the beneficiary's trustee in bankruptcy,"® especially where it is in lieu and takes the place of the beneficiary's interest in her husband's estate.^** It has been held that a trustee in bankruptcy may bring a suit in equity to obtain the surplus of income from a trust fund, if that income be more than sufficient for the support of the bankrupt,^®* and under the New York code a continuing execution in the nature of garnishment may be had against the income of a trust fund.^^^ Property allotted to an Indian under an act of Congress to be held in trust for such Indian by the United States for twenty- five years, after which a conveyance is to be made by the government to the Indian free and clear from all charges and incumbrances, is not during the twenty-five years an alienable estate and does not pass to the trustee.^^^ (Ill) Mingling trust funds; following such funds. — It seems also that where the bankrupt mingles trust funds with his own so that their identity is lost, the beneficiaries must share pari passu with the creditors.^'* Persons, seeking to trace trust funds into a bank and thence into collateral which ulti- mately came into the hands of a trustee in bankruptcy, are under the burden of proving their title, and if their evidence leaves the matter of identification in doubt must be resolved in favor of the trustee in bankruptcy. ^^* There can be no departure from the general principle that to follow trust funds there must be some identification of the property sought to be charged with 147. McNaboe v. Marks, 16 Am. B. E. 767, 51 N. Y. Misc. 207, 99 N. Y. Supp. 960; Butler v. Baudolne, 16 Am. B. E. 238 n., 84 N. Y. App. DlT. 215, 82 N. T. Supp. 773, afEd. 177 N. Y. a30, 69 N. E. 1121. Contra: In re Baudolne (C. C. A., 2d Clr.), S Am. B. E. 651, 101 Fed. 574; Brown v. Barker, 8 Am. B. E. 450, 68 N. Y. App. Div. 592, 74 N. Y. Supp. 43; Matter of Eeynolds (D. C, N. Y., 40 Am. B. E. 141, 243 Fed. 272. Compare Smltli v. Belden, 6 Am. B. B. 432, 35 N. Y. MlBc. 113, 71 N. Y. Supp. 246, for method of reaching such a surplus. 148. Wetmore v. Wetmore, 149 N. Y. 520, 44 N. E. 169, 33 L. E. A. 708, 52 Am. St. Eep. 752; Mills V. Husson, 140 N. Y. 99, 35 N. B. 422. 149. In re Burtis (D. C, N. Y.), 26 Am. B. E. 310, 133 Fed. 799; In re Baudolne (C. C. A., 2d Clr.), 3 An>. B. E. 651, 101 Fed. 574. 151. Code Civil Procedure, New York, { 1391, as amended by L. 1908, ch. 148. 168. In re Eussle (D. C, Oreg.), 3 Am. B. E. 6, 96 Fed. 609. 163. In re Elchard (D. C, Teun.), 4 Am. B. E. 700, 104 Fed. 792; In re Marsh (D. C, Conn.), 8 Am. B. B. 576, 116 Fed. 396 ; In re Kurtz (D. C, Pa.), 11 Am. B. E. 129, 125 Fed. 992; In re Mulligan (D. C, Mass.), 9 Ain. B. E. 8, 116 Fed. 715; Matter of See (C. C. A., 2d Clr.), 31 Am. B. E. 680, 188 Fed. 527. 160. In re TlCEany (D. C, N. Y.), 13 Am. B. E. 360, 209 Fed. 172; Matter of Leigh (D. C, 111.), 31 Am. B. E. 379, 208 Fed. 486, holding t|iat a trust fund must be clearly traced in order to charge a bankrupt's estate with lia- bility therefor. Matter of Ferrer (D. C, Porto Eico), 40 Am. B. E. 689, 10 P. E. Fed. 262. Mingling: trust funds with ffeneral funds. — Where trust funds have been unlawfully diverted and intermingled with the general funds of a bankrupt, so as to render their identification impossible,- the bankruptcy court, acting as a court of equity, will follow them and decree restitution to the cestui que trust, if the unlawful appropriation of the trust funds resulted in swelling the assets and came into the possession of the trustee; but if after the misappropriation and mingling all the money is withdrawn, the equities are lost, although moneys from otljer sources pre subsequently deposited in the same place; or If a part of the funds so mingled is withdrawn, so that the fund is reduced to a smaller sum than the trust fund, the latter must be regarded as dis- sipated, except as to the balance, and funds subsequently added from other sources cannot be subjected to the equitable claim of the cestui que trust. In re Dunn & Co. (D. C, Ark.), 28 Am. B. E. 127, 193 Fed. 212. See also Matter of Ferrer (D. C, Porto Eico), 40 Am. B. E. 689, 10 P. E. Fed. 262. Where money Is intrusted to the bankrupt for safe keeping, and is deposited by him to his credit. It may be claimed by the owner out of the balance of such deposit coming into the hands of the trustee, although it cannot bo speciflcaUy identified, it appearing that at all times the bankrupt's account at the bank ex- ceeded the amount intrusted to him. In re Eovea (D. C, Wash.), 16 Am. B. E. 141, 143 Fed. 182. 154. Schuyler V. Littlefleld, 232 U. S. 707, 35 Am. B. E. 209, 58 Li. Ed. 806, 34 Sup. Ct. 466, holding that where one has deposited trust funds in his Individual bank account and the mingled fund is at any time whoUy depleted thi trust fund is thereby dissipated, and can- not be treated as reappearing in sums subse- quently deposited to the credit of the same account. See also Knauth v. Knight (C. C. A., 5th Cir.), 42 Am. B. K. 743, 255 Fed. 677. 156. In re Mclntyre & Co. (Petition of Grace) (C. C. A., 2d Clr.), 26 Am. B. B. 61, 185 Fed. 96; Commings v. Synnott (C. C. A., 3d Clr.), 25 Am. B. E. 859, 184 Fed. 718; Central State Bank V. McFarlln (C. C. A., 8th ,Clr.), 44 Am. B. E 1, 257 Fed. 535; Matter of Jarmulowsky (C C t'J'^ ^i"'-^' ** -*™- S- K. 432, 261 Fed. 779; Matter of BaUard (D. C, Tex.), 44 Am. B. E. 651. Trust funds. — ^Where money was paid to a bankrupt for transmission to a foreign country and was mingled with other funds of the bankrupt, and it appeared that some of the depositors received drafts which were not JP^"? ?? . ®°™* ■'®™'' received any drafts, it was held that the former could not claim against '1136 Title to Peopeett. [§. 70-a. the trust.^^^ But if there has been no mingling, the trus.tee of a bankrupt estate takes no title, though he has the right to possession and a quasi-interest until the beneficiaries prove their right.-^^" (10) DowEB AND cuETESY EIGHTS. — Here also the State law control?^""'' It is the general rule that, if the dowress is the bankrupt and her estate is vested, the trustee takes her interest ;^^'' conversely, if her interest is still inchoate, it does not pass. So also of the husband's curtesy: if vested, it passes; if merely initiate, it does not.^°* Where, however, the husband, not the wife, is the bankrupt, her inchoate interest is, in most States, sufficiently vested to endure, and the husband's title passes to the trustee subject thereto ;^^ if the husband dies after his bankruptcy, she is entitled to the same interest she would have taken had he died before it.^"" If a purchase-money mortgage has been given by a bankrupt husband, the contingent right of dower of his wife- only attaches to the surplus remaining after the payment of the mortgage debt.-^^^ If a bankrupt's wife consents to the sale by the trustee of the bankrupt's real property, and to accept a gross sum. in lieu of her dower, such property may be sold free from her inchoate right of dower j^"^ but there can be no such sale vsatiout the wife's consent.^^^ On the other hand, where the wife is the bankrupt, the husband is not entitled to have his curtesy initiate admeasured. If the mortgage in which the wife has joined is declared void as a preference, the wife's right of dower is restored.-^^ These doctrines flow from well-recog- nized principles of real estate law. Oases collaterally valuable will be found in the foot-note."* the fund which had been traced but that the latter were prima facie entitled to share In the fund, and that the amount must be stated and the various priorities awarded beginning on the first day when the fund was less than the trust money and then on the next day when the new deposits in the fund were insuffi- cient to cover the new trust money, and so on. Matter of Bolognesi & Co. (C. C. A., 2d Cir.), 42 Am. B. E. 548, 254 Fed. 770. 166. In re Cobb (D. C, N. C), 3 Am. B. R. 129, 96 Fed. 821. If the trust is coupled with an interest, he becomes vested with the Interest. Walker v. Siegel, Fed. Cas. 17,085. 156a. Carver v. Ward (W. Va. Sup. Ct. of App.), 41 Am. B. E. 557, 95 S. E. 828; Matter of Munford (D. C, N. Car.), 43 Am. B. E. 218, 255 Fed. 108. 157. Compare In re Watterson, 95 Pa. St. 312. 168. Hesseltine v. Prince (D. C, Mass.), 2 Am. B. R. 600, 95 Fed. 802; Matter of Eussell (Ref., Ohio), 13 Am. B. E. 24. . Interest in property purchased for wife with money of husband; Virg:ini£b Kule. — Where a husband causes property to be conveyed to his wife and pays a portion of the purchase price from his own funds, with the Intent of giving the same outright to his wife, and subsequently pays the balance of the purchase price after her death, and thereafter becomes a voluntary bankrupt, his trustee cannot, under the law of Virginia, claim an interest of the bankrupt as tenant by curtesy in the property which be- longed to his wife, for the rule in that State is that where a husband transfers, or causes to be transferred, real estate to his wife the presumption is that he transfers his entire interest, Including all his marital rights. Cox V. WaUace (C. C. A., 4th dr.), 33 Am. B. E. 186, 210 Fed. 126. 169. In re Shaeffer (D. C, Pa.), 5 Am. B. P 248, 104 Fed. 973; In re Forbes (Ret, Ohio), 7 Am. B. R. 42; Porter v. Lazear, 109 U. S. 84, 27 L. Ed. 865, 3 Sup. Ct. 58; Matter of Ha^fklns (Eef., B. I.), 9 Am. B. R. 598; Thomas v. Woods (C. C. A., 8th dr.), 23 Am. B. R. 132 173 Pea. 585. But see Kelly v. Strange, Fed. Cas. 7,676. As to rule in Pennsylvania, see In re Freedman (Ref., Pa.), 29 Am. B. R. 135; Matter of Chotiner (D. C, Pa.), 32 Am. B. R. 760, 216 Fed. 916; Carver v. Ward (W. Va. Sup. Ct. of App.), 41 Am. B. E. 557, 95 S. H. 828. Contputation of value of dower ; effect ef assent to compromise. — In Ohio the wife of a bankrupt Is entitled to receive from the trustee out of the proceeds of the sale of the bank- rupt's real property remaining after satisfaction of mortgage liens, the value of her contingent right of dower, computed upon the gross sell- ing price of the property. The wife's right to dower is not barred by the compromise of a claim by the trustee to which she assented. Matter of Strauch (D. C, Ohio), 31 Am. B. E. 36, 208 Fed. 842. Where a fixed sum in lieu of dower rights in the surplus remaining from the sale of mort- gaged lands of a bankrupt is determined by the difference of the expectancy of the life of the wife and the bankrupt as shown by mor- tality tables, and the wife Is willing to accept such sum In lieu of dower, the court may direct Its payment, if there are no objections by other interested parties. Matter of Munford (D. C, N. Car.), 43 Am. B. E. 219, 255 Fed. 108. 160. In re Hester, Fed. Cas. 6,437. But see Bosteck V. Jordan, 54 Tenn. 370. The rule is different under the Arkansas statute. In re McKenzie (C. C. A., 8th Cir.), 15 Am. B. H. 679, 142 Fed. 383. 161. Matter of Hays (C. C. A., 6th dr.), 24 Am. B. E. 669, 181 Fed. 674; Matter of Mumfor-l (D. C, N. Car.), 43 Am. B. E. 218, 255 Fed. 108 162. Matter of AcreteUi (D. C, N. Y.), 21 Am. B. E. 537, 173 Fed. 121; Savage v. Savage (C. C. A., 4th Cir.), 15 Am. B. R. 599, 141 Fed. 346. See also Matter of Mumford (D. C, N. Car.), 43 Am. B. E. 218, 255 Fed. 108. 16!8». KeUy V. Minor (C. C. A., 4th Cir.), 41 Am. B. R. 215, 252 Fed. 115. § 70-a.j Licenses and Feanchises. 1137 (11) Licenses, franchises, and personal privileges. — (I) In general. — Property rights which by their terms are either nonassignable or restricted to the person originally acquiring them, often furnish puzzling problems. Thus of nonassignable leases. The English and American rules seem to be different ; the better American opinion is that a bankruptcy, even if voluntary, is not a breach of a covenant not to assign. ^'^ The irustee of a bankrupt tenant is, therefore, entitled to the leased premises for the remainder of the term.^®® Pensions or annuities payable to State or municipal employees after long and continued services are not in the nature of property rights, but are public bounties as awards for such services, granted as an encouragement for continuance in official positions; they are not subject to execution and are not transferable, and hence do not pass to trustees in bankruptcy. ^^^ (II) Personal contracts. — A contract between a publisher and an author, whereby the former undertakes to publish and market literary productions of the latter, is not assignable ;^^ nor is a contract with a person for the manu- facture by him of a particular commodity requiring special skill of the manufacturer.^®® But there is a difference between an absolute assignment of a contract and an assignment of rights under a contract. Thus, under a contract between an insurance company and its agent, commissions on renewal premiums on policies written prior to the agent's adjudication as a bankrupt, but unaccrued at that time, pass to his trustee as property which the bankrupt might have assigned without the consent of the company. "^^^ The "medical and surgical practice and good will" acquired by a bankrupt physician by contract with another physician does not pass to his trustee in bankruptcy."^ (III) Franchises and licenses. — Whether a franchise or a license passes to the trustee on the bankruptcy of its owner depends usually on the terms of the instrument creating it, or, if that is silent, on whether in its nature it calls for personal skill or discretion."^ It has been held that a franchise to con- struct a turnpike road, and to collect the tolls was a personal trust and did not pass to the assignee in bankruptcy since the person who had the franchise could not voluntarily assign it, the consent of the party conferring the fran- chise being necessary by reason of the personal character of the work to be performed."^ But a franchise which gave to one the right to take tolls from persons crossing a certain bridge has been held to be assignable."* It is already well settled that a bankrupt's interest in a license to sell liquors irS. Matter of Liugafelter (C. C. A., 6tli Cir.), H. 23, 134 Fed. 142; In re Rubel (D C Wis 1 24 Am. B. E. 656. 21 Am. B. R. 566, 166 Fed. 131. " '' 164. Hawk V. Hawk (D. C, Ark.), 4 Am. B. l^J- Matter of Hoag (D. C, N. Y.), 36 Am. R. 463, 102 Fed. 679; In re Garner (D. C, Ga.), B. R. 142, 227 Fed. 478. 6 Am. B. R. 596, 110 Fed. 123 ; In re Rooney (D. 168- Matter of McBride & Co. (D. C, N. Y ) C, Vt.), 6 Am. B. R. 478, 109 Fed. 601; Matter 12 Am. B. E. 81, 132 Fed. 285. of Tletje (D. C, N. Y.), 44 Am. B. R. 638, 263 „1^9;„'r«"er Brewing Co. t. ScoUan, 15 Am. B. Fed. 917. R. 300, 111 N. Y. App. Dlv. 925, 96 N. T. Supp. 166. For the English rule. Bee Doe v. Bcyan, 1130. 3 Maule & S. 353; Doe v. Smith, 5 Taunt. 795; A^'^'^^i^^L/'^^"^" /f; ^i,^'J^ ^'"■■'' !» Dommett v. Bedford, 3 Ves. 148. For the ,4?- J^. S' i^t'J^^ '^^'^J*!' ^^f- 18 Am. B. E. American, Starkweather v. Cleveland Ins. Co., ^^^i,}^J„^^^\^,^' ^^TK' J? "^'"v^J ^- ™' Fed. Cas. 13,308; Perry v. Lorillard, 61 N. Y. 3"^; 24, lo8 p|" 407 ' '' ^^ '^™- .■. ^. i i. i. . ... , 172- Parsons on Contracts, Part II ch 12 A tenant's covenant not to assign his lease ; 9. Peonle v niincan it rai kot. ai™ * ' without the landlord's permission in writing Hargrove 23 Ala 429 ' ^'®'^^'^' ^• does not apply to an ad.1udication of the ten- 173. People v. Duncan 41 Cal B07 ?7f Fe'dTlS^"- *"•■ ^- ^'^ '' ^■"'- ^- ^- ""'• B."R-.'53/l3^^°e^''°6l3;''Jn-^re &^ (l.^g; J.** rea. txa. Mass.), 3 Am B R 4nfl or v*art aa ^rp^t 166. In re Adams (D. C, Conn.), 14 Am. B. as Fisher v. Cushman (C. C. A., 1st' ai^'. 72 1138 Title to Pbopbety. [§ TO-a. passes to his trustee;"® but this question is dependent upon the statute under which the license is issued,^™ and whether it was granted before or after the bankrupt's adjudication."^ If the law under which a liquor license is granted makes it a mere personal privilege and not a property right, it may not be mortgaged, and where it is attempted, the mortgagee's interest will not prevail as against that of the licensee's trustee in bankruptcy."* A license to occupy a city market is property passing upon the bankrupt licensee, and the court will order an assignment to the trustee of such property."* A trustee must conform in all respects to a license which comes to him upon the bankruptcy of a licensee; in respect to such license he occupies the same position as the bankrupt licensee. ^^^ (IV) Seat in stock exchange. — It has been ield that the bankrupt may be ordered to transfer a seat in a stock exchange to his trustee.'*^ But the 4 Am. B. E. Wi, lOS Fed. S60; In re Becker (D. C, Pa.), 3 Am. B. R. 412, »8 Fed. 407; In re May (Ref., Minn.), 5 Am. B. R. 1; Matter of Weisel & Knaup (D. C, Pa.), 23 Am. B. R. 59', 173 Fed. 718, holding that the right to apply for a renewal of a liquor license is an asset which passes to the trustee. Compare In re Emrich (D. C, Pa.), 4 Am. B. R. 819'; 101 Fed. 23'1. 176. Assignability of liquor license under State law.— In re McArdle (D. C, Mass.), 11 Am. B. R. 3158, 126 Fed. 442, in which case the court applied the case of In re Fisher (D. C, Mass.), 3 Am. B. R. 4i06, 9« Fed. 88, as limiting the right of a trustee to realize upon the value of a liquor license to a case where the granting authority gave its assent thereto ; it was there held that a bankruptcy court should not enforce the claim of a mort- gagee to the proceeds of the bankrupt's liquor license, where the granting power, on grounds of public policy and interest, declines to recognize any right in the licensee to mort- gage his license, and any claim of the mort- gagee therein. In re Olewine (D. C., Pa.) , 11 Am. B. R. 40, 125 Fed. 840; Tracy v. Gins- berg, 1® Am. B. R. 792, 189 Mass. 260'; Snyder v. Rougher, 16 Am. B. R. 792, 214 Pa. St. 453, hold'ing that although a liquor license may not be sold by the trustee, yet the fijctures and furniture may be sold on condition that the license shall be transferred to the purchaser by the license court; Matter of Keller (Ref., Ga.), 16 Am. B. R. 727, arising under Georgia statute. 177. Whitlock's License, 22 Am. B. R. 262, 30 Pa. Super. Ot. 34. Liquor license; unexpired term and right to renewal. — Where a bankrupt at the date of his adjudication holds an unexpired liquor license with the right to a reneiwal, the un- expired term and the right to a renewal pass to his trustee and upon their sale by the receiver the bankrupt may be ordered to join in proceedings for a renewal necessary to make the sale eflFective. Matter of Doyle (C. '0. A., 3d Cir.), 31 Am. B. R. 571, 209 Fed. 1, revg. 30 Am. B. R. 58, 205 Fed. 543. 178. Gilday v. Warren, ©9 Conn. 237, 37 Atl. 4194; Joyce on Intoxicating Liquors, § 238. See also Tracy v. Ginsberg, 16 Am. B. R. '792 (note) , 189 Mass. 2«0, 75 N. E. 637. The statutes of Virginia provide that no license to traffic in liquors shall be granted to any person who is not a qualified voter of the county or city in which the 'business is to 'be conducted; that if the licensee is a corporation, its agent selling such liquor must be so qualified. The applicant must be a fit person and personally superintend the business. Every license is deemed to confer a personal privilege and may only be assigned to a person to whom it might originally liave been granted, the validity of such assignment depending upon a certificate in favor of the assignee mside by the court granting the original license. In case of the death of the licensee, his personal representative has like powers of assignment. Under such pro- visions, held, that the trustee of a bankrupt licensee is entitled to the proceeds of such license as against a brewing company claim- ing the same by virtue of an attempted as- signment thereof, given prior to the granting of the license, as security for a loan to the bankrupt of the greater part of the license fee. In re Flaherty (D. C, Va.), 25 Am. B. R. 943, 184 Fed. 962. A stock of liquors held by a bankrupt, duly licensed under the statutes of » State, is property which passes to the trustee in bankruptcy, .although under the State statute the trustee cannot sell or dispose of the same. Strub V. Gamble (C. C. A.. 8th Cir.), 34 Am. B. R. 229, 221 Fed. 253. 179. In re Emrich (D. 'C, Pa.), 4 Am. B. R. 819, 101 Fed. 231. 180. In re Spitzel & Co. (D. C, OST. Y.), 21 Am. B. R. 729, 168 Fed. 156. Fountain pens under license agreement. — Where a fountain pen company, having de- livered pens under a license agreement for sale at retail, fails to comply with the law of bailments of West Virginia, its patented articles pass absolutely without a,ny limita- tion into tlie hands of the trustee in bank- ruptcy of the licensee. Waterman Co. v. Kline (C. C. A., 4th Cir.), 37 Am. B. R. 252, 234 Fed. 991. 181. In re Page (D. C, Pa.), 4 Am. B. R. § 70-a.] Life Insurance Policies. 1139 question as to whether a seat in a stock exchange belongs to a bankrupt and is, therefore, to be administered as part of his assets by the trustee depends upon the facts in each particular case.^®^ The fact that the sale of a seat in a stock exchange is hindered by conditions contained in the by-laws or con- stitution of the exchange would not affect the question ; the court naay direct the bankrupt member to take such action as may be required to pass title. ^** Although the seat passes to the member's trustee in bankruptcy, it is not available to him as an asset of the estate, until the claims of other members of the exchange have been settled by the sole tribunal entitled to pass upon the same according to the laws of the exchange.^^ (12) Life insueance policies. — (I) In general. — These rights are akin to those personal privilege^ just considered. The bankrupt is obliged to enumerate such policies in Schedule B (3) accompanying his petition. Here, also, the test is: Was the interest of the insured transferable or subject to levy ? Where a policy has been pronounced valueless and turned over to the bankrupt, and the premiums thereof are paid either by himself or his wife, and the bankrupt dies soon after the policy is so turned over, the proceeds of the policy do not belong to his estate in bankruptcy.^** Creditors not participat- ing in the distribution of the estate may recover on life insurance policies of the bankrupt although they participated in the election of trustee and were represented at meetings of the creditors. ^*^* The meaning and effect of the proviso clause in subdivision (5) is considered in a later paragraph.^*" (II) Cash surrender value. — If the policy has an expressed cash surrer.der value, payable to the bankrupt, and enforceable by him, it is, of course, within 467, 102 Fed. 747; In re Gaylord (D. C, Mo.), 7 Am. B. R. 195, 111 Fed. 717; Matter of Hurl- butt (C. C. A., 2d Cir.), 13 Am. B. E. 50, 68 C. C. A. 216. See Am. Bankr. Dig. § 330. 182. Burleigh v. Foreman (C. C. A., 1st Cir.), 12 Am. B. E. 88, 130 Fed. 13, revg. 9 Am. B. R. 237, 118 Fed. 348 ; Board of Trade v. Weston (C. C. A., 7tli Cir.), 40 Am. B. E. 263, 243 Fed. 332; Matter of Stringer (C. C. A., 2d Cir.), 41 Am. B. E. 510, 253 Fed. 352. Scat in stock exchange as property, — In the case of Page v. Edmunds, 187 U. S. 596, 9 Am. B. E. 277, 47 L. Ed. 318, 23 Sup. Ct. 200, affg. 5 Am. B. E. 707, 107 Fed. 89, It was held that a seat or partnership in a stock exchange, which by its articles provided that a member may sell his partnership provided there is no unsettled contract or claim against him by any other member of the exchange, arising out of the business of the exchange, subject to the approval of the proper authorities, is property which prior to the filing of the petition the bankrupt might have transferred, and which, therefore, passes to and vests in his trustee. See also Cohen v. Budd, 17 Am. B. E. 329, 52 N. Y. Misc. 217, 103 N. Y. Supp. 45; Matter of Gregory (C. C. A., 2d Cir.), 23 Am. B. fi. 270, 174 Fed. 629; Wrede v. Clark (Sup. Ct., N. Y.), 21 Am. B. E. 821, 132 App. Div. 293, 117 N. Y. Supp. 5, holding that a property right in a seat on the N. Y. Stock Exchange passes to a receiver in supplementary proceedings or to a trustee in bankruptcy as the case may be, but If an order in supplementary proceedings Is served prior to the four months' period, the title of the receiver appointed In such pro- ceedings relates back to the commencement thereof, and is superior to the title of the trustee. 183. O'Dell V. Boyden (C. C. A., 6th dr.), 17 Am. B. E. 751, 758, 150 Fed. 731; In re Hurl- but & Co. (C. C. A., 2d Cir.), 13 Am. B. R. 50, 135 Fed. 504; Board of Trade v. Weston (C. C. A., 7th Cir.), 40 Am. B. E. 263, 213 Fed. 332. 184. In re Currle (C. C. A., 2d Cir.), 26 Am. B. E. 345, 185 Fed. 263; Solinsky v. N. Y. Stock Exchange (D. C, N. Y.), 44 Am. B. E. 56, 260 Fed. 266. Effect of rules of exchange. — A stock- brokerage firm loaned stock that it had pur- chased for ii customer to another firm as security for a deposit. The rules of the stock exchange of which both firms were members, provide that on the insolvency of a member other members shall have a lien on his seat for debts due them, and also that other members holding securities of the insolvent must close them out under the rules of the exchange. Held, that the rules of the ex- change became part of the contract between the members and that the firm holding the security was bound to sell it as provided by the rules before it could establish any claim to the proceeds of the sale of the seat if the amount realized from the stock was insuf- ficient, and consequently they had but one security for their debts, and as this was suffi- cient they never became entitled to a lien on the stock exchange seat and therefore the creditor had no right of subrogation against such seat. Matter of Van Sehaick & Cb (C. C. A., 2d Cir.), 37 Am. B. E. 59, 228 Fed. 465. 185. Meyers v. Josephson (C. C. A. 5th Cir.). 10 Am. B. R. 687, 124: Fed. '734; Benjamin v. Chandler (D. C, Pa.), 15 Am B. R. 439, 142 Fed. 217. 185a. Andrews v. Nix & Co. (U. S. Sup a.), 41 Am. B. R. 260, 38 Sup. Ct. 249. 18S. See discussion under this section, post subtitle "Exempt property." ' 1140 Title to Pbopbety. [§ tO-a. the proviso, and unless the amount thereof is paid or secured as therein pro- vided, it passes to the trustee,^®'' A policy may have a cash surrender value, although none be expressed in the policy; if it have a value recognized by the practice of the company so that upon a surrender of it the insured vyould receive a financial benefit, it has a cash surrender value.^*^ Cash surrender value means the amount v?hich would have been paid by the company, had the policy been surrendered, even though no amount was stipulated in the policy. ^^^ If it appear that the company will pay a prescribed amount upon the surrender of the policy, the effect is the same as though there was an expressed cash surrender value, and the bankrupt may retain the policy upon paying or securing the payment of such amount. ^^^ Such a policy so passes to the trustee, even without the consent or assignment of the beneficiary, and the bankrupt may be ordered to execute any necessary papers to accomplish the transfer. -^^^ Where, however, there is no surrender value, as, for instance, in "ordinary life" policies, ^^^ nothing passes to the trustee.-'^^ It is not the policy, but the cash surrender value thereof, which passes to the trustee.-'®* So that if the cash surrender value is paid into the estate, by or in behalf of the bankrupt, the policy, and all other rights under it, revert to the bank- rupt. ^^^ And if the bankrupt has borrowed upon his policy from the com- 187. In re Diack (D. C, N. Y.), 3 Am. B. E. 723, 100 Fed. 770; In re McDouneU (D. C, Iowa), 4 Am. B. E. 92, 101 E'ed. 239; In re Moore (D. C, Tenn.), 23 Am. B. E. 109, 173 Fed. 679; In re WolfE (D. C, N. Y.), 21 Am. B. E. 452, 165 Fed. 9S4. No default in premium, — The trustee Is entitled to tlie cash surrender value although no default in premium has been made at the date of bankruptcy. Traveler's Ins. Co. v. Middlekamp (Colo. Sup. Ct.), 44 Am. B. E. 403, 185 Pac. 335. 188. Malone v. Cohn (C. C. A., 5th Cir.), 38 Am. B. E. b7, 236 Fed. 8S2, affd. 43 Am. B. E. 1, 39 Sup. Ct. 141; In re Boardman (D. C, Mass.), 4 Am. B. E. 620, 103 Fed. 788; Matter of Gan- non (C. C. A., 2d dr.), 40 Am. B. E. 518, 247 Fed. 932. 189. Hiscock V. Mertens, 205 XJ. S. 202, 17 Am. B. R. 484, 51 L. Bd. 771, 27 Sup. Ct. 488, afCg. 15 Am. B. E. 701, 142 Fed. 445, revg. 12 Am. B. K. 712, 131 Fed. 972; Holden v. Stratton, 198 U. S. 202, 14 Am. B. E. 94, 49 L. Bd. 1018, 25 Sup. Ct. 656, containing dicta to same effect. The test of *' surrender value " is whether the policy has a present cash value available to the insured bankrupt in accordance with fixed method, and by the exercise of his own unas- sisted wiU. Matter of Samuels (0. C. A., 2d Cir.), 42 Am. B. K. 434, 254 Fed. 775. 190. Matter of Phelps (Eef., N. Y.), 15 Am. B. E. 170; In re Coleman (C. C. A., 2d Clr.), 14 Am. B. R. 461, 136 Fed. 818 ; CTark v. Equit- able Life Assur. Co. (C. C, Pa.), 16 Am. B. E. 137, 143 Fed. 175; Gould v. New York Life Ins. Co. (D. C, Ark.), 13 Am. B. E. 233, 132 Fed. 927; In reBuelow (D. C, Wash.), 3 Am. B. E. 389, 98 Fed. 86; In re White (C. 0. A., 2d Cir.), 23 Am. B. R. 90, 174 Fed. 333; In re HettUng (C. C. A., 2d Cir.), 23 Am. B. E. 161, 175 Fed. 65; Equitable Life Assurance Co. v. Miller (C. C. A., 8th Cir.), 25 Am. B. R. 560, 185 Fed. 98; In re Herr (D. C, Pa.), 25 Am. B. E. 141, 182 Fed. 715; Matter of Samuels (C. 0. A., 2d Cir.), 42 Am. B. E. 434, 254 Fed. 775. Contra: Van Kirk V. Slate Co. (D. C, N. Y.), 15 Am. B. R. 239, 140 Fed. 38; In re Welling (C. C. A., 7th Cir.), 7 Am. B. E. 340, 113 Fed. 189; In re SlinglutC (D. C, Md.), 5 Am. B. E. 76, 106 Fed. 154, repudiating In re Hernick (Eef., Md.), 1 Am. B. E. 713. See also In re Becker (D. C, N. Y.), 5 Am. B. E. 438, 106 Fed. 54. 191. In re Diack (D. C, N. Y.), 3 Am. B. E. 723, 100 Fed. 770; In re Whelpley (D. C, N. Y.), 22 Am. B. E. 433, 109 Fed. 1019. For the duty of the trustee touching policies of life Insurance, see In re Welling (C. C. A., 7th dr.), 7 Am. B. E. 340, 113 Fed. 118. 19». Gould V. New York Life Ins. Co. (D. C, Ark.), 13 Am. B. E. 233, 132 Fed. 927. A trustee cannot claim any more than the cash surrender value of a life insurance policy. He has no right whatever to a policy in which there is no cash surrender value. King v. Miles (Miss. Sup. Ct.), 34 Am. B. E. 93, 67 So. 182. 193. In re Lange (D. C, Iowa), 1 Am. B. E. 189, 91 Fed. 361; In re Buelow (D. C, Wash.), 3 Am. B. E. 389, 98 Fed. 86; In re McDonnell (D. C, Iowa), 4 An*. B. R. 92, 101 Fed. 239; In re Judson (C. C. A., 2d Cir.), 27 Am. B. E. 704, 192 Fed. 834, afifd. 228 U. S. 459, 30 Am. B. E. 6, 57 L. Bd. 920, 33 Sup. Ct. 564; Matter of Fetterman (D. C, Ohio), 39 Am. B. E. 834, 243 Fed. 975. Policy witU optional benellts. — Where at the date of adjudication of a bankrupt his wife is the sole beneficiary under a life insurance policy upon which the premiums have all been paid and the bankrupt is only entitled to certain optional benefits at the maturity of the policy, such optional benefits do not pass to the trustee in bankruptcy under section 70-a. Matter of Churchill (C. C. A., 7th Cir.), 31 Am. B. E. 1, 209 Fed. 766, revg. 29 Am. B. R. 153, 198 Fed. 711. 194. Burlingham v. Grouse, 228 U. S. 459, SO Am. B. E. 6, 57 L. Ed. 920, 33 Sup. Ct. 564; Everett v. Judson, 228 U. S. 474, 30 Am. B. E. 1, 57 L. Ed. 927, 33 Sup. Ct. 8; Matter of Hamnel & Co. Care should be taken to distinguish bkween goods sold on condition and goods consigned, and positive identifica- tion of the latter should be required.^" If it is intended by the contract that the purchaser should be absolutely bound in all events to pay for the goods, the title2 being reserved in the vendor, then the contract is one of con- ditional sale; but if the vendor merely delivers the goods to be sold by the vendee with no obligation to pay for those unsold, the contract is merely a consignment for sale.^^^ As to the avails of goods so consigned, but sold by him before the bankruptcy, the funds being mingled with his own, title thereto passes to the trustee. ^^ The owner of the proceeds of the goods may recover them in full, to the extent of his ability to trace them into the hands of the bankrupt's trustee. ^^* "Where seizure is necessary to establish the creditor's rights, title will not pass unless seizure is made before the bankruptcy.^* Where, however, the property is merely consigned for sale, the bankrupt is not a vendee on condition.^* If consigned for sale the bankrupt was a bailee terms bailments, but It appeared that at tbe same time the Instruments • were executed, claimant accepted from bankrupt negotiable notes, not only for the respective amounts pro- vided to be paid by baukrupt in case he exer- cised the options to pur^.'hase said machinery, the intention to return the property is denied by the acts of the parties, and the transaction constitutes, not a bailment or lease, but a sale. Tn re Gaplioiie & Son (D. C, Pa.), 28 Am. B. E. 694, 200 Fed. 81. Contia«t in terms a bailment. — Although the mere use of words "lease" and "rental" In a written agreement relating to personality, will not convert Into a bailment what must other- wise be construed as a conditional sale, yet, even in a contest in which execution creditors are concerned, if the contract by its terms is a bailment, it will be given that effect to the ex- clusion of the execution creditors. Smith & Bro. Typewriter Co. v. Alleman (C. C. A., 3d Cir.), 28 Am. B. E. 699, 199 Fed. 1. 229. Nylin v. American Trust & Sav. Bank (C. C. A., 7th Cir.), 21 Am. B. E. 533, 166 Fed. 276; In re Boschelll (D. C, Pa.), 25 Am. B. E. 528, 183 Fed. 864; In re Daterson Pub. Co. (C. C. A., 3d Cir.), 26 Am. B. E. 582, 188 Fed. 64; Matter of Nat. Engineering & Equip- ment Co. (D. C, Wash.), 42 Am. B. E. 208, 256 Fed. 985. Keturn of amounts advanced by bankrupt. — Goldman v. Shreve (C. C. A., 3d dr.), 45 Am. B. R. 285, 263 Fed. 74. 230. See Am. Baukr. Dig. § 398. Consig:nnient, conditional sale and sale dis- tinguished. — V^^hether an assignment is a con- signment, a conditional sale, or a sale on credit, depends less on how it is described by the parties than on the rights and liabilities created by it. Matter of Aronson (D. C, Mass.), 40 Am. B. E. 177, 245 Fed. 207. The delivery of property to be paid for when sold constitutes a consignment, and the con- signor may recover such property from the trustee in bankruptcy of the consignee. Mat. ter of Bondurant Hardware Co. (D. C. Ga.), 37 Am. B. E. 308, 231 Fed. 247. And see Gray V. Martin & Co. (Ga. Ct. of App.), 37 Am. B. E. 50O, 89 S. E. 540; Matter of Nat. Home & Hotel Supply Co. (D. C, Mich.), 35 Am. B. E. 139, 226 Fed. 840 ; Adams v. Meyers, Fed. Cas. 62. See In re Levin (D. C, Pa.), 11 Am. B. E. 446, 127 Fed. 886; Matter of Leflys (C. C. A., 7th dr.), 36 Am. B. E. 306, 229 Fed. 695. Goods mingled so as to be impossible of identification. — ^A rubber company by contract made bankrupt its agent, and consigned to liim goods for sale upon certain terms. It waa expressly stated that the goods should be and remain the property of the company until sold and delivered by the agent to its lona fide customers. The agent was not only permitted to mingle the consigned goods with his own stock, but the contract expressly pro- vided that the consignors would furnish the consignee "free of charge all samples of tires and accessories and necessary advertising matter, imprinted with the name and address of the consignee." Held, that, as to the cred- itors of the bankrupt agent, title to the con- signed goods should be held to have passed to the consignee, and that they cannot be reclaimed by the consignor. Miller Rubber Co. V. Citizens' Trust and Savings Bank (C. C. A., 0th Cir.), 37 Am. B. R. 542„ 233 Fed. 488. 231. Matter of Thomas (D. C, Ga.), 36 Am. B. R. 600, 231 Fed. 513; Matter of Aronson (D. C, Mass.), 40 Am. B. R. 177, 245 Fed. 207. 232. Compare Bills v. Schliep (C. C. A., 2d Cir.). 11 Am. B. R. 607, 127 Fed. 103. 233. In re Acheson Co. (C. C. A., 9th Cir.), 22 Am. B. R. 338, 170 Fed. 427. 234. In re Ohio, etc., Co. (Ref., Ohio), 2 Am. B. R. 775. 235. In re Columbus Buggy Co. (C. C. A., 8th dr.), 16 Am. B. E. 759, 143 Fed. 859; Deere Plow Co. v. McDavid (C. C. A., 8th Cir), 14 .V::.. B. E. 653, 137 Fed. 802 ; In re Miller (D. C. § 70-a.J Peopbety Soi. B. B. 184, 120 Fed. 992; In re O'Connor (D. C, Ga.), 9 Am. B. B. 18, 114 Fed. 777; Silvey v. Tift, 17 Am. B. E. 9, 123 Ga. 804, 51 S. E. 748; Matter of Levi (D. C, N. Y.), 16 Am. B. B. 756, 148 Fed. 654, holding that in the absence of fraud in making the statement, reclamation should not be aUowed ; In re Rose (D. C, Pa.), 14 Am. B. E. 345, 135 Fed. 888, In which case it was held that the return of goods should not be permitted where the evidence is insufficient as to the making of a false verbal statement to a commercial agency ; Levi v. Picard (D. C, N. Y.), 17 Am. B. E. 439, 148 Fed. 654; Matter of Johnson (D. C, Ohio), 30 Am. B. E. 787. False financial statement inducing sale to bankrupt; intent not to pay. — In a pro- ceeding by a creditor to reclaim from a trus- tee goods sold to the bankrupt as on a false and fraudulent financial statement on which the creditor relied, it is not necessary, in order to constitute fraud authorizing re- scission of the sale, that the financial state- ment shall have been made by the bankrupt with intent not to pay, but it may be re- scinded, regardless of his intent about pay- ing if induced by his false and fraudulent representations. But where it appeared that the financial statement was incomplete rather than false and fraudulent, and the subsecLuent conduct of the bankrupt accorded with honesty and good faith, the bankrupt could not be said to have made a false or fraudu- lent financial statement upon which an action by the creditor relying thereon could be based. EUet-Kendall Shoe Co. v. Ward (C. C. A., 8th Cir.), 26 Am. B. R. 114, 187 Fed. 982. Right to recover goods obtained by false epresentalions innocently made. — Where a bankrupt makes false statements inducing a sale of goods to him, it is not necessary tliat such statements should have been made with a fraudulent intent to entitle the vendor to reclaim the goods. Matter of Underwood & Daniel (D. C, Ga.), 32 Am. B. R. 779, 215 Fed. 279. 266._In re Stewart (D. C, N. Y.), 84 Am. B. R. '474, 178 Fed. 4C3; In re Kenyon (D. C., Ohio), 19 Am. B. R. 194, 156 Fed. 863, in which case the right to rescind a deposit § 70-a.] Reclamation Peoceedikgs. 1155 (II) Intent not to pay.— Knowledge of inability to pay when purchase is made is equivalent to purchase with intent not to pay, and such purchase is constructively fraudulent.^®'' If there was no concealment of the fact of insolvency indicating that the purchaser designed to acquire the goods without paying for them, there is no fraud justifying reclamation.^** (III) When right exercised; who may defeat right. — He should exer- cise this right before he has of his own volition placed himself in the posi- tion of a creditor, for if he joins in the election of a trustee, with knowledge of the fraud perpetrated against him, he is estopped from thereafter insist- ing on a return of the goods. ^® The trustee may not prevent reclamation upon the assumption that he is in a favored position because of the amendment of- 1910 to § 47-a (2) which places him in the position of a lien creditor; this amendment does not constitute the trustee a bona fide purchaser for value, and it is only such a purchaser of the article ■ sought to be reclaimed who may defeat reclamation.^™ (IV) Proof of insolvency, or of intent not to pay. — Whether or not proof of insolvency is essential depends upon the character of the representation which institutes the sale. If the representation consists of a statement as to solvency, it would be necessary to prove insolvency to justify a reclamation of the goods sold;^^ and also the concealment from the claimant of the fact of insolvency, and the intention on the part of the bankrupts at the time of the sale not to pay for the goods.^^^ If, on the other hand, a solvent purchaser falsely represents the extent of his assets with the purpose of obtaining credit, and the seller, relying on this false representation, lets him have the goods when otherwise he would have declined the sale and insolvency thereafter contract with a bank and recover the money tion of a bona fide purchaser for value, but deposited was recognized, but it was held only gives him the right of a lien creditor, that the depositor waived his right to rescind and therefore, where it appears that bank- by retaining the certificate of deposit and rupt made a false statement of its financial making no offer to surrender it. condition to a mercantile agency which com- 267. Matter of Siegel Co. (D. C, Mass.), municated it to one who relying thereon 36 Am. B. E. 130, 223 Fed. 3'69. extended credit to bankrupt, at a time when 268. In re Marengo County Mercantile Co. it was hopelessly insolvent, and it further (D. C., Ala.), 29 Am. B. R. 46, 199 Fed. appears that, in the circumstances, the vend- 474. or's right to rescind the sale and reclaim 269. Standard Varnish Works v. Haydock the property is, under the law of Colorado, (C. C. A., eth Cir.), 16 Am. B. R. 286, 143 superior to the lien of a judgment creditor Fed. 318; Matter of Kaplan & Myers (D. C, and enforceable against all except bona fide Pa. ) , 37 Am. B. R. 630. purchasers for value, the vendor is entitled Waiver of fraud by creditor. — An intention to reclaim the unsold part of its goods from of a creditor, holding a note to waive the bankrupt's trustee, notwithstanding the fraud and rely on the contractual obligation amendment. Compare In re Whatley Bros, for which the note was given, cannot be in- (D. C, Ga.), 29 Am. B. R. 64, 199 Fed. 326. f erred from the presentation of the note, not Goods obtained by fraud; laches. — Where yet due, after a petition in bankruptcy has about five months before bankruptcy claim- been filed against the maker. The right of ant sold to bankrupt a soda fountain and a vendor to reclaim property obtained by appurtenances under a conditioral sale eon- fraud Is not waived by the fact that its attor- tract, but made no rescission of the contract ney joined in a petition to set aside an order „,. effort at reclamation before bankruptcy of sale, and, without authority, described tho . , j -j. u j. i ■ ii. r ~/ vendor as a creditor, but at the hearing stated mtervened, it could not reclaim the property that his client had not decided what it "is on the ground that the sale had been in- going to do yet." Matter of Midland Motor duced by fraud. Becker Co. v. Gill (C. C. A.. 224 Fed fea ^' ^" ^'^ ^*'^ ^"■^' 3" -^'°- ^- ^- ^29. 206 Fed. 36. «70. Matter of Collins (D. C, Ala.), 39 Am. _271- Matter of Marks & Co (C. C. A., B. R 510, 242 Fed. 975; Jones v. Hobble 3d Cir.), 33 Am. B. R. 275,. 218 Fed. 453 j Grocery Co. (C. C. A., 5th Cir.), 40 Am. B. R. Matter of N. Y. Commercial Co. (C. C. A., holding that the amendment of 1910 to Section ^^l^\¥^^^" °^ J^^^}/ ^, ^- j^;,?' ^^ ^ 47a (2) does not put the trustee in the posi- Cir.), 33 Am. B. R. 275, 218 Fed. 453. 1156 Title to Peopeety. [§ 70-a. ensues causing loss to the seller, proof of insolvency at the time of the sale is not essential.^^^ The petitioner has the burden of showing the alleged fraud, and in the absence of affirmative proof of such fraud the property may not be ^ reclaimed, although the buyer was insolvent and the seller was ignorant of it.^* (5) Peopeety sold subject to appeoval; eental co-nteacts. — Where' machinery or other articles are sold upon the condition that if they are not satisfactory the purchaser may return them and such purchaser prior to his bankruptcy expressed himself as dissatisfied and declared that he would not accept such machinery or articles, the seller may reclaim them, and the receiver or trustee of the bankrupt purchaser will not be heard to say that the refusal of the bankrupt to accept was arbitrary or capricious, fraudulent and in bad faith.^'^^ Where goods were shipped with the proviso that they were to be paid for as soon as the goods were received provided they were satis- factory, reclamation will only be allowed where it is claimed without delay. ^^* 273. In re Bendell (D. C, Ala.), 25 Am. B. R. 698,1813 Fed. 816; Matter of New York Commercial Co. (C. C. A., 2d Cir.), 35 Am. B. R. 779, 228 Fed. 120. Reasonable expectation of ability to pay. — In case of Matter of Berg (Ref., Mass.), 25 Am. B. R. 170, the court dismissed the petition of reclamation upon the proof that the bankrupt, when he purchased the gooda^ had reasonable expectations that he would be aible to pay for them and did not know that he was insolvent. See also In re Roalswick (D. C, Mont.), 6 Am. B. E. 752, 110 Fed. 639; In re Davis (D. C, N. Y.), 7 Am. B. E. 276, 112 Fed. 294. 247. Schroth v. Monarch Pence Co. (C. C. A., «tli Clr.), 36 Am. B. E. 258, 229 Fed. 549; Matter of Farmers' Dairy Association (D. C, Cal.), 37 Am. B. E. 672, 234 Fed. 118. Stotemcnts of agent. — Matter of Bernstein (D. C, N. Y.), 44 Am. B. E. 359, 261 Fed. 719. Proof of fraud. — To entitle a vendor to recover possession of the goods from a third person, to whom they had been assigned, the vendor must show that bankrupt was insolv- ent at the time of the purchase of the goods, that it concealed its insolvency from the vendor, and that it intended not to pay for the goods. In re Aarons & Co. (C. C. A., 2d Cir.), 28 Am. B. R. 399, 193 Fed. 646. In order to entitle a vendor to rescind a sale and reclaim from bankrupt's trustee goods sold to the bankrupt, upon the ground that the sale was induced by fraud, it must appear that the bankrupt was insolvent at the time of the purchase of the goods, that he concealed from the vendor his insolvency which was known to him at the time of the purchase, and that false end fraudulent representations were made by bankrupt with intent to deceive and defraud the vendor and to induce the latter to deliver to him the goods in question, with the intent and design not to pay for them. In re Marengo County Mercantile Co. (D. C, Ala.), 29 Am. B. R. 46, 199 Fed. 474. Evidence of fraudulent purchase. — In a proceeding to reclaim certain property on the ground that the purchase was fraudulent in that the purchaser, now bankrupt, was in- solvent and had no reasona/ble expectation of being able to make payment when due, it appeared that at the time of the purchase and delivery the bankrupt was doing a large ■and active business; that although insolvent, in fact, it had excellent credit at a bank which was its principal creditor; that by the bank's failure, which was not anticipated, the purchaser was forced into bankruptcy. Held, on all the evidence, that the bankrupt was not without reasonable expectation of paying for the property in question. Schroth V. Monarch Fence Co. (C. C. A., 6th Cir.), 36 Am. B. B. 258, 229 Fed. 549. See also Matter of Baslcin (D. C, Ohl6), 44 Am. B. E. 536. Judicial notice will be taken of the papers on record in a banliruptcy case in a proceeding to reclaim property in the possession of the trustee in bankruptcy. Matter of Siegel Co. (D. C, Mass.), 35 Am. B. E. 130, 223 Fed. 369. 275. In re Hill Co. (C. C. A., 7th Cir.), 12 Am. B. R. 221, note, 123 Fed. 866. Com- pare In re Simpson Mfg. Co. (C. C. A., 7th Cir.), 12 Am. B. R. 212, 130 Fed. 307, in which case the evidence was considered, and it was held that there being no complaint made that the machinery was unsatisfactory, a sale of the machinery was completed, and that the vendor upon the bankruptcy of the purchaser was not entitled to a return of the machinery upon a claim that it was never accepted; In re Froelich Rubber Refin- ing Co. (D. C, Pa.), 15 Am. B. R. 72, 139 Fed. 201, holding that where the contract contained an option to purchase within a pre- scribed time, the title to the property only passed to the bankrupt after such time ex- pired. Lease with option to purchase. — ^Where a bankrupt failed to purchase machinery at the end of the term for which he had leased it with the option to purchase, but con- tinued to pay rent therefor, the lessor may reclaim the property from the lessee's trus- tee. McEwen v. Totten (C. C. A., 5th Cir.), 21 Am. B. R. 336, 164 Fed. 837. 276. In re O'Callaghan (Ref., Mass.), 30 Am. B. R. 97; Becker Co. v. Gill (C. C. A., 8th Cir.), 30 Am. B. R. 429, 206 Fed. 36. §: 70-a.j Eeclamation Peoceedings. 1157 So also reclamation should be. permitted -wkere the bankrupt was in posses- sion of articles being manufactured by him under contracts requiring pay- ments at stated periods which had been regularly made, it appearing that the trustee did not intend to complete the contract and deliver the completed articles.^" The question frequently arises where title passes to the purchaser under a contract whereby it is agreed to pay a stipulated amount as rental for the article sold, such amount to be applied upon the purchase price. It is generally held that if the agreement provides for the surrender of the property at the expiration of a designated term, or the purchase of such article at such time, it does not operate as a conditional sale but is a bailment and therefore the "lessor" may reclaim the article upon the bankruptcy of tha lessee, prior to the exercise of the option to purchase.^™ (6) Payment on deliveet; stoppage in teansit. — Goods shipped to a person who, prior to the shipment, had gone into bankruptcy, may be stopped in transit and reclaimed 'by the shipper ; but if the goods have arrived at their destination and the charges have been paid by the receiver in bank- ruptcy, it is too late for the shipper to reclaim the goods.^''^ If personal property be sold upon the express condition that payment be made on delivery, and delivery is made on the faith that the condition will be immediately performed, and payment is refused upon demand, title does not pass, and the seller may properly be permitted to reclaim the property.^^** If a contract of sale under which the bankrupt was in possession reserved title in the vendor and permitted him to retake the property upon failure of the vendee to pay the purchase price, the vendor may reclaim the property, provided, of course, the contract is valid as against creditors under the laws of the State where made.^^ If the claimant insists upon a latent or undisclosed title to the goods claimed, in the possession of the bankrupt, the burden is on him to show his title.^®^ All of such cases will depend for their determination \ipon principles already declared as to the validity of contracts for the conditional sale of 277. In re McDonald (D. C, Conn.), 14 Am. must be treated as other creditors. Matter of B. E. 797, 138 Fed. 463. Arctic Stores (D. C, N. J.), 43 Am. B. E. 543, 278. Liquid Carbonic Co. v. Quick (C. C. A., 258 Fed. 688; Matter of Baskln (D. C, Ohio), 3d Clr.), 25 Am. B. K. 304, 182 Fed. 603. The 44 Am. B. K. sm. See also Morgan v. Chicapo provision in the agreement that the article & N. W. Ry. Co. (Wis. Sup. Ct.), 41 Am. B. K. should be "leased" to the bankrupt for a sped- 422, 166 N. W. 777. fled term and a specified rental and that at In possession of forwarding company. — A the expiration of the term it should be sur- seller of goods which were bought for export rendered to the lessor, are the indicia of a bail- to a stated point In a foreign country has the ment. In re Tlce (D. C, Pa.), 15 Am. B. E. 97, right of stoppage in tra::c:tz^ after the inter- 139 Fed. 52; In re Morris (D. C, Pa.), 19 Am. rentlon of bankruptcy of the purchaser, though B. E. 422, 156 Fed. 507; In re Norton (D. C, said goods were at the time in the possession Pa.), 24 Am. B. E. 794, 181 Fed. 901. of a forwarding company for the purpose of Agreei^ent to execute conditional sale con- forwarding them to their point of destination tra«t. — Where a creditor delivered certain prop- where said forwarding company had no author- erty to a bankrupt on the express understand- ity to receive them for anv other purDOSi^. ing at the time of the delivery that a lease Matter of Stork (D. C, N. Y.), 45 Am. B. E. conditional sale contract should later be ex- IDS, 265 Fed. 864. ecuted, such creditor is entitled to reclaim . 280. Southern Pine Co. v. Savannah Trust Co such property from the bankrupt estate, as it (C. C. A., 5th Cir.), 15 Am. B. E. 618, 141 Fed. Is of no importance that the conditional sale 802; In re Cattus (C. C. A., 2d Cir.), 26 Am. B contract was signed by the bankrupt about six E. 348, 183 Fed. 733. months after the 'property was delivered or that Payment by check. — When goods are sold on the sale was under a secret understanding with condition that title is not to pass until payment him. If it is true that such understanding at is made, the receipt of a chock does not operate the time of delivery was that the property as payment, and the title to the goods remains should be incumbered by the conditional con- In the seller tiU the check is paid. Matter of tract. In re Hutchins Co. (D. C, N. Y.), 24 Am. Perpall (C. C. A., 2d Cir.). 43 Am B E SS B. E. 647, 179 Fed. 864. 256 Fed. 758. ' ' 279. In re Allen (D. C, Pa.), 24 Am. B. E. 281. Eeardon v. Eock Island Plow Co (C C B74, 178 Fed. 879; Matter of Johnson (D. C, A., 7th Cir.), 22 Am. B. E. 26 168 Fed '654-' In Ohio), 30 Am. B. E. 787; Matter of Nicol (D. re Burke (D. C, Ga.), 22 Am B e' 69 'l68 C, N. Y.), 34 Am. B. E. 465, 221 Fed. 82, hold- Fed. 994; Franklin v. Stoughton ' Wagon Co Ing that where goods shipped after adjudication (C. C. A., 8th Clr.), 22 Am. B. R 63 168 Fed" are received by trustee, and shipper did not 857 ; In re Agnew (D. C. Miss ) 23 Am B E attempt to stop them in transitu or to reclaim 360, 178 Fed. 478; In re' King Motor Car Po! them, he is not entitled to payment in full but (Eef., Mich.), 31 Am. B R ira 1158 Title to Peopeett. [§ 70-a. personal property. ^^ If delivery is made without insistence upon payment and the purchaser retains possession without payment for a considerable time, title to the property will vest in the bankrupt, the right of payment as a con- dition precedent having been waived.^** If partial payment is made upon the contract the court may, as a condition to a decree in reclamation proceedings, direct the vendor to pay the trustee of the bankrupt vendee the amount of such payment, less the expense of repossessing and the cost of deterioration. ^^^ (7) Pboop of identity. — Identity is the sine qua non of the right of possession. Proof of it is insisted on even in the far less important pro- ceeding when a consignor creditor claims goods in the hands of the trustee. The court whose right to possession is questioned can, it is thought, nay, in the interest of that pro-rating which the bankruptcy law commands, should, insist on the claimant establishing identity by proof in open court, with right to cross-exajnination by the adverse party, before yielding that which in bankruptcy cases is often more than " nine points of the law." This prac- tice is outlined in the case cited in the foot-note.^® In such proceedings it is only recovery of the identified articles which may be had; as to the articles which have been sold or disposed of by the bankrupt, the vendor is left to his remedy as a general creditor.^^'^ (8) Peactice. — The practice has been to refer a petition for reclamation to a special master and not to the referee in bankruptcy, although the referee may have jurisdiction of such proceedings. This practice of reference to a special master should be followed until the Supreme Court especially rules that a reference may be made to the referee.^ The costs in a reclamation pro- ceeding to recover property found in the possession of the bankrupt will be imposed upon the bankrupt's estate where tne claimant is successful.^*^^ h. Eights of action. — (1) In geneeal. — Under subdivision 6 all "rights of actions arising upon contracts '^^^ or from the unlawful taking or detention of, ui' injury to," the bankrupt's property pass to the trustee. This subdivision is declaratory of the law. It has been held that a person who has been adjudged a bankrupt and obtained his discharge cannot sue upon a claim for services upon a quantum meruit, which arose prior to the filing of his petition, where it appears that he did not disclose the existence of the claim or any other asset, in the bankruptcy proceedings-, bscause of which no trustee was appointed.^'' It seems that, after being vested in the trustee, such rights of action may be carried to judgment by the bankrupt for his own benefit after a composition is confirmed.^^" It has been held that a trustee in bankruptcy does not succeed to the right which a bankrupt has under a State law to bring an action for the partition of real property held in common.^^^ There is, however, authority to the contrary. The question depends upon the statutes of the particular States.2"^ 1888. In re Burke (D. C, Ga.), 22 Am. B. K. 885. In re Hooven-Owens-Eentsehler Co. (C. 69, 168 Fed. 994. C- ■*■•. 6"! Clr.), 28 Am. B. E. 135, 195 Fsd. 424. 283. See discussion under sub-title "Property Set-off.— Where a render receives a check rn'd' ^n-ot^ertSL^Se?""-^"""^'" ""*^' ^'^ ''''■"• '^^^^^^tcy:Tn%lyil^l% 'r^^^P^rZ^yV^n 1. r^ * mf*; . rn <. ^ T^, * actuaUy delivered, such vendor In a proceeding AT*?*-T.'*"fm**?. ^"H.,*n, •^^'"?i A^"- Z- tF^os* t° reclaim from the trustee in bankruptcy the Nat. Bank (C. C. A., 3d Cir.), 26 Am. B. E. 85, proceeds of the sale of such of the property as 185 led. 61i. haij not been resold by the bankrupt, need not Sale of bonds between brokers. — Where It is credit to the trustee, the payment received from the custom among brokers for one who sells a the bankrupt, where the amount of its claim bond to deliver it by messenger and later to for goods sold by the bankrupt exceeds the send another messenger to collect 'h.- =i"^ amount of the latter's payment. Matter of Mid- price, the fact that the first messi^;,r:r doc i )ii:k1 Motor Car Co. (C. C. A., 7th dr.), 37 Am. not collect the price does not amount to :i 13. li. 364, 224 Fed. 368. waiver on the part of the seUer of the '•infiition 286. In re Coleman v. Sherman (Raf., N. Y.), of payment. Matter of Perpall (C. (.. A., 2d 8 Am. B. E. 703. Clr.), 43 Am. B. E. 33, 256 Fed. 758. 287. In ro Bliowich (D. C, N. Y.), 17 Am. B. § 70-a.j Eights of Action. 1159 (2) Actions foe personal injuries; tobts affecting peopebty of BANKRUPT. — Causes of actions for personal injuries, such as assault and battery, slander, seduction and the like, are usually not assignable.^^ Where the suit is to recover usurious interest paid hy the bankrupt,^®* and money lost in gaming,^®* and perhaps where the gravamen is deceit or fraud ;^° so long as the suit pertains to the property of the bankrupt, the right of action vests in the trustee. This subdivision is limited to rights of action arising upon contract or _ respecting property and does not include an action of tort for personal injuries.^® The cases are by no means uniform. The safe rule is that stated in the text: that the trustee is vested with the bankrupt's rights of action on contract and for the unlavTful taking or detention of or injury to his property.^*''' A trustee may sue for tortuous injuries inflicted upon the property of the bankrupt between the date of the filing of the petition and the date of the adjudication.^^* An action for conspiracy, is an action in tort 419, 148 Fed. 464; Matter of Arkin Dress Co., Inc. (C. C. A., 2d Cir.), 41 Am. B. E. 827, 253 Fed. 926. 288. In re Tracy (C. C. A., 2d Clr.), 24 Am. B. E. 539, 179 Fed. 366. Hearings of several iietitions. — A referee may Sn his discretion hear together several peti- tions to reclaim property from the receiver. Matter of Aronson (D. C, Mass.), 40 Am. B. E. 177, 245 Fed. 207. 888a. Matter of Parker Co. (D. C, Ohio), 45 Am. B. E. 34, — Fed. — . The storaeo charges paid by a receiver in banlcruptcy for the preservation of property of a third person prior to the filing of a petition in reclaniation proceedings and pending the determination of the court of the controversy respecting the title, should be paid by the claimant. Matter of Parker Co. (D. C, Ohio), 45 Am. B. R. 34, — Fed. — . 288b. Tennison v. Hanson (Ark. Sup. Ct.), 42 Am. B. E. 492, 206 S. W. 438. 289. Eand V. Iowa Central Ey Co., 12 Am. B. E. 164, 96 N. Y. App. Div. 413, 89 N. Y. Supp. 212. 290. See Stone v. Morris (Sup. Jud. Ct., Mass.), 4 Am. B. E. 568, 57 N. E. 1,002. 291. Hobbs V. Frazier (Sup. Ct., Fla.), 22 Am. B. E. 684, 56 Fla. 796. 291a. Harlin v. American Trust Co. (Ind. App. Ct.), 41 Am. B. E. 401, 119 N. E. 20. Suit by trustee for partition of real estate. — Where a bankrupt had an undivided Interest witli others In land, his trustee in bankruptcy may convey such interest to a purchaser who may thus become a tenant in common with the other owners ; but the trustee is not a tenant in common as recognized in partition proceed- ings, but is a trustee of a tenant in common, and may not bring and maintain a suit for the partition of real estate in which such bankrupt was tenant in common, Lindsay v. Eunkle (Sup. Ct, Ohio), 24 Am. B. E. 612, 92 N. B. 489. 292. Noonan v. Orton, 12 N. B. E. 405; Beck- ham V. Drake, 8 Mees. & W. 845; Howard v. Crowther, 8 Mees. & W. 601; Brewer v. Dew. 11 Mees. & W. 625. Cause of action for injury to person or repu- tation. — Under clause six of this section a trustee in bankruptcy cannot be substituted as plaintiff and continue the prosecution in a suit to recover damages for libel which had been commenced by the bankrupt prior to his bank- ruptcy, although the injuries to the bankrupt resulting from such libel may have been the cause of his bankruptcy. Epstein y. Hand- verker (Sup. Ct., Okl.), 26 Am. B. E. 712, 116 Pac. 769. 293. Tiffany v. Boatmen's Sav. Inst., 18 Wall 375; Moore v. Jones, 23 Vt. 739. Recovery of usury. — In Wheelock v. Lee, 64 N. Y. 242, the trustee in bankruptcy was held to have the right to recover money exacted usuriously, but the court based its decision upon the fact that independent of th-^ r'-itu- tory right to recovery there existed a right to recover upon principles of the common law. In the case of Wright v. First Nat. Bank of Greensburg, 18 N. B. E. 87, Fed. Cas. 18,078, It was held that the right of action given by the banking act of the United States to recover back usurious interest was a claim or debt passing to the assignee in bankruptcy; that while the right of action given by that act was final, yet the exacting of the usurious interest was in its nature an injury to the property rights of the bankrupt, and that the sections of the bankrupt law must be construed as giving the trustee the right to sue for and recover such usurious interest. But in Bromley v. Smith, Fed. Cas. 1,922, 5 N. B. E. 152, 2 Biss. 511, and in Nichols v. Bellows, 22 Vt. 581, both commented upon in Wright v. First Nat. Bank of Greensburg, the right of a trustee in bank- ruptcy to recover usurious interest was denied upon the ground that the right given by the statute was in the nature of a right to redress a personal injury done to the borrower himself, and that, like rights of action for personal torts, it does not pass to the trustee. 294. Meech v. Stoner, 19 N. Y. 26. 295. Thus, In re Crockett, Fed. Cas. 3,402, 2 Ben. 514, it was held that a suit brought for fraudulently recommending a person as worthy of trust and confidence is not a claim which vests as an asset in the assignee. But in Hyde v. Tufts, 45 N. Y. Super. Ct. 56, where one who afterward became a bankrupt was induced by false representations to enga&o in a business venture in which, by reason of the false representations, he incurred great loss, It was held that the cause of action for the fraud vested in his assignee In bankruptcy. 296. Sibley v. Nason, 22 Am. B. E. 712, 196 Mass. 125, 81 N. E. 887, 44 L. E. A. 180. note. 297. Hansen Mercantile Co. v. Wyman, Partridge & Co., 22 Am. B. E. 877, 105 Minn. 491, 117 N. W. 926; In re Harper (D. C, N. Y.), 33 Am. B. R. 918, 175 Fed. 412; In re Gay (D. C, Mass.), 25 Am. B. R. Ill, 182 Fed. 260, in which case it was held that where, at the time of bankruptcy, an action of tort was pending, which the bankrupts, who were dealers in stocks and bonds, had brought to recover damages for losses resulting from the purchase of certain bonds, which they alleged they had been induced to buy by false representations ma- terially affecting the value of the bonds, the bankrupt's right of action was one "arising from injury of "the bankrupt's property" so as to pass to the trustee under clause six of this section. 298. Arnold v. Horrigan (C. C. A., 6th Cir.) 38 Am. B. R. 174, 238 Fed. 39; Matter of Veler (C. C. A., 6th Cir.), 41 Am. B. R. 736, 249 Fed. 633. 1160 T:tle to Peopeety. [§ -ro-a. and is not included within the rule; even though such an action is pending at the time of the plaintiff's bankruptcy, the right of action does not pass to his trustee. ^^' But it has been held otherwise as to a right of action for injuries causing the death of the bankrupt's son.^"" A claim for a breach of warranty by the bankrupt against a third person passes to the trustee as a part of the assets of the estate.^"^ (3) Actions by coepoeations^ and against stockholdees^ dieectoes, AND oPFiCEES. — The right of a trustee of a bankrupt corporation to sue on a contract is co-extensive with that of the corporation. So that a right of action of a corporation to recover damages accruing because of the misconduct or neglect of duty of a corporate ofGicer passes to the trustee of the bankrupt corporation;^"^ and so also as to recovery of unpaid stock subscriptior.s.^"^ If 899. Cleland v. Anderson, 11 Am. B. R. 605, 66 Neb. 276. Actions for conspiracy. — A trustee In bank- ruptcy cannot maintain an action In tort for conspiracy in assisting a bankrupt to place his property beyond the reach of his creditors against persons who are aUeged to have per- formed their acts of conspiracy during the pendency of the bankruptcy proceedings, but before the adjudication therein, where no al- legation is made that any of the defendants received any portion of the bankrupt's estate, and the sole result of the conspiracy 13 to turn the bankrupt's property Into money in his hands, for which he, himself, failed to account to the trustee. Friedman v. Meyers, 19 Am. B. E. 883, 30 Ohio Cir. Ct. 303. A cause of action by a bankrupt to recover damages under the Sherman Law for alleged conspiracy to create a monopoly does not pass to his trustee in bankruptcy. Bonvillian v. American Surar Eef. Co. ;D. C, La.), 41 Am. B. R. 267, 250 Fed. 641. ^ ^„ , 300. fn re Burnstine (D. C, Mich.), 12 Am. E. R. 506, 131 Fed. 828. 301. Crouch V. Fahl (Ind. App. Ct.), 38 Am. B. E. 929, 113 N. B. 1009. ^ „„ 302. Brent v. Simpson (C. C. A., 5th Cir.), 38 Am. B. E. 813, 238 Fed. 285; Floyd v. Layton (No Car. Sup. Ct.), 38 Am. B. R. 306, 89 S. E. 008; Woodman v. Butterfleld (Me. Sup. Ct.), 40 Am. B. R. 40, 101 Atl. 25; McCullam v. Buck- ingham Hotel Co. (Mo. Ct. of App.), 41 Am. B. E. 104, 199 S. W. 417. Bight of action by corporation against directors for neglect of duty. — The right of action by a corporation against its directors for negligence or neglect of duty resulting in a loss of assets, passes to its trustee in bank- ruptcy. Evidence in such an action examined and held sufficient to establish the liability of directors of a mercantile or supply store who were its managing officers. Bynum v. Scott (D. C, N. C), 33 Am. B. E. 436, 217 Fed. 122. 303. Courtney v. Croxton (C. C. A., 6th Cir.), 38 Am. B. R. 560; Matter of Commonwealth Lumber Co. (D. C, Wash.), 35 Am. B. R. 202, 223 Fed. 667; Allen v. Grant, 14 Am. B. R. 349, 122 Ga. 552; Thrall v. Union Maid Tobacco Co., 22 Am. B. R. 287, 54 Ohio Law Bull. 732; In re Eureka Furniture Co. (D. C, Pa.), 22 Am. B. R. 395, 170 Fed. 485; Babbitt v. Read (C. C. N. Y.), 23 Am. B. R. 254, 173 Fed. 712; Roney V. Crawford (Sup. Ct., Ga.), 24 Am. B. E. 638, 68 S. B. 701; Matter of La JoUa Lumber i' MIU Co. (D. C, Cal.), 40 Am. B. R. 273, 243 Fed. 1004. See also under section 47, ante. "Suits by trustees of bankrupt corporations." Release by corporation of stockholder's lia- bility. — Benner v. Billings (Wash. Sup. Ct.), 43 Am. B. R. 576, 181 Pac. 19. What law controls.— Whether a stockholder of a bankrupt corporation is liable to the estate for the difference between the par Tslue of the stock held by him and the amount originally paid therefor, is to be determined by the law of the State where the company was incorpo- rated. Matter of Mfgs. Box & Lumber (io. (D. C, N. J.), a Am. B. E. 763, 251 Fed. 957. Stock issued in violation of State law. — A trustee of a bankrupt corporation is entitled to recover on a note riven for subscription to its stock, although such stock was issued in vio- lation of the constitution and laws of the State. Smoot v. Perkins (Tex. Civ. App.), 40 Am. B. E. 193, 195 S. W. 988. Under the Missouri statute the right of action against officers of a corporation to compel pay- ment by them to the corporation which they represent and to its creditors, of all property which they have acquired to themselves, or transferred to others, or lost or wasted by any violation of their duties or abuse of their powers, is a right which vests in the trustee of banki'uptcy of such corporation, and which may be dealt with, disposed of, sold or compro- mised by him under the direction of the court. In re Swofford Bros. Dry Goods Co. (D. C., Miss.), 24 Am. B. E. 282, 180 Fed. 549. Right of trustee to levy assessment on un- paid stock under New Jersey statute. — Section 21 of the New Jersey Corporation Act provides that "where the whole capital of a corporation shaU not have been paid in, and the capital paid shall be insufficient to satisfy its debts and obligations, each stockholder shall be bound to pay on each share held by him the sum necessary to complete the amount of such share, as fixed by the charter of the corpora- tion, or such proportion of that sum as shall be required to satisfy such debts and obliga- tions." Section 22 empowers the directors from time to time to make assessments upon the shares of stock subscribed for, not exceeding. In the whole, the par value thereof. Held, that upon the a'djudication in bankruptcy of a New Jersey corporation, not only the title to its property vests in the trustee, but also the right to exercise the powers of the directors, under the statute, to cause an assessment to be made on all its unpaid shares of stock. In re New- foundland Syndicate (D. C, N. J.), 28 Am. B. E. 119. 196 Fed. 443, atCd. 29 Am. B. E. 858, 201 Fed. 917. Under the law of Ohio, where a corporation upon Its formation purchases the property, business and good will of a partnership and assumes its liabilities, turning over to the partners In consideration therefor shares of Its capital stock, each partner wiU be regarded as an original subscriber for so much of the stock as is issued to him, and credited on his sub- scription for only the actual value of his in- terest in the partnership property transferred to the corporation in payment of his subscrip- tion, and the balance left, after applying this credit, will be deemed a debt due front him to the corporation, and, therefore, corporate § 70-a.J KiGHTs OF Action. 1161 a right of action exists against tlie directors of a bankrupt corporation, and one of the three trustees is a director, the remaining trustees may sue . all the directors.^"* The statutory right of a credilior or stockholder to sue the directors and officers for excessive indebtedness or other statutory liability does not pass as an asset to the trustee in bankruptcy of the corporation ; such right is enforceable as a secondary security of the creditors or stockholders independently of the bankruptcy proceedings.^"" Where the right of action against officers or stockholders inures to a creditor under conditions prescribed in the statute giving such right, the trustee of the bankrupt corporation does not succeed to such right.^"^ But where under a state statute a stockholder's liability for the unlawful issue of stock may be enforced by the corporation, its trustee in bankruptcy may sue to enforce such liability.^'*^ Where dividends were paid to stockholders out of the assets of a corporation to the impairment of its capital, a trustee in bankruptcy may recover such dividends for the benefit of the creditors who became such after the payment of such dividends.^"* While a corporation may not sue on a purely personal tort, it may recover damages for a malicious attachment of corporate property, and the right of action passes to the trustee in bankruptcy 'of the corporation.^"® If the corpo- ration is a foreign corporation and because of failure to comply with the laws of a State where it was transacting business, its contracts in such State are void, the trustee of such corporation cannot sue on such contracts in the Federal courts.^^" assets, recoverable by the corporation's trustee in banltruptcy in an appropriate suit brought for the benefit of the banlirupt estate. Kis- kaaden v. Steinle (C. C. A., 6th Cir.), 29. Am. B. R. 346, 203 Fed. 375. The rule adopted by the Federal courts in cases arising in Ohio is that a stockholder who has purchased the impaired capital stock of a going concern at less than its par value but at its fair market value, cannot be compelled by a trustee in bankruptcy to pay the differ- ence between the purchase jjrice and the par value. Thomas & Brenneman v. Goodman (C. C. A., 6th Cir.), 42 Am. B. E. 688, 254 Fed. 39. Assessment of stock. — The district court has power to make a preliminary inquiry concern- ing the need to assess unpaid subscriptions, and may authorize the trustee to make such assessment. A mere order to assess, however, does not conclusively determine that the stock- holder must pay; It does not take away his right to' prove that he has already discharged the obligation, although it does prevent him from attacking the need foi; an assessment or the amount assessed. Matter of Stipp Construc- tion Co. (C. C. A., 3d Cir.), 34 Am. B. B. 333, 221 Fed 372 304. In re Syracuse Paper & Pulp Co. (D. C., N. Y.), 21 Am. B. E. 174, 164 Fed. 275. 305. In re Beachy & Co. (D. C, Wis.), 22 Am. B. E. 538, 170 Fed. 825; SeegmiUer v. Day (C. C. A., 7th Cir.), 41 Am. B. E. 317, 249 Fed. 177. 306. Courtney v. Georger (D. C, N. Y.), 34 Am. B. E. 517, 221 Fed. 502, affd. 36 Am. B. E. 20, 228 Fed. 859, arising "under a Minnesota statute prohibiting the issue of stock for a less amount to be actuaUy paid in than the par value of the stock first issued, and it was held, applying decisions under the statute, that it was for the purpose of providing a remedy against stockholders for creditors who had been misled by the issue and such remedy was not for the benefit of the creditors generally, giving to the. trustee of the bankrupt corpora- tion the right to sue. ^ ^ tion the right to sue. To the same effect see State Bank of Commerce v. Kennedy Bank In- strument Co. (Minn. Sup. Ct.), 44 Am. B. E. 91, 173 N W. 560; Matter of Eerier Shoe Co. (DC N Y ), 40 Am. B. K. 470, 246 Fed. 1018. Rule under New York stainte. — In re Jassoy (C. C. A., 2d Cir.), 23 Am. B. E. 622, 178 Fed. 515, 101 C. C. A. 641, it was held by Judge Jjacombe that under the stock corporation law of New York, which substantially provides that holders of stock in a corporation for which par value has not been paid shall be person- ally liable to certain classes of creditors to the extent of the balance due on their stock, no claim or right of action is given to the corpo- ration against such stockholder, and further- more that under such circumstances no right of action inures to the trustee in bankruptcy of the corporation on behalf of its general creditors to compel stockholders to make pay- ment equal to the par value of the stock. 307. Babbitt v. Bead (C. C. A., 2d Cir.), 38 Am. B. R. 303, 236 Fed. 42. 308. Mackall v. Pocock (Minn. Sup. Ct.), 38 Am. B. R. 680, 161 N. W. 228. But see Ratcliff v. Clendenin (C. C. A., 8tli Cir.), 36 Am. B. R. 561, holding in effect that if the corporation was solvent when the dividends were paid and the stockholders received them in good faith, the creditors are not entitled to recover such dividends. Johnson v. Can- field-Swigart Co. (111. Sup. Ct.), 45 Am. B. R. 234, 126 N. E. 608. 300. Hanson Mercantile Co. v. Wyman, Partridge & Co., 22 Am. B. R. 877, 105 Minn. 491, 117 N. W. 926. 310. Thomas v. Birmingham Ry., L. & P. Co. (D. C, Ala.), 28 Am. B. R. 152, 195 Fed. oM, holding that in such case, since the stat- utory prohibition is directed against the per- formance;, as well as the making of the con- tracts, no action can be maintained upon im- plied contract or upon a quantum meruit; nor does the fact that the contracts had been, performed by bankrupt, prevent the inter- position of the defense of illegality. 1162 TiTi^ TO Peopeety. [§ 70-a. IV. BURDENSOME AND EXEMPT PROPERTY. a. Burdensome property and contracts. — ( 1 ) In General. — The statute is silent respecting burdensome property. The English law goes into this subject with considerable particularity, the trustee there being given twelve months in which to elect to claim or disclaim onerous property.311 The general rules phrased into that law are, however, doubtless also the law in this country. Thus, it is well settled that trustees in bankruptcy are not bound to accept property which is onerous and unprofitable, and which will burden, rather than benefit, the estate.312 A trustee is not obliged nor is it his duty to accept title to property that he con- siders worthless, and his opinion may be based on the fact that assertion of ownersliip may involve a lawsuit of uncertain outcome.313 The doctrine has been applied where property is mortgaged beyond its value, in which case the court may direct that the property be released and surrendered to the mortgagee upon such conditions as it may deem just.314 The question is not one of jurisdiction or of right, but of discretiou.315 The doctrine has no application to property which the bankrupt has concealed, and of the existence of which the trustee has no kiiowledge, and has not therefore had the opportunity to make an election.3l6 If the trustee files a disclaimer, and the property is rejected, the bankrupt may reassert his title to the property and take possession thereof .317 (2) ExECUTOEY CONTBACTS AND LEASES. — Trustees in bankruptcy are not bound to adopt the executory contracts and the leases, .or otherwise step into the shoes of the bankrupt, if, in their opinion, it would be unprofitable and undesirable to do E0;3lTa and they are entitled to a reasonable time to elect whether to accept such contracts and leases or to repudiate tliem.318 The fact that the bankruptcy proceedings are in effect voluntary does not amount to an antici- patory breach of the contracts by the bankrupt, so as to prevent the trustee from enforcing them without the consent of the seller.SlSa In the execution of their trust they are confronted at the outset with the duty of electing whether to assume an existing executory contract, continue its performance, and ultimately dispose of it for the benefit of the estate or ■ to renounce it and leave the injured party to such legal remedies for the breach, as the case affords. If they elect to assume such a contract, they are required to take it cum onere, as the bankrupt enjoyed it, subject to all its provisions and condi- tions, in the same plight and condition that the bankrupt held it.319 If a trustee fails to take title to or possession of a contract of the bankrupt, title and possession rtmain in the bankrupt, and he may enforce the contract the same as before bankruptcy .3l9a 311. Eng. Act of 1883, § 55, as amended by Act his assigns. Mesirov v. Innis Speiden & Co of 1890, § 13. (N. J. Sup. Ct.), 37 Am. B. R. 201, 97 Atl. 160 ' 312. MeCarty v. Light, 155 N. Y. App Div. 317a. Barr v. Youngeville Sugar Factory (La 36, 33 Am. B. E. 883, 139 N. Y. Supp. 853; Sup. Ct.), 40 Am. B. K. 30, 75 So. 805; Matter of People's Nafi Bank v. Maxson (Sup. Ct., Iowa), Schilling and'LolIer (D. C, Ohio) 41 Am B 33 Am. B. R. 765, 150 N. W. 601; Watson v. R. 705, 251 Fed. 972, 966; Planters' Oil Co v' MoUey (Ala. Sup. Ct.), 39 Am. B. R. 750, 75 Gresham (Tex. Ct. of Civ. App.), 42 Am B E So. 147; Trabue v. Ash (Tex. Ct. of Civ. App.), 29, 202 S. W. 145; Matter of Elk Brook Coal' Co.' 41 Am. B. R. 122, 200 S. W. 415; Matter of (D. C, Pa.), 44 Am. B. B. 283 262 Fed 445 Berry (D. C, Mich.), 41 Am. B. E. 357, 247 Fed. 318. United States Trust Co. v. Wabash E'y., 700; Matter of ]\orth Star Ice & Coal Co. (D. 150 U. S. 287, 37 L. Ed. 1085, 14 Sun Ct 86' C, Tenn.), 42 Am. E. E. 76, 252 Fed. 301. Matter of Otis, 101 N. Y. 58Q, 5 N. E. 571; 'Barr 313. GreenaU v. Hersum (Mass. Sup. Ct.), 34 v. Yo-angeville Sugar Factory (La. Sup Ct ) ^-™-. ^■, ?;■, ?2'- ^"J, "^Vrp^- ^*V ^?,!1<=\^IH "■ *° ^'"- ^- ^- 30, 75 So. 805, citing Collier on National Clothing Co. (Tenn. Sup. Ct.), 38 Am. Bankruptcy (10th ed.), 1033; Matter of Berrv B. R. 719, 191 S. W. 524. „ .^ ^ ,, (D. C, Mich.), 41 Am. B. E. 357, 247 Fed. 700; 314. BciiutaL -■ Loan & Security Co. v Moss Rosenblum v. Uber (C. C. A., 3d Cir.), 43 Am. S '^"-.iS- ?■ ■*■■■ ^t'^ ^"^-I'l^^f"?,- ^••^- ^"' V?? B- K. 480, 256 Fed. 584; Matter of Morris & K^'^: "SJJ J? ^^/^''T'' ^^^^^Jn^''}i^%^^°-aiS- !**'=« 'D. C, Mass.), 44 Am. B. E. 146, 258 Fed. C. A., 9th Cir.) 14 Am. B. E. 689, 138 Fed 625 ; 712; Ezquiagu v. Carolina (D. C, Porto Rico), 1° ,'^«„?Sl^°?J f°- ^■' I'H' ^^ '^™V,?V,'^- ??^' ??, 44 ^i"- B. R. 125; Matter of Pottier & Stymus Fed. 787; Matthews & Sons v. Webre Co. (D. Co. .(C. C. A., 2d Cir.), 44 Am. B. E. 469, 262 C, La,), 32 Am. B. E. 180, 213 Fed. 396. ped 955 „oFvJ V5 SS^H^ *°V?;,' ^T^^'^^ ^'^■^n-,?- a' sell4r obligated to deliver on a contract 731, 107 Fed. 73 ; In re DiUard, Fed. Cas 3,912. to a bankrupt purchaser cannot, in an action ,,5",-o^i''^* ^''l- So^'^n'^- ™^^"ii?c'oH ^-r,?- by the trustee in bankruptcy for failure to 115, 13 Am. B. E. 698, 49 L. Ed. 408, 25 Sup. Ct. deliver, assert that he is not liable, simply ^.°® • .^^}?\ ^- ^^S"S-^« ^^SS- -Jr^^n^a '^"™- ° because the trustee did not elect within n App.), 42 Am. B. E. 753, 207 S. W. 906. reasonable time to accept the contract. 317. Smith V. Wahl (N. J. Ct. of Errors & planters' Oil Co. v. Gresham (Tex. Ct. of Civ. App.), 37 Am. B. E. 157, 97 Atl. 261. App.), 42 Am. B. E. 29, 202 S. W. 145. Kejection by trustee; title revests in bank- 318a. Planters' Oil Co. v. Gresham (Tex. Ct. rupt. — When a trustee in bankruptcy rejects of Civ. App.), 42 Am. B. E. 29, 202 S. W. 145. any part of the bankrupt's assets because their 319. Planters' Oil Co. v. Gresham (Tex. Ct. of acceptance would be a burden to the estate. Civ. App.), 42 Am. B. E. 29, 202 S. W. 145; such action is Jinal, and the title thereto re- Matter of Barnhardt Coal & Limestone Co. (D. mains in the bankrupt, unless the Federal C, Ohio), 44 Am. B. E. 170; Greif Bros. v. court shall compel another course, and the Mullinix (C. C. A., 8th Cir.), 45 Am. B. K. trustee, having rejected any part of the bank- 265, 264 Fed 391; Atchison, etc., Eailway Co. v. rupt's estate. Is divested of any sufllcient title Hurley (C. C. A., 8th Cir.), 18 Am. B. E. 396, upon which to rest an action in trover for the 153 Fed. .503. Compare Glenny v. Langdon, 98 conversion of such assets by the bankrupt or TJ. S. 20, 25 L. Ed. 43; Sparhawk v. Yerkes, 142 § 70-a.] Burdensome Peopeety and Conteaots. 1163 This doctrine is frequently appilied in case of leaseg^^^" The trus.tee takes title to a leasie only in case he elects to accept it; the property, therefore, which may be said to pass inunediately to the trustee is not the lease itself hut the option of accepting it.^^^ If a lease is accepted by the trustee, he is not pref- vented from selling the same under an order of the court, by a clause contained in the lease providing that the tenant shall not sublet or assign without the consent of the landlord.^^^ A trustee may, with the consent of the landlord, sur- render a lease, whereupon the landlord regains possession and all unmatured obligations between the parties depending upon the continuance of the leasehold estate are terminated.^^^^ Where a bankrupt is vendee under an executory contract for the sale of land the referee has power, at the instance of the bank- rupt's creditors, to direct the trustee to execute a formal release and surrender of the bankrupt's right to performance of such contract.^^ But it has beem ruled that a referee under the bankruptcy act is hot vested with power to order the trustee to specifically perform a contract of the bankrupt. Hence, he haa no power to make an order directing the trustee to make a deed of the interest of the bankrupt in certain property now in the possession of the proposed devise©.^^ (3) Peacticb.^ — This is simple. The trustee, if satisfied, after appraisal oi: even on an independent investigation, that some or all of the property which has vested in him is of no value or will be a charge on the estatej, should .file a report to that effect and ask for instruction. The referee may, it is thought, act without calling a meeting of creditors or even submitting the application to a pending meeting; but safe practice suggests that the creditors be consulted and their wishes observed. If the trustee is instructed to disclaim the property as onerous, an order should be entered to that effect. This in effect revests the title in the bankrupt.^^^ Leases should be accepted or disclaimed promptly ,^^^ but a continuance in possession will not usually be V. S. 1, 35 L. Ed. 915, 12 Sup. Ct. 104; In re of years at a cash rent, expressly, reserving Scheerman, 2 N. B. N. Eep. 118, and cases title to the earnings of the stock and to the cited. See also "Supplementary Forms," post. hay and fodder, not as security for the pay- The trustee is not bound to talce property ment of the rent, but to Insure the preservation ■which may involve him in litigation. Old- of the stock, and the tenant went into- bank- mlxon V. Severance, 18 Am. B. E. 823, 117 N. ruptcy before the expiration of the lease, har- y. App. Div. 921, 104 N. Y. Supp. 1042. A iug paid the rent up to said date, and sur- trustee Is not bound to accept and complete rendered possession to the owner, who sold the contracts made by the bankrupt, but, if he stock, hay and fodder, the trustee in bank- undertakes to do BO, he is subject to all the ruptcy, not having assumed the lease, cannot conditions Imposed by the contract upon the recover the proceeds of the sale from the bankrupt. In re Delong Furniture Co. (D. C, owner. Matter of Place (D. C, N. Y.), 35 Am. Pa.), 26 Am. B. K. 469; In re Davis (D. C, N. B. E. 426, 224 Fed. 778. Y.), 25 Am. B. E. 1, 180 Fed. 148. 3»1. Matter of Fraziu & Oppeiiteim (C. C. A., 319a. Planters' OU Co. T. Gresham (Tex. Ct. ^d Cir.), 24 Am. B E 903, 183 Fed 28; Matter of Civ. App.), 42 Am. B. E. 29, 202 S. W. 145. ^ SPo'^^ i^S^'fli^' S' A- ^^f e'^^'' ^* /-'"v ^• 320. For instance see Baldwin on Bankruptcy f^ ^c ' A 2d^Sir ? 'si Am ""b E 769 °2m' F^fl"" (8th ed.), pp. 281-291, and General Eule (Eng.), ^^gi. in re Saninsk'v (D c" Kv^' 30 Am R b" 320; also numerous cases in this country; iig ' 20^ Fed ^23 ' ^Wm °B ^n%a" r^Fvld^^flS^^in'^re\Jbli »»«• ^''^''ly ^- WilUams, 210 U. S. 41, 20 Am. 23 Am. BE. 289 174 Fed. 713, In ^ K"bel ^ jj ^g, 28 Sup. Ct. 687, 52 L. Ed. 950; In re iSding Thai''a''trtstee^i.a?- a 'r'^a'sonable " ttoe ^.TZ^^-^'^ti.^t^-hZn^- fuc?" !'l^!I ^„*''- Sf ^il^f do?tTCsris *a°n ^I^etTthe^X^/ tIfns^°^f '"of dfn'a^rV ^JX^n^ l^^a'Sn^t ^lu^§!et??n°g and"oSe?'tZ' s^ame'for'^sale, of whethe'i^^e^*^!! - TSr' baVru^Tc?' ^IZj^.Xi'onTt^l if°r,^ V^'f^- ^"'""^ "' ^*''" *°- "■• '"''■'■ bankruptcy Taw,"does^n7t' a'7oid''?hf "easef ba? 41 Am. a. a. 11^. . ^ ^ .. , , " may be sold for the benefit of creditors. Bight to use premises occupied by bajikrnpt 332a. Surrender of lease.— A valid surrender tenant.— A trustee or receiver has the right to consists not only in an offer by the lessee to use the premises occupied by the bankrupt for surrender but an acceptance of that offer bv a reasonable period, sufficient to enable him to the landlord. Eosenblum v Uber (C C A dispose of the bankrupt's property without 33 cir.), 43 Am. B. E. 480 256 Fed 584 unnecessary loss, and to do so by selling it a landlord has no right to make a' condl there, if that be the best way. Matter of Craw- tional acceptance of the surrender of a leasp o°/^,.^'T?^?/°- ^°- ^■' ^^''•'' *^ ^'"- ^- ^- ?'' *"« bankrupt tenant or to hold the leasehold 92, 253 Fed. 76. for the benefit of the estate. Matter of Stem Title of trnstee as asainst landlord o< bank- (D. C, Pa.), 41 Am. B. E. 712. rupt farmer. — Where the owner of a farm and 383. Kenyon v. Mulert (C. C. A 3d Clr ) 26 the stock thereon rented the same for a term Am. B. E. 184, 184 Fed. 825. ' 1164 Title to Peopeety. [§ 70-a. construed an election to accept the burdens and obligations of the lease.^^'' Another method of disposing of burdensome property is to sell it at a meeting of creditors called for that purpose. This is often done at final meetings, and sometimes at the instance of lien creditors, who thereby get title without the usual delays and costs attending foreclosures and judicial sales. b. Exempt property. — (1) In geneeal. — The trustee does not take title to property exempt by the law of the State, but, until the exempt property is set off, has possession.^^^ The reference to exemptions in this section does not show an intent to require a claim for an exemption to be made prior to adjudication. ^^^ The trustee takes no title to exempt property; the right to exemption is to be determined as of the date of the adjudication.^*^" This subject has been fully considered elsewhere. ^^^ (2) Conflict between- § 6 and § 70-a (5) as to eights of beneficiaeies UNDEE LIFE iNSUEANCE POLICIES. — The proviso clause in subdivision (5) has already been often considered by the courts. It was doubtless inserted to prevent the hardship which might result to beneficiaries of life insurance policies did the latter pass to the insured's trustee absolutely. In effect, the bankrupt may retain the advantage which years of premiums may have given him, provided he pays or secures to the estate the cash surrender value of the policy. ^^^ The practice is sufliciently indicated by the words of the statute. But the question generally discussed is whether, since most of the States declare life insurance policies exempt, the clause here is subject to § 6, or a limitation on it. The Supreme Court has now declared that the provisions of this section do not apply to life insurance policies which are exempt under a State law; as to such policies the State law must control regardless of whether they had a cash surrender value.^^^ A bankrupt does' not waive his 324. Dreyer v. Perkins (C. C. A., Sth Clr.), 38 Am. B. E. 799, 233 Fed. 422: Dreea v. Arn- 33 Am. B. K. 232, 217 Fed. 889. strong (Iowa Sup. Ct.), 38 Am. B. B. 737, 101 3Z5. Sessions v. Eomandka, 145 U. S. 29, 36 N. B. 40; Waters v. Hodcpeth (No. Car Sun L. Ed. 609, 12 Sup. Ct. 799. Ct.), 38 Am. B. E. 707, 90 S. E. 314. 326. Kenyon v. Mulert (C. C. A., 3d Cir.), 2G 331. See in § 6, ante. And compare §§ 2 (11) Am. B. K. 184, 184 Fed. 825; Matter of Sher- and 47-a (11); .liso General Ord^r XVII woods. Inc. (C. C. A., 2d Cir.), 31 Am. B. E. 332. In re Moore (D. C, Teuu.), 23 Am. B. E. 769, 210 Fed. 754 109, 173 Fed. 679. 327. Eoo discussion under Section Seventeen Necessity for notice to bankrupt. — Notice to of this work. In Matter of Frazin & Oppen- a bankrupt to redeem life insurance policies heim (C. C. A., 2d Cir.), 24 Am. B. E. 903, 183 after ascertaining tlieir cash surrender value, Fed. 28. is not required by section 70-a of the Bank- 328. McKenney v. Cheney (Sup. Ct., Ga), 11 ruptcy Act, but the burden of taking advant- Am. B. E. 54, 45 S. E. 433; In re Castleberry age of the privilege therein granted is upon (D. C, Ga.), 16 Am. B. E. 159, 143 Fed. 1018; the bankrupt himself. Pittsburg, etc., Pack- In re Sullivan (D. C, Iowa), 16 Am. B. E. 87, ins Co. v. Shrope (D. C, Pa.), 33 Am. B. 1;. 142 Fed. 620; In re Bender (Ref., Ohio), 17 Am. 122. B. E. 895; In re Bailey (D. C, Utah), 24 Am. 333. Holden v. Stratton, 198 U. S. 202. 14 Am. B. E. 201, 176 Fed. 628; Pincus v. Meinhard & B. E. 94, 49 L. Ed. 1018, 25 Sup. Ct. 656, revg. Bro. (Sup. Ct., Ga.), 32 Am. B. E. 123, 77 S. E. 7 Am. B. E. 615, 113 Fed. 141; Steele v. Buel 82, citing Collier on Bankruptcy (9th ed.), 1029; (C. C. A., 8th Cir.), 5 Am. B. E. 165, 104 Fed. Matter of Auge (D. C, Mont.), 39 Am. B. E. 968, revg. 3 Am. B. E. 549, 98 Fed. 78. See also 39, 238 Fed. 621; Hughes v. Sebastian County explaining effect of proviso, Hiscock v. Mertena, Bank (Ark. Sup. Ct.), 39 Am. B. E. 866, 195 S. 205 U. S. 202, 17 Am. B. E. 484, 51 L. Ed. 771, W. 364. 27 Sup. Ct. 488. The foUowing cases are op- The federal homeetead act does not create an posed to this doctrine : In re Lange (D. C., exemption, but merely a statutory benefit, and Iowa), 1 Am. B. E. 189, 91 Fed. 361; In re the title to the property passes to the trustee Scheld (C. C. A., 9th Cir.), 5 Am. B. E. 102, 104 and the rights of the parties under the statute Fed. 870; In re Welling (C. C. A., 7th CSr.), 7 are to be worked out in the bankruptcy court. Am. B. E. 340, 113 Fed. 189; Matter of Fetter- Matter of Auge (D. C, Mont.), 39 Am. B. E. man (D. C, Ohio), 39 Am. B. E. 834, 243 Fed. 39, 238 Fed. 621. 975; Matter of Hunter (D. C, N. Y.), -tl Am. 329. In re Fisher (D. C, Va.), 15 An>. B. E. B. E. 445; Matter of Brinson (D. C, Miss.), 45 652, 142 Fed. 205. Am. B. E. 99, 262 Fed. 707. 330. In re Seydel (D. C, Iowa), 9 Am. B. E. The Tennessee statute which provides that 255, 118 Fed. 207; Chicago, B. & Q. E. E. Co. v. life Insurance effected by a -husband on hia own Hall, 229 U. S. 511, 30 Am. B. E. 619, 57 L. Ed. life shall inure to tiie benefit of his widow and 1306, 33 Sup. Ct. 885: Matter of Fletcher (Eef., next of kin, does not affect the title of his Ohio), 16 Am. B. E. 491; In re Letson (C. C. A., trustee in bankruptcy to the surrender value: 8th Cir.), 19 Am. B. E. 506, 157 Fed. 78; In re such statute does not give an exemption to the Judson (C. C. A., 2d Clr.), 27 Am. B. E. 704, bankrupt. In re Monro (D. C, Tenn.). 23 Am. 192 Fed. 834; Matter of Vouhee (D. C, Wash.), B. R. 109, 173 Fed. 079. § 70-a.j Appeaiseks Ax\d Appeaisal. 1165 right to exemptions of life insurance policies by listing them in his schedules, and showing that they have been assigned as security for an amount greater than their surrender value.^^* To policies which are so exempt § 6 applies; this is so since the opening clause of the section vests the trustee with the bankrupt's title except as to " property which is exempt." This qualification necessarily controls all the enumerations, and therefore excludes exempt property from all the provisions contained in the respective enumerations. It controls the proviso as well as other parts of the section and makes the life insurance policies which are exempt by State statute subject in all respects to the provisions of § 6. (3) Title vests subject to chaege foe suppoet of widow and minoe CHiLDEEN. — The trustee's title is also subject to the condition that if the bankrupt dies during the pendency of the proceedings, the widow and children are entitled to receive the allowance given them by the laws of the State of the bankrupt's residence. '^^^ V. APPRAISERS AND APPRAISAL. a. In general. — The only reference to appraisers .occurs in subsection b. The words seem to require the appointment of appraisers in every case.^*^ At the same time, it is not thought that this is so far jurisdictional as to make defective a title sold by a trustee without appraisal. Three appraisers, not two or one, must be appointed. They must be disinterested; this excludes creditors and all other persons having an interest in the proceeding.*'*'' The appointment may be, in fact, usually is, made by the referee. Their fees are discretionary, the statute being silent, and are fixed in some districts by general rule, in others by order in each case. They are usually in the form of a per diem, and are moderate rather than large.*** Inasmuch as the appraisal is often the key to the administration of asset cases and knowledge of the percentage of cost price used in getting at values essential to bidders and court alike, one of the appraisers should be selected and serve as the representative of Ifhe referee. Such a practice will, it is thought, check col- lusive bidding and inadequate prices at subsequent sales. It has been held that the prevailing cost to the trade should be adopted as the actual value.**® An official appraiser of a bankrupt estate is, as a matter of law, incapable of purchasing the property of the estate prior to the filing of his appraisal.**" 334. King V. Milea (Miss. Sup. Ct.), 34 Am. case it was held that the appointment of an B. E. 93, 67 So. 182. appraiser upon the suggestion of a creditor was 335. Hull T. Dicks, 235 U. S. 584, 34 Am. B. not necessarily void. E. 1, 59 L. Ed. 372, 55 Sup. Cf. 152. Lessee of bankrupt as appraiser. — A lessee 336. Necessity of appraisal. — While the want of a portion of the property of a bankrupt of an appraisal does not necessarily invalidate under a mining lease, executed more than four a sale by trustee of property of a bankrupt's months before the petition in bankruptcy was estate, and a sale for a reasonable price with- filed, and requiring work to be done and out appraisal may be confirmed, yet, if the royalties to be paid, not shown to have an price is wholly inadeq.uate the sale will not be Interest in the bankruptcy proceedings or in allowed to stand. In such a case, the pui- the sale of the property, Is not disqualified chaser may return the property and recover as an appraiser under section 70-b of the Bank- the purchase price with interest. Matter of ruptcy Act. Clark Hardware Co. v. Sauve (C. Monsarrat (D. C, Hawaii), 25 Am. B. E. 820, 3 C. A., Sth Cir.), 33 Am. B. E. 674, 220 Fed. 102. V. S. Dist. Ct. Hawaii, 641. See also Matter oi 338. In re Fiddler & Son (D. C, Pa.), 23 Am. Irvine (D. C, S. Car.), 43 Am. B. E. 155, 253 B. E. 16, 172 Fed. 632, holding that the trustee Fed. 16S. must justify by special circumstances the pay- The appraisement is evidence upon which the ment of more than $5 per day as fees to ap- court may base a valid discretion when called praisers. upon to confirm or set aside a trustee's sale. ggg, jq re Prager (Eef., Col.), 8 Am. B. E. Jacobsohn v. Larkey (C. C. A., 3d Clr.), 40 jgg ™37. Matter of Columbia Iron Works (D. C 3*0. Matter of Frazin & Oppenhelm (C. C. Mich.), 14 Am. B. E. 526, 142 Fed. 234, In which A., 2d Cir.), 24 Am. B. E. 598, 181 Fed. 307, 1166 Title to Peopeety. [§ 70-b. b. Practice. — In no-asset cases appraisers are not needed, or often appointed. In asset cases, their appointment should be moved at the first meeting of creditors. Where possible, the wishes of the creditors should be consulted as to their choice. The appointment is evidenced by an order.*" An oath of office must be taken. **^ The appraisal should be made as soon as possible; no notice to creditors or parties in interest is required. It has been said that an appraisal should be general rather than special, only such particularity being given as will be sufficient to reasonably identify the property in char- acter and quantity, and give a fair idea of its value.*** When made, it is reduced to writing,*** signed by the appraisers, and filed with the referee. With it, should be filed affidavits of the number of days actually spent by each appraiser; this for the guidance of the referee in fixing the fees.**''^ VI. SALES OP PROPERTY. a. In general. — Subsection 6 also provides for the sale by the trustee of the bankrupt's real and personal property. The subject of sales is largely con- trolled either by rules or by the order of the court in each case. Here the present law differs materially from that of 1867. The latter, especially after the amendments of 1874, regulated sales with much particularity.**® Subject to the statute and General Orders XXI and XXIII interpreting, it, the assignee (trustee) then had a large discretion as to sales. Cases under that law should, therefore, be cited with caution. The present statute, after, in general words,**'' conferring jurisdiction on courts of bankruptcy to convert estates into money and distribute them, and charging this duty on the trustee,*** limits the latter's powers by the words "under the direction of the court," in § 70-b, and then, as to sales, provides that the same, when practicable, shall be made subject to the approval of the court; indeed, that no sale at less than 75 per cent, of the appraised value shall be made without such approval.*** This subsection and the one that follows are, other than those in § 58-a (4), the only words of the present statute having to do with the reduction of a bankrupt's property into money. Thus, the only statutory check, on absolute discretion is that creditors are entitled to notice of all pro- posed sales. This latter restriction is, as we have seen, unfortunate. The subject is, however, one of practice rather than law. This is recognized in General Order XVIII and the numerous special rules regulating sales in the different districts. b. Practice on sales; conduct of sales. — (1) In genebal. — It will be seen that a trustee has the option (1) of disclaiming the bankrupt's property, or (2) of selling it. If the latter, (a) he may sell it immediately without notice, holdini^ that under the rule of equity that 344. Form No. 13. no person can be permitted to purchase an 345. See generally 1 N. B. N. 179, and Interest in property and hold it for his own Rule 13, Erie Co. (N. Y.) District in 1 benefit where he has a duty to perform in N. B. N. 114. Compare also In re Grimes relation to such property which is inconsist- (D. C., N. Car.), 2 Am. B. R. 730, 96 Fed. ent with the character of a purchaser on his 529; In re Jamieson (Eef., R. I.), 6 Am. own account and for his own individual use, B. E. 601. an official appraiser of a bankrupt is iflca- 346. See "Analogous Provisicms" at head pable of purchasing the property which he of this sectior. has appraised. 347. Bankr. Act, § 2 (7). 341. Form No. 13. 348. Bankr. Act, S 47-a (2). i '■ 342. Id. 349. Matter of Monsarrat (D. C, Hawaii:), 843. In re Gordon Supply, etc., Co. (D. 25 Am. B. R. 820, 3 U. S. Dist. Ct., Hawaii. C, Pa.), 13 Am. B. R. 352, 133 Fed. 798. 641. f 70-b.] Sales of Peopeety. 1137. if it be perishable, in which case the practice is indicated in Form No. 46 f^ (h) he may sell it at public auction on notice using Form 'So. 4:2 f^^ or (c) he may sell it at private sale^°^ under General Order XVIII (2) with or without notice, as the court shall direct,^"^ in which case Form No. 45, modified to fit the facts, should be used; or (d) he may sell it subject to liena, when the practice is not unlike that on a sale of unincumbered property, though Form No. 44 should be used; or (e) he may sell it clear of liens, for which no form is provided but to which Form No. 44, with the additional recitals and directions indicated in the last paragraph, may be adapted, or (/) he may redeem it from liens, as provided in General Order XXVIII, i:\ which event Form No. 43 should be used; or (g) he may sell unconverted assets as a part of the final meeting of creditors.^^* The bankruptcy court may order how a sale of the bankrupt's property shall be made and may order the property sold either in parcels or as a whole.^^^ (2) JuEisDicTioN- OF EEFEEEE AS TO SALES. — ^A referee has power to order and confirm a sale;^^® but not before the adjudication.^^'' (3) By whom conducted. — The act does not require the sale to be made by the trustee; the court may direct that the sale be conducted by an officer appointed by it;^'^ in some districts official auctioneers are designated to conduct the sales.^^* It has been held that the act of March 3, 1893 (27 Stat. 75; TJ. S. Oomp. Stats. 1901, p. 710), requiring judicial sales of land to be made upon the land itself, or at the court house in the county where it lies, and upon not less than four weeks' notice, does not apply to bankruptcy ,sales.^«» Sale without teonrt order. — A sale by a trustee in bankruptcy of personal property belonging to the estate of thfe bankrupt, in the absence of an order of the bankruptcy court authorizing such sale, is not absolutely void and cannot bo attacked collaterally. Trabue v. Ash (Ct. of Civ. App., Tex.), 41 Am. B. K. 122, 200 S. W. -415. 350. This form Is erroneous in so far as it S51. For a form of notice, see 1 N. B. N. 117. 352. The court may, under its broad powers, •order a private sale of either real or personal property belonging to the estate. In re Edes (D. C, Me.), 14 Am. B. E. 382, 135 Fed. 595. See also McKay v. Hamill (C. C. A., 3d Cir.), 26 Am. B. E. 164, 185 Fed. 11; In re Britannia Mining Co. (D. C, Wis.), 28 Am. B. E. 651, 197 Fed. 459. 353. As to when notice to creditors and lienors of a private sale should be given, see AUgair v. Fisher (C. C. A., 3d Cir.), 16 Am. B. E. 278, 143 Fed. 962. Notice. — A sale by a trustee in bankruptcy, or an offer to seU at public auction, may be made on ten days' notice. Matter of Progres- sive' Wall Paper Corporation (D. C, N. Y.), 3 Am. B. E. 508, 222 Fed. 87. Right to object for want of notice Is waived by appearing at the day of the sale and filing exceptions and objections and by attending the sale. Pace v. Berry (Ky. Ct. of App.), 40 Am. B. E. 53, 195 S. W. 131. 354. See "Supplementary Forms," post; and .also Hagar & Alexander's Bankruptcy Forms (2d ed.), 355. Matter of Haywood Wapron Co. (C. C. A., 2d Cir.), 33 Am. B. E. 618, 219 Fed. 655. Sale of property subject to oil lease. — Where a tract of land subject to an oil and gas lease is subdivided and sold and later the lessee produces oil on one of the subdivisions the purchaser of thit particular subdivision Is entitled to the royalties under the lease. Pitts- burg & W. Va. Gas Co. v. Enkrom (W. Va. Sup. Ct. of App.), 42 Am. B. E. 523, 97 S. B. 593. 356. In re Matthews (D. C, Ark.), 6 Am. B. E. 96, 109 Fed. 603; In re Fisher & Co. (D. C, N. J.), 14 Am. B. E. 366, 135 Fed. 223; Matter of Schilling and LoUer (D. C, Ohio), 41 An>. B. E. 705, 251 Fed. 972, 966. 357. In re Styer (D. C, Pa.), 3 Am. B. R. 424, 98 Fed. 290. Compare In re Kelly Dry Goods Co. (D. C, Wis.), 4 Am. B. B. 528, 102 Fed. 747. 358. Sturgis V. Corbin (C. C. A., 4th Cir.), 15 Am. B. E. 543, 141 Fed. 1, 72 C. C. A. 179. 359. In re Benjamin (C. C. A., 2d Cir.), 14 Am. B. E. 481, 136 Fed. 175, afCg. 13 Am. B. R. 18. Sale by auctioneer. — An order directing a sale is not invalid, which dispenses with the requirements of a local rule providing that sale of a bankrupt's property shall be made by the official auctioneer, and that a conspicu- ous notice shall be posted, at least two days before the sale, in front of the premises where the property is to be sold, since such matters are not jurisdictional. In re Nevada-Utah Mines & Smelters Corporation (D. C, N. Y.), 28 Am. B. E. 409, 198 Fed. 497, affd. 29 Am. B. R. 754, 202 Fed. 126. 360. In re Britannia Mining Co. (C. C. A., 7th Cir.), 29 Am. B. E. 472, 203 Fed. 450, revg. 28 Am. B. E. 651, 197 Fed. 459. Act March 3, 1893, providing; that all sales of real estate or any interest in land, made under any order or decree of any United States court, shall be upon the property Itself or at the court house of the county in which it is situated and upon at least four weeks' notice by publication, has no application to sales In bankruptcy. In re La France Copper Co. (D. C, Mont.), 30 Am. B. R. 381, 205 Fed, 207. 1168 Title to Peopeety. [§ 70-b. (4) Peopeety to be sold. — Only perishable property should be sold before adjudicatioii, even by the court/^^ though, if ordered, the trustee, when ap- pointed, may doubtless be directed to ratify a receiver's sale, and thus perfect the purchaser's title. A contingent interest in an estate may be sold under cer- tain circumstances, there being some foundation in fact upon which the trustee^s claim to such interest is based.^** The trustee may be authorized to sell his right, title and interest in a pending suit to which he has been made a party defendant.^^^^ Where a negotiable promissory note is sold by a trustee in bankruptcy, delivery without endorsement will transfer title.^*^ A promissory note, inventoried as in tbe hands of am attorney for collection, and which was never appraised for the purpose of the sale and which was never in the possession of the trustee or the auctioneer, cannot be construed as being included in a bankruptcy sale of " open accounts and claims.^^ The question whether the State has the title to lands under water, sold by the trustee in bankruptcy as part of the bankrupt's estate, should be determined by suit in a proper court and cannot be decided upon affidavits.^^^ (5) CoNDXiCT OF sale; bids; eights and obligations of biddees. — The sale must be fairly conducted without discrimination as against any bidder; all persons who, in good faith and with capacity to comply with the terms of the sale, were present at the sale may make offers or bids; the person who proposes to pay the greatest amount is entitled to have his bid or offer accepted and reported to the court, upon complying with the terms of the sale.^^® When the sale is completed by the acceptance of the bid and a partial performance by the trustee it becomes a contract, and the bidder cannot insist before con- firmation that the money paid be returned.^®^ A sealed bid, submitted under an order of the referee directing that sealed bids be received and that the trustee report the same to the court with his recommendations, is received subject to the approval of the court, and may be withdravsm by the bidder at any. time prior to its acceptance by the court. ^^* A purchaser at the sale is not entitled to be relieved from his bid because a by-bidder or "puffer" was the only other bidder, where there is no allegation that such by-bidder made fictitious bids while tjelieving that he was secure from personal liability or had assurance of immunity.^®' The bid itself does not confer a legal right upon the bidder, prior to its acceptance by the trustee and confirmation by the court.^™ If a creditor is present at the sale and bids on the property sold, he cannot afterward complain that he received no notice of the sale.*''^ If a 361. In re KeUy Dry Goods Co. (D. C, Wis.), demand of a bidder that he disclose the names 4 Am. B. E. 528, 102 Fed. 747. of the persona for whom he is acting. Coal Sales by receivers iu bankruptcy are Jus- City House Furnishing Co. v. Hogue (C. C. A., tlfied only when property is perishable or is 4th Cir.), 28 Am. B. E. 258, 197 Fed. 1. rapidly depreciating in ralue on the falling 367. In re Lane Lumber Co. (C. C. A., 9th market or for other reasons. In re Desrochers Cir.), 31 Am. B. E. 148, 207 Fed. 762. (D. C, N. Y.), 25 Am. B. E. 703, 183 Fed. 991. 368. Matter of Glas-shipt Dairy Co. (C. C. A., sea. In re Gutterson (D. C, Mass.), 14 Am. 7th Cir.), 38 Am. B. E. 554, 239 Fed. 122. B. E. 495, 136 Fed. 698. 369. Williams v. Hogue (C. C. A., 4th dr.), 363a. Matter of Vanoscope Co. (C. C. A., 2d 34 Am. B. E. 40, 219 Fed. 182. Cir.), 40 Am. B. E. 70, 244 Fed. 445. An agreement by creditors to bid against 363. Wade T. Elliott (Ga. Ct. of App.), 28 Am. each other so as to induce the others to bid' B. E. 888, 75 S. E. 989. and so that the court would be more likely to 364. Seger v. Fabacher (La. Sup. Ct.), 34 Am. confirm the sale. Is not void on ground of pub- B. R. 89, 67 So. 369. lie policy, but may amount to such a fraud a» 365. Matter of WlUlams v. Bailey (D. C, to prevent the parties from enforcing the con- N. Y.), 19 Am. B. E. 470, 150 Fed. 691. tract between themselves. Schaap v. Eobinson 366. Duty of trustee to accept bids.— In the (Ark. Sup. Ct.), 41 Am. B. E. 256, 201 S. W. absence of any controlling reason to the con- 292. trary, such as fraud or manifest Inability to 370. Untereiner v. Connors (C. C. A., Hth comply with the terms of the sale, the trustee Cir.), 36 Am. B. E. 122, 228 Fed. 890. Is bound to accept all bids made at a public 371. In re CaldweU (D. C, Ga.), 24 Am. B. K. sale of a bankrupt's real estate and to report 495, 178 Fed. 377. the same to tbe court; and be has no right to § 70-b.J Sales ob" Pbopeety. 1169 bidder has received every reasonable opportunity to submit a bid in competition with other bidders, his objection to confirmation of a sale to a bidder who, subsequent to the time set for submitting bids, offered a higher bid, which the former bidder refused to raise, should not be sustained.*''^ Sales regularly and fairly made will not, as a rule, be disturbed on the ground of mere inade- quacy of price, unless for fraud or the stifling of bids, or the like."''* It is sufficient, at an auction sale of a bankrupt's property, if all parties desiring to bid have a fair chance, the announcement by the auctioneer, from time to time, of the amount bid disclosing to each just how the sale is going, and bids in good faith, from responsible parties alone being entertained.*^* An error as to the basis of value, made in the trustee's circular inviting bids, will not warrant a resale, where the purchaser had opportunity to ascertain the value, independently of the circular.*'^ Where a sale of a lease was made by a trustee and the purchaser knew that a question had arisen as to the validity of the title and the right of the trustee to sell, and the trustee stated at the sale that he assumed no personal responsibility and did not warrant the lease or its salability, such sale will not be set aside after it appears that the value was less than he supposed.*''^ A sale of the bankrupt's equity of redemption in certain real estate will be set aside where the trustee failed to give notice of the sale to an intending bidder, acccording to promise, and the petitioner filed an agreement to bid three times the amount bid at the first sale.*" After the bids are received and acted upon the circumstances must be unusual to permit a re-opening of the bidding before confirmation, for the reception of additional or increased bids. If the sale is unsatisfactory the remedy is to set it aside and order a resale, when application is made for confirmation.*'^* 372. In re Chandler (C. C. A., 7th Clr.), 28 Am. B. K. 89, 194 Fed. 944. 373. In re Thompson (Eef., Pa.), 2 Am. B. K. 216; In re Groves, 2 N. B. N. Eep. 30; In re Ethier (D. C, Wis.), 9 Am. B. R. 160, 118 Fed. 107; Sturgis v. Corbin (C. C. A., 4th Cir.), IS Am. B. E. 543, 141 Fed, 1, 72 C. C. A. 179; Matter of Irvine (D. C, S. Car.), 43 Am. B. E. 155, 255 Fed. 168. Compare In re Finday Bros. (D. C, N. Y.), 4 Am. B. E. 745, 104 Fed. 675, for case where application was made to set aside unfair sale made by a general assignee before banltruptcy. 374. In re Ketterer Manufacturing Co. (D. C, Pa.), 19 Am. B. E. 638, 158 Fed. 719, hold- ing that the fact that the attorney of the purchaser at an auction sale of a bankrupt's property by the trustee had a private arrange- ment with the auctioneer that the bid of any other person should be raised $50 each time until a sign was given by the attorney to stop, does not render the sale invalid or prevent its confirmation. 375. Owens v. Bruce (C. C. A., 4th Cir.), G Am. B. E. 322, 109 Fed. 72; In. re Fisher (D. C, N. J.), 17 Am. B. E. 404, 148 Fed. 907, holding that where a resale is had, the expenses should be paid out of the estate. See also Matter of McCann (D. C, N. Y.), 42 Am. B. E. 155, 250 Fed. 1006. 376. Matter of Frazin and Oppenheim (C. C. A., 2d Cir.), 29 Am. B. E. 212, 201 Fed. 343. 377. In re Shea (D. C, Mass.), 10 Am. B. E. 481, 122 Fed. 742. Compare In re Belden (D. C, N. Y.), 9 Am. B. E. 679, 120 Fed. 524, where the court refused to set aside a sale of the bank- rupt's interest in his father's estate, on the mo- tion of one who has no interest in the matter except a desire to become a bidder and pur- chaser at a higher figure, especially where all the creditors oppose the motion, and protest in writing against a resale. 74 378. Be-openinar bids before conflrmation. — Under the old English practice before a sale had been confirmed courts would open the biddings and direct a resale of the property i case a person was ready to offer a larger price than the property brought at the first sale. But this practice in England was abolished by statute. St. 30 and 31 Vict. c. 48, sec. 7. And now in that country to entitle the parties to open the bidding it appears to be necessary to show either fraud or such misconduct as borders on fraud. Delves v. Delves, L. E. 2 ) Eq. 77. In the courts of this country there seems to be some difference of opinion whether before confirmation it is proper to open the biddings to obtain a greater bid and the prac- tice of doing so has been widely condemned in our courts as making judicial sales unstable and as tending to chill the bidding. In a num- be of cases it has been held that there must i some further reason arising out of the cir- cumstances of the sale sufficient to cause a refusal of confirmation or the application to reopen the bids will be denied. If courts are strongly inclined to decline to open biddings even in cases where the advanced bid is actu- ally brought into court, or a bond or guarantee of a higher bid is furnished, a fortiori the bid- dings cannot be opened where no such bid is offered and no such guarantee is produced. Matter of Haywood Wagon Co. (C. C. A., 2d Cir.), 33 Am. B. E. 618, 219 Fed. 655. 379. Matter of Finks (C. C. A., 6th Cir.), 34 Am. B. E. 749, 224 Fed. 92. 380. In re Shea (C. C. A., 1st Cir.), 11 Am. B. E. 207, 123 Fed. 153 ; s. c, 10 Am. B. E. 481, 122 Fed. 743. See also Olltsky v. Estersohn (N. J. Ct. of Ch.), 44 Am. B. E. 350, 108 Atl. 88. Validity of private sale. — A sale of bank- rupt's property at private sale by trustee 1170 Title to Peopeety. [§ 70-b. Where the property sold was destroyed by " Act of God," for and without the negligence of the purchaser, prior to confirmation, the purchaser may not be compelled to complete the purchase. It would be inequitable to require the purchaser to stand the loss. In such a case the court, in the exercise of a fair discretion, should refuse to confirm the sale.^''* (6) CoNFiEMATiON- OE APPEOVAL OF SALES. — Upon a true construction of this subsection, a sale of the bankrupt's property is in all circumstances subject to the approval of the court when practicable, and any sale for which an approval was unquestionably practicable, conveys no title until it is confirmed, and a setting aside of the sale is equivalent to a refusal to oonfirm.^^" But it has been held that a sale by a trustee of personal property belonging to the estate of the bankrupt, is not absolutely void and subject to collateral attack, although there was no order of the bankruptcy court authorizing such saL."^"* The confirmation is a matter of discretion f^''^ it should not be refused where the sale was properly conducted, although one of the bidders, upon a hearing of the objections to confirmation, offers considerable more than the amount for which the property was sold.^'^ Confirmation of a sale will depend upon the suffi- ciency of notice and a compliance with proper requirements as to the conduct of the sale in respect to the treatment of bidders, and honesty and fair dealing.^*^ Before confirmation a sale is not in a technical and legal sense a sale. But a confirmation has the effect of completing the sale, and while it does not pasa the legal title it vests the full equitable title to the property in the purchaser, even though the deed executed in pursuance thereof is irregular, and even if no deed is given.^^ Although the terms of sale state plainly that the trustee is selling only the right, title and interest of the bankrupt in real estate, a person who bids off a parcel that has been sold by the bankrupt a long time before bankruptcy should be relieved from his obligation to carry out the bid.^^* The order of confifirmation takes effect as of the date of its entry, and cannot be without appraisal and -without the order of good reasons why a better price cannot be the court, and which has not been approved obtained on a resale. Matter of American by the court, .vests no title in the buyer. Matter Beaver Co. (D. C, N. J.), 39 Am. B. K. 603, of Monsarrat (D. C, Hawaii), 25 Am. B. E. 815. 242 Fed. 599. Sale without leave of bankruptcy court. — 383. Confirmation of sale. — While a sale of the Where a bankrupt more than four months prior assets of a bankrupt's estate at public auction to his bankruptcy executed a security deed is subject in aU things to the confirmation of upon lands which remained in his possession the court, that confirmation must depend upon through tenants, and several months after the the sufflciency of the notice, the complying with appointment of the trustee in bankruptcy the all the necessary or proper requirements in holders of the deed, with the knowledge of the holding the sale, honesty and fair dealing and bankruptcy, but without notice to the trustee a proper treatment of the bidder in considerinjj or permission from the bankruptcy court, or his right after the property is knocked down State court, duly exercised the power of sale to him, which generally Involves merely the contained in the deed and offered the lands ni possibility of his completing the purchase and public sale, purchasing them themselves, both of the adequacy of his bid. In re Kronrot the Bankruptcy Act and public policy require (D. C, N. Y.), 25 Am. B. E. 738, 183 Fed. 653. that such sale should be set aside, although See also Sturgiss v. Corbln (C. C. A., 4th dr.). the holders of the deed acted in good faith. 15 Am. B. E. 643, 41 Fed. 1. As to notice of Cohen v. Nixon & Wright (D. C, Ga.), 37 Am. application to confirm, see In re Nevada-Utah B. E. 646. Mines and Smelters Corporation (D. C, N. Y.), The approval of the court Is unnecessary if 28 Am. B. E. 409, 198 Fed. 497, affd. (C. C. A., the property is sold for seventy-five per cent. 2d Cir,), 29 Am. B. E. 754, 202 Fed. 126. If the of the appraisement. Matter of American property has increased greatly in price since Beaver Co. (D. C, N. J.), 39 Am. B., E. 603, the sale and there was only one bidder, tlm 242 Fed. 599. sale should not be confirmed. Matter of Ohio 380a. Trabue v. Ash (Tex. Ct. of Civ. App.), Copper Mining Co. (D. C, N. Y.), 38 Am. B. E. 41 Am. B. E. 122, 200 S. W. 415. 548, 237 Fed. 490. See also Matter of Irvine (D. 380b. Matter of American Beaver Co. (D. C, C, S. Car.), 43 Am. B. E. 155, 255 Fed. 168. N. .!.), 39 Am. B. E. 603, 242 Fed. 599; Jacob- The appraisement Is evidence upon which the sohn V. Larkey (C. C. A., 3d dr.), 40 Am. B. court may base a valid discretion when called E. 563, 245 Fed. 538. upon to confirm or set aside a trustee's sa'^ 381. Matter of Mitchell (Eef., Mass.), 15 Am. Jacobsohn v. Larkey (C. C. A., Sd Cir.), 40 B. E. 735; Jacobsohn v. Larkey (C. C. A., 3d Am. B. E. 563, 245 Fed. 538. dr.), 40 Am. B. E. 563, 245 Fed. 538. 383. Matter of Burr Mfg. Co. (C. C. A., 2d Borden of proof. — A trustee who brings the dr.), 32 Am. B. E. 708, 217 Fed. 16. report of a sale for less than seventy-five per 384. Matter of Capenirri (C. C. A., 2d Cir.), 32 cent, of the appraised value to the court for Am. B. E. 158, 210 Fed. 807. confirmation has the burden of establishing § 70-b.J Sales of Peopeett. 1171 treated as in effect on the day of the sale.""'' The fact that all the secured and most of tiie unsecured creditors of a bankrupt are satisfied with a judicial sale of the assets subject to incumbrances affords some indication that the good faith of the trustee ought not to be impugned. But a single objecting creditor, if actually wronged by a S'ale of the assets, is entitled to protection by the court.^^** The successful bidders may appear and urge the acceptance of their bids and the confirmation of the sale.^'^^ c. Sales at public auction or by private sale under General Order XVIII. — General Order XVIII limits the discretion of the district and the referee courts. Its third paragraph applies the same rules to perishable property as were stated in the statute under the former law;^®^ and the cases then decided are thought still applicable ; those under the present law are considered elsewhere.''^* Its first paragraph compels sales at public auction, unless other- wise ordered by the court.^^ The term "perishable property" includes property which may deteriorate in value and price if not sold at a certain time, as well as property which deteriorates physically.*'®'* The second para- graph is by far the most important. In seeming to dispense with notice to creditors, it is of doubtful validity, yet, as a way out of many an awkward situation, it is very generally availed of where the interests of creditors will be best subserved by an immediate sale at a specified bid. By its means, much larger prices are often obtained than could be at public auction. At the same time, in the face of the mandatory provision of § 58-a (4), this rule will be cautiously applied, and only where the moving papers show clearly either a necessity for immediate sale or a fair and adequate offer. ^^^ d. Sales of incumbered property. — (1) In geneeal. — Sales free of incum- brances were authorized by the statute of 1867.^®^ The present law has no r.uch provision. This has cast doubt on the power of the court to authorize such a sale. The cases are quite uniform, however, in declaring that such sales can be authorized, and by the referee^®^ as weft as by the judge.^®* But 385. Matter of Finks (C. C. A., 6tli Cir.), 34 but one-tenth in amount of the stockholders Am. B. K. V49, 224 Fed. 92. objecting and of the creditors all but one- 386. Matter of Haywood Wagon Co. (C. C. twelfth or less in value either openly advocat- A., 2d Cir.), 33 Am. B. B. 618, 219 Fed. 655. ing the sale or by silence, acquiescing therein, 386a. Jacobsohn T. Larkey (C. C. A., 3d Cir.), Is justified. In re Peerless Finishing Company 40 Am. B. E. 503, 2:3 Fod. 53S. (D. C, N. Y.), 2 Am. B. E. 429, 199 Fed. 3jj. 387. Act of 1S67, § 25, E. S., § 50G5. 398. Act of l£'d7, § 20, E. S., § 50i5. 388. See discussion under Section Fifty-eight 393. As to sale free of liens by order of of this work. referee, see In re Waterloo Organ Co. (D. C, 389. Public sale.— A sale of bankrupt's assets N. Y.), 9 Am. B. E. 427, 118 Fed. 904; Citizens' is not a public sale, when it is made at a Savings Bank v. Paducah (Ct. of App. Ky.), meeting advertised by a notice addressed only 32 Am. B. E. 508, 167 S. W. 870 ; Shinn v. Kemp to "creditors, stockholders and other parties & Herbert (Sup. Ct., Wash.), 32 Am. B. E. 852, in interest," wherein the meeting to be held 131 Pac. 822. was stated to be a meeting of such persons, 394. In re Pittelkow (D. C, Wis.), 1 Am. B. since the essential feature of a public sale Is E. 472, 92 Fed. 901; In re Btheridge Furniture lacking, viz., that the public be invited to Co. N. E. 691 ; Lesser v. Bradford Ecalty Co., 15 Am. § VC-a] Feaudulent Transfers Avoided. 1181 b. The saving clause. — That clause in this subsection is similar to those found in § 6l-e and § 67-f, and is for the same purpose. What has already been said of them will not be repeated here. This saving of the rights of bona, fide holders for value is also merely expressive of the law.^®^ But, after adjudication, the filing of the petition amounting to constructive notice, there can be no bona fide holder.*®* c. The amendment of 1903. — Here the words added are the same as those added to § 60-b and § Q'7-e.*^'' Their purpose and effect have been considered in the discussion of those sections.*®* The effect of the omission from § 23-b of all reference to § 70-e has been questioned. It has been held, however, that such omission operates to bring actions under § 70-e within the general rule as laid down in § 23-b, and that while a bankruptcy court has general jurisdiction over the subject-matter it can only be exercised under the con- ditions imposed by § 23-b, that is, by the consent of the proposed defendants.*®* The effect of this omission has been nullified by the amendment of § 23-b by the amendatory act of 1910, which enlarged the jurisdiction of the bank- ruptcy court to entertain suits under § 70-e as well as under §§ 60-b and 67-6.*®" B. E. 123, 47 N. Y. Misc. 463, 95 N. Y. Supp. 933, as to sufficiency of complaiut lu actiou to set aside chattel mortgage made wlthlu four moutlis' period; Breekons v. Snyder, 15 Am. B. E. 112, 211 Pa. St. liB, as to sunicieucy of evi- dence In action to recover preferential payment ; Durham t. Wick, 14 Am. B. E. 3S5, 210 Pa. St. 128; Wright v. Skinner (D. C, N. Y.), 14 Am. B. E. 500, 136 Pea. 694, as to allegations as to citizenship in bill where jurisdiction depends upon diverse citizenship ; Horskius v. Sander- con (D. C, Vt.), 13 Am. B. E. 101, 132 Fed. 415, as to jurisdiction over property within the district where the defendant resides elsewhere ; Union Trust Co. v. Amery (Wash. Sup. Ct.), 27 Am. B. E. 499, 120 Pac. 539; I-Iplbrook v. In- ternational Trust Co. (Mass. Sup. Ct.), 33 Am. B. li. 808, 107 N. E. 665, citing text; Woodman T. Butterfleld (Me. Sup. Ct.), 40 Am. B. E. 40, 101 Atl. 25; Sherwood v. Holbrook (N. Y. App. Div.), 40 Am. B. E. 100, 165 N. Y. Supp. 514; Matter of Franklin Brewing Co. (D. C, N. Y.), 43 Am. B. E. Ill, 254 Fed. 910; Kimbrough v. Aired (Ala. Sup. Ct.), 43 Am. B. E. 116, 80 So. 617; McCrory v. Donald (Miss. Sup. Ct), 43 Am. B. E. 181, 80 So. 643 ; Smith v. Powers (D. C, N. Y.), 43 Am. B. E. 303, 255 Fed. 582; Garland t. Arrowood (N. Car. Sup. Ct), 43 Am. B. E. 549, 99 S. E. 100; Commonwealth v. Leven- thal (Pa. Quarter Sess.), 44 Am. B. E. 84, 67 Pittsb. L. J. 553 ; Markham v. Waterman (Kan. Sup. Ct), 44 Am. B. E. 103, 182 Pac. 546; Scales v. Holje (Cal. Ct of App.), 44 Am. B. E. 127, 183 Pac. 308; Simpson v. Combs (Wash. Sup. Ct.), 44 Am. B. E. 152, 182 Pac. 566, as to setting aside foreclosure of chattel mortgage and sale thereunder; Moran v. Moran (C; C. A., 2d Cir.), 44 Am. B. E. 178, 258 Fed. 234; French v. Cunningham (C. C. A., 8th Cir.), 44 Am. B. E. 534, 261 Fed. 909; Willman t. Peter- son, (Neb. Sup. Ct.), 44 Am. B. E. 568, 175 N. W. 644; Cohen v. George (Ga. Sup. Ct), 44 Am. B. E. 617, 101 S. E. 803; Termini v. Huth (N. Y. App. Div.), 45 Am. B. E. 263, 191 App. Div. 218. in New Jersey an insolvent debtor may pre- fer any creditor either by a mortgage securing an antecedent debt or by a conveyance of prop- erty in satisfaction of such indebtedness, pro- vided that the transaction is in good faith and for an adequate consideration, and the trustee in bankruptcy of the debtor may not avoid such transfer under section 70-e. Manning v. Evans (D. C, N. Y.), 19 Am. B. E. 217, 223, 156 Fed. 106. 455. In re Mullen (D. C, Mass.), 4 Am. B. E. 224, 101 Fed. 413. 456. Harrell v. Beale, 17 Wall. 590. Compare In re Lake, Fed. Cas. 7,U02. 457. For the time when this amendment be- came operative, see "Supplimentary Section to Amendatory Act," post. 458. See in sections 60 and 67. 469. Gregory v. Atkinson (D. C, Mo.), 11 Am. B. E. 495, 127 Fed. 1S3, disapproved iu Hurley V. Devlin (D. C, Kan.), 17 Am. B. E. 793, 149 Fed. 268, holding that the bankruptcy court, without the consent of the defendant, has juris- diction of a suit by the trustee to set aside an alleged fraudulent transfer of property made by the bankrupt anterior to the four months' period. Sheppard v. Lincoln (D. C, N. Y.), 25 Am. B. E. 804, 184 Fed. 182. A suit by the trustee cannot be brought under section 70-e without the consent of the defend- ant Skewis V. Barthell (D. C, Iowa), 18 Am. B. E. 429, 152 Fed. 534. Consent of defendant. — "Construing section 70-e in connection with section 23-b, it appears that the former conferred jurisdiction on courts of bankruptcy of suits to avoid transfers of his property made by the bankrupts which any creditor of the bankrupt might have avoided, but that although jurisdiction of the subject- matter is conferred, it can only be exercised over the persons of the defendants by their consent." Hull v. Burr (C. C. A., 5th dr.), 18 Am. B. E. 541, 547, 153 Fed. 945. 460. See discussion under section 23 of this work; and see Milkman v. Arthe (C. C. A., 2d Cir.), 34 Am. B. E. 536, 223 Fed. 507, revg. 32 Am. B. E. 519, 213 Fed. 642. SECTION SEVENTY-ONE. INDEXES AHD SEARCHES OF CLERKS. § 71. That the clerks of the several district courts of the United States shall prepare and keep in their respective offices complete and convenient indexes of all petitions and discharges in bankruptcy here- tofore or hereafter filed in the said courts, and shall, when requested so to do, issue certificates of search certifying as to whether or not any such petitions or discharges have been filed ; and said clerks shall be entitled to receive for such certificates the same fees as now allowed by law for certificates as to judgments in said courts : Pro- vided, that said bankruptcy indexes and dockets shall at all times be open to inspection and examination by all persons or corporations without any fee or charge therefor.* I. ADDITIONAL DUTIES OF CLERKS. This section was added by the amendatory act of 1903. It was not in the bill as introduced, but was originally inserted by the Judiciary Com- mittee of the House of Representatives. The only explanation of it is found in the report^ accompanying the bill. The Senate Judiciary Committee modified it, but not in any important particulars. Clearly the section should be a subdivision of § 51. Indeed, its necessity may be doubted. The chief purpose seems to be to require clerks to keep bankruptcy indices; this was already the practice in most of the districts. The provisions for certificates as to petitions and discharges seem to duplicate general provisions of law long enforced. The proviso clause is perhaps aimed at the practice of excluding the public from the clerk's files nnd records in vogue in some quarters. The provisions of the section are all new. They are carefully phrased, and do not require further comment. Under the rule phrased in § 19 of the amendatory act of 1903, this section affects only cases begun on or after February 5, 1903. ■ This section was added by the amend- to issue certificates in relation thereto when atory act of 1903. required. It also requires that these be kejgt 1. See House Report, No. 1,698, 57th Con- open to inspection and examination. It is gress, first session. frequently desirable to know whether a per- The last amendment is one generally de- son has filed a petition in bankruptcy, and mianded, and is in the interest of all persons also whether he has been discharged, and it who deal with property. It requires the is many times impossible within a reasonable clerks to prepare and keep indexes of all time to ascertain these facts in the absence petitions and discharges in bankruptcy and of convenient Indexes. [1182] SECTION SEVENTY-TWO LIMITATION ON FEES OF CERTAIN OFFICERS. § 72. That neither the referee, receiver, marshal, nor trustee shall in any form or guise receive, nor shall the court allow him, any other or further compensation for his services than that expressly author- ized and prescribed in this act.* Analogous provisions: In U. S.: As to property in general passing to the trustee, Act of 1867, § 14, R. S., § 5044; Act of 1841, § 3; Act of 1800, §§ 10, 11, 17, 27, 50; As' to patents, copyriglits, rights of action and the like. Act of 1867, § 14, R. S., § 5046 ; -Act of 1841, § 3; Act of 1800, §§ 13, 17; As to sales by the trustee, Act of 1867, §§ 15, 25, R. e., §§ 5062, 5062B, 5063, 5064, 5065, 5066; As to sales of incumbered property. Act of 1867, § 20, R. S., § 5075. In Eng.: As to property passing to the trustee, Act of 1883, §§ 43, 44, 59; As to bur- densome property, Act of 1883, § 55; Act of 1890, § 13; As to sales by the trustee. Act of 1883, |§ 56(1). 70. In Can.: Act of 1919, §§ 40. 67; Cross-references: To the law: §§ 1(13), 2(3) (7) (15), 3-e, 7(4) (5), 12, 13, 14, 15, 47-a(2), 48, 60-b, 67-e, 69. To the General Orders: XVIII, XXVIII. To the Forms: Nos. 13, 43, 43, 44, 45, 46. SYNOPSIS OF SECTION. Limitation on Referees' and Trustees' Fees, 1183. a. Scope of section, 1183. b. Its effect, 1184. c Additional compensation for conducting business, 1184. d. Fees of special masters, 1184. . LIMITATION ON REFEREES' AND TRUSTEES' FFES. a. Scope of section, — This section was added by the amendatory bill of 1903. It should be read in connection with §§ 40 and 48, and General Order XXXV (2) (3). It is a statutory ratification of the rule promulgated by the Supreme Court in the General Order just mentioned, which was perhaps too liberally interpreted in some districts and in others ran counter with antagonistic rules already in force at the time and Supreme Court orders became operative. * This section was added by the amendatory act of 1903, and amended by the Amendatory Act of 1910. [1183] 1184 Limitation of Fees of Certain Officers. [§ 72. b. Its eflfect. — The purpose of the law-making power in enacting this sec- tion was to forestall any of those scandals due to the fee system for com- pensating the officers mentioned which first made the law of 1867 odorous and then pointed the way to its repeal. Under the present law, the practice had grown up, and even in certain districts heen ratified by rules, of per- mitting the referee to charge for specified services, as, for instance, a small sum for mailing each notice or a per diem for hearings and continuances, in addition to the fees allowed by the law; while devices to increase the trustee's compensation, either through larger allowance to his attorney or by a per diem for extra work, as, for instance, in managing a going busi- ness, were often resorted to and have been frequently defended as essential to the proper administration of the law. Doubtless with knowledge of these practices, and surely of the reasons for them, the law-making power has both increased the compensation of these officers^ and to guard against similar local rules in the future, has, in this section, riveted the rule that the same shall be full compensation. Clearly, hereafter, neither a referee nor a trustee can receive any compensation as such, save that "expressly authorized and prescribed in this act." ^^ Thus, the court is without power to allow special compensation to the referee, where a contested application for a discharge is refused under General Order 12,^ or to the trustee for services in investigating the bankrupt's disposition of property and the loss of his stock by fire.^ 0. Additional compensation for conducting business. — "Additional compensa- tion" can only be construed in relation to the fact that where a trustee is authorized to conduct the bankrupt business as a going concern he thereby receives extra compensation because he receives the commissions on all moneys disbursed by him in the conduct of such going concern, which includes moneys paid out for salaries and material necessary to the conduct of such business. This was not allowed to trustees previous to the amendment of 1903, the trus- tees then being only allowed compensations on sums paid out as dividends and commissions. It, therefore, appears that Congress, in the amendment referred to, by allowing commissions on all moneys disbursed, intended to provide additional compensation to a trustee for conducting the bankrupt business as a going concern.* d. Fees of special masters. — Although this section does not allow the referee to receive any further compensation for his services than as expressly author- ized in the act, yet it has been the practice to allow compensation for services in the nature of masters' services outside of the duties of the referee.^ Here 1. See Bankr. Act, §§ 40 and 48, also § 4. Matter of Hart & Co. (D. C, Hawaii), 2 (3), all as amended by the Act of 1903. 17 Am. B. E. 480. la. Matter of Webster Loose Leaf Filing Compensation of referee for conduct of Co. (D. C, N. J.), 42 Am. B. R. 125, 253 Fed. business.— A referee who, without the express 959; United States v. Ward (C. C. A., 8th sanction of the court, authorizes the trustees, Cir.), 43 Am. B. E. 711, 257 Fed. 353. t^j order, to continue the bankrupt's business, a. In re Wilcox (D. C, Mich.), 19 Am. B. f^^ the purpose of completing partly executed R. 241, 156 Fed 685 ; In re Coventry-Eyans .o^t.^^s of the bankrupt, is not entitled to a 623°17TfS''67^' commission of one per cent, upon all fund. A contract'for extra compensation has been Vf\ out by the trustees in the conduct and held void as against public policy. Devries v. admmistration of the business ordered to be Orem (Ct. Appeals, Md.), 17 Am. B. E. 876, continued, though in all that he did the 65 Atl. 430. referee was supported by the creditors and 3. In re Screws (D. C., Ga.), 17 Am. B. E. trustees and their counsel, and expended mucli 269, 147 Fed. 989. time and performed great labor, showing the § T2.J Fees oe Special Mastees. 1185 the rule of Fellows v. Freudenthal ^ still pertains. Eef erences to the referee as such may, of course, be made under the authority of General Order XII (3). Such references are rare, for the reason that, the judicial service performed being by the statute limited to the judge, there is no provision for compensat- ing the junior officer. References are, therefore, usually made, not under this order, but under the general power of the court to call to its assistance a master in chancery. While serving as such, the referee does not sit as referee, and would seem to have the same right to compensation as when appointed by the judge while sitting on any of the other sides of his court. The referee is in this simply an individual practitioner, who from experience and training is best qualified to pass on bankruptcy questions. The cases under the original law are, therefore, most of them still in point.'' utmost fidelity to his trust throughout. Bray V. Johnson, 21 Am. B. R. 383, 166 Fed. 57. 5. Matter of Hart & Oo. (D. C, Hawaii), 18 Am. B. K. 137; United States v. Ward (C. C. A., 8th Cir.), 43 Am. B. E. 711, 257 Fed. 352, citing Collier on Bankruptcy (11th ed.), 1184. Kules of court. — Where, in a reclamation proceeding, the parties, through attorneys orally agreed, in the presence of the special master, that the fees and expenses of the master should be paid by the party to whom the property should be awarded, but did not fix the master's compensation, the amount is limited by the rules of the District Court which cannot be changed nunc pro tunc so as to grant a greater allowance. Matter of ■Growe Const. Co. (D. C, N. Y.), 42 Am. B. H. 654, 253 Fed. 981. 6. Fellows V. Freudenthal, 4 Am. B. R. 490, lOa Fed. 731. 7. Fellows V. Freudenthal, supra; In re McDuff, 4 Am. B. R. 110, 101 Fed. 241 j Bragassa v. St. Louis Cycle, 5 Am. B. R. 700, 107 Fed. 77; In re Grossman, 6 Am. B. R. 510, 111 Fed. 507. See also In re Todd, 6 Am. B. R. 88, 109 Fed. 265. Upon the bankruptcy of a stockbroker, the allowance to the special master and the ex- penses for stenographic minutes must come primarily out of the estate. If that is not sufficient, then they should come pro rata out of the securities or their proceeds available to claimants of a lesser class. If not satis- fied out of such class of securities or pro- ceeds, then the balance, if any, should be apportioned pro rata among claimants hold- ing the highest claims. Matter of Wilson & Co. (D. C, N. Y.), 42 Am. B. R. 350, 268 Fed. 631. 75 TIME OF TAKING EFFECT The Time When Act of 1898 Went into Effect.— a This act shall, go into full force and effect upon its passage: Provided, however, that no petition for voluntary bankruptcy shall be filed within one month of the passage thereof, and no petition for involuntary bank- ruptcy shall be filed within four months of the passage thereof. b Proceedings commenced under State insolvency laws before the passage of this act shall not be affected by it. The Time When Amendatory Act of 1903 Took Effect.— (§ 19 of Amendatory Act of 1903. — That the provisions of this amendatory act shall not apply to bankruptcy cases pending when this act takes effect, but such cases shall be adjudicated and disposed of con- formably to the provisions of the said act of July first, eighteen hundred and ninety-eight. The Time When Amendatory Act of 1910 Took Effect.— (§ 14 of Amendatory Act of 1910). — That the provisions of this amendatory act shall not apply to bankruptcy cases pending when this act takes effect, but such eases shall be adjudicated and disposed of con- formably to the provisions of said act approved July first, eighteen hundred and ninety-eight, as amended by said act approved February fifth, nineteen hundred and three, and as further amended by said act approved June fifteenth, nineteen hundred and six. WHEN THE ACT OF 1898 WENT INTO EFFECT. Subsection a is different from the corresponding provisions of previous laws. The operation of each was postponed to a day certain some time after the approval of the act. Ifot so of the present statute.^ It went into full operation on July 1, 1898 — which means the whole of that day^ — save that no petitions could be filed until August 1, 1898, if voluntary; or until November 1, 1898, if involuntary. "Passage" here means the same as "approval." Thus, the courts had power on July 1, 1898, to appoint referees and promulgate rules, and from and including that day all State insolvency laws were suspended.* It has even been held that the rights of 1. For the reason, see cases like: In re 3. Palmenter Mf?. Co. v. Hamilton, 1 Am. Horton, Fed. Cas. 6,708 ; Day v. Bardwell, 97 B. R. 39 ; re Bruss-Ritter Co., 1 Am. JB. R. 68, Mass. 246, and Judd v. Ives, 4 Mete. 401, are 90 Fed. 651 ; In re Etheridge Furniture Co., no longer of value. 1 Am. B. R. 112, 92 Fed. 329; In re Curtis, S. Compare Leidigh Carriage Co. v. Sten- 1 Am. B. R. 440, 91 Fed. 737; Littlefield v. gel, 2 Am. B. R. 383, 95 Fed. 637. And see Gray, 8 Am. B. R. 409. Also cases cited in In re Tonawanda St. PI. Mill, 6 Am. B. R. 38. foot-note 13, post. [1186] Time of Taking Effect. 1187 creditors fixed by the law accrued on that day, the exercise of them only being suspended until a petition could be filed.* On the other hand, a State court sustained a demurrer to a bill in equity, the apparent purpose of which was to keep the debtor's property intact until a bankruptcy petition could be filed.^ The amendatory act of 1903 went into effect February 5, 1903, that of 1910 went into effect June 25, 1910. 4. Westoott V. Berry, 4 Am. B. E. 264. 5. Ideal Clo. Co. v. Hazle, 6 Am. B. R. 265. Comj|are Kosches v. Libowitz, 4 Am. B. R. See also Ellis v. Hays, etc., Co., 8 Am. B. R. 265, in note; Blake v. Valentine Co., 1 Am. 109. B. R. 372, 89 fed. 691. GENERAL ORDERS IN BANKRUPTCY ADOPTED BY THE SUPREME COURT OF THE UNITED STATES At the October Term, 1898. Pbefatoky NoTfi. — The General Orders in Bankruptcy were adopted by the Supreme Court of the United States in conformity with the power conferred by section 30 of the bankruptcy act. The cross-references inserted after each General Order are to sections of the act, to the official and supplementary forms, and to the equity rules. Cases constru- ing and applying the several orders are digested and classified. These orders are supposed to explain, amplify and apply the provisions of the bankruptcy act, and have the full force of law except as they conflict with that act. They are, therefore, an essential part of the law of bankruptcy. PKEAMBLB. Gen. Order I. Docket, 1190. //. Filing of papers, 1191. ///. Process, 1191. IV. Conduct of proceedings, 1191. V. Frame of petitions, 1192. VI. Petitions in different districts, 1192. VII. Priority of petitions, 1194. VIII. Proceedings in partnership cases, 1194. IX. Schedide in involuntary bankruptcy, 1196. X. Indemnity for expenses, 1196. XI. Amendments, 1197. XII. Duiies of referee, 1198. XIII. Appointment and removal of trustees, 1200. XIV. No official or general trustee, 1202. XV. Trustee not appointed in certain cases, 1202. XVI. Notice to trustee of his appointment, 1203. XVir. Duties of trustee, 1203. XVIII. Sale of property, 1205. XIX. Accounts of marshal, 1206. XX. Papers filed after reference, 1206. XXI. Proof of debts, 1206. XXII. Taking of testimony, 1210. XXIII. Orders of referee, 1211. XXIV. Transmission of proved claims to clerk, 1212. XXV. Special meeting of creditors, 1212. XXVI. Accounis of referee, 1212. XXVII. Review by judge, 1212. XXVIII. Redemption of property and compounding of claims, 1214. XXIX. Payment of moneys deposited, 1215. XXX. Imprisoned debtor, 1216. XXXI. Petition for discharge, 1217. XXXII. Opposition to discharge or composition, 1217. XXXIII. Arbitration, 1218. XXXIV. Costs in contested adjudications, 1218. XXXV. Compensation of clerks, referees, and trustees, 1219. XXXVI. Appeals, 1221. XXXVII. General provisions, 1222. XXXVIII. Forms, 1223. [1189] 1190 General Oedees. [I. PREAMBLE. In pursuance of the powers conferred by the Constitution and laws upon the Supreme Court of the United States, and particularly by the act of Congress approved July 1, 1898, entitled "An act to establish a uniform system of bankruptcy throughout the United States, it is ordered, on this 28th day of November, 1898, that the following rules be adopted and estab- lished as general orders in bankruptcy, to take effect on the first Monday, being the second day, of January, 1899. And it is further ordered that all proceedings in bankruptcy had before that day, in accordance, with the act last aforesaid, and being in substantial conformity either with the provisions of these general orders, or else with the general orders established by this court under the banrupt act of 1867 and with any general rules or special orders of the courts in bankruptcy, stand good, subject, however, to such further regulation by rule or order of those courts as may be ne.dessary or proper to carry into force and effect the bankrupt act of 1898 and the general orders of this court. Cross-references: To the law: § 30. To the General Orders: XXXVII, XXXVIII. To the Equity Rules: LXXXIX, XC. (See also Revised Statutes, §§ 913, 914.) Effect and construction of the general orders. — The general orders of the Supreme Court and the rules of the district courts in accordance therewith are as obligatory on ofScers of the court as the bankruptcy act itself. In re Cobb (D. C, N. C), 7 Am. B. K. 202, 112 Fed. 655. These general orders have the same force as a provision of the statute.' They are made under an express delegation of power, both constitutional and statutory. In re Hoyt & Mitchell (D. C, N. Car.), 11 Am. B. R. 784, 127 Fed. 968. Though controlling, so far as not inconsistent with the act, they must yield to the act and cannot operate to prevent or alter its operation. Matter of Ingalls Bros. (C. C. A., 2d Cir.), 13 Am. B. R. 512, 137 Fed. 517. The Supreme Court, when it made the general orders, intended to direct a much simpler mode of procedure. Matter of Daugherty (D. C, Ky.), 26 Am. B. R. 550, 553, 189 Fed. 239. The general orders are an amplification of the law with respect to procedure. Orcutt Co. V. Green, 17 Am. B. R. 72, 204 U. S. 96, revg. 13 Am. B. R. 512; West Co. v. Lea, 174 U. S. 590, 2 Am. B. R. 4fi3. As has been stated in respect to the use and application of the general orders : " Seek the meaning and intent of the law first and follow that rather than the order or the form; and if the latter are not harmonious each with the other, seek the meaning and intent of the order and follow it rather than the form." In re Soper and Slada (Ref., N. Y.), 1 Am. B. R. 193, 196. The rules and forms so prescribed by the Supreme Court under and by virtue of the bankruptcy act have the force and effect of law. In re Gerber (C. C. A., 9th Cir.), 26 Am. B. R. 608, 617, 186 Fed. 693. As to the furnishing and delivering of subpoenas, see In re Hemstreet (D. C, la.), 8 Am. B. R. 760, 117 Fed. 568; Matter of the Abbey Press (C. C. A., 2d Cir.), 13 Am. B. R. 11, 1.34 Fed. 51. I. DOCKET. The clerk shall keep a docket, in which the cases shall be entered and numbered in the order in which they are commenced. It shall contain a memorandum of the filing of the petition and of the action of the court thereon, of the reference of the case to the referee, and of the transmission by him to the clerk of his certified record of the proceedings, with the dates thereof, and a memorandum of all proceedings in the case except those duly entered on the referee's certified record aforesaid. The docket shall be arranged in a manner convenient for reference, and shall at all times be open to public inspection. [Latter part of General Order I, 1S67, with changes specifying more fully the entries to be vaeAe in the docket.] II, IIIjIV.] Filing; Peocess; Proceedings. 1191 Cioss-ieferences: To the law: As to commencement of proceedings, § 1(10) ; As to duties of the clerk, §§ 51, 71; As to duties of the referee, S§ 29-c, 30-a(7), 42; As to duties of the trustees, §§ 29-c, 49. To the General Orders: II, IV. To the Equity Rules: I-VI, inclusive. II. FILING OF PAPERS. The clerk or the referee shall indorse on each paper filed with him the day and hour of filing, and a brief statement of its character. [Part of General Order I, 1S67, but not so full.] Cross-references: To the law: |§ 18-a, 59-a-b. To the General Orders: VI, IX, XX. To the Official Forms: None, both the clerk and the referee usually have filing stamps. Cases citing this order: Matter of Lacey & Company, (Sup. Ct., D. C.) 35 Am. B. K. 231, 43 Wash. Law Rep. 434. III. PROCESS. All process, summons and subpooenas shall issue out of the court, under the seal thereof, and be tested by the clerk; and blanks, with the signature of the clerk and seal of the court, may, upon application, be furnished to the referees. [General Order II, 1867, except the word " referees " is substituted herein for the word " registers."] Cross-references: To the law: As to process in involuntary proceedings, § 18-a (and ^Iso under §§ 4 and 5) ; As to process to witnesses, § 21-a. To the General Orders: VIII. To the OfScial Forms: Nos. 5, 30. To the Equity Rules: VII to XVI, inclusive. Illustrative cases: Matter of the Abbey Press (G. C. A.), 13 Am. B. R. 11, 134 Fed. 51; In re Norton (D. C, N. Y.), 17 Am. B. R. 504, 148 Fed. 301. See those cited under Sections Eighteen and Twenty-one of this work. IV, CONDUCT OF PROCEEDINGS. Proceedings in bankruptcy may be conducted by the bankrupt in person in his own behalf, or by a petitioning or opposing creditor; but a creditor will only be allowed to manage before the court his individual interest. Every party may appear and conduct the proceedings by attorney, who shall he an attorney or counselor authorized to practice in the circuit court or district court. The name of the attorney or counselor, with his place of busi- ness, shall be entered upon the docket, with the date of the entry. All papers or proceedings offered by an attorney to be filed shall be indorsed as above required, and orders granted on motion shall contain the name of the party or attorney making the motion. Notices and orders which are not, by the act or by these general orders, required to be served on the party personally may be served upon his attorney. [General Order III, 1867, without substantial change, except that the old rule required the entry of the attorney's place of residence as well as his place of business.] Cross-references: To the law: As to who may file voluntary petitions, §§ 4-a, 59-a; As to who may file involuntary petitions, § 59-b; As to partnership petitions, § 5; As to petitions against corporations, § 4-b; As to where petitions must be filed, § 2(1); As to appearances, §§ 18-b, 59-f; As to answer and other pleas, §§ I8-d, 59; As to notices, § 58. To the Equity Rules: IV, XVII, and, as to pleadings, generally The Supplementary Forms: For those in involuntary eases, Nos. 118, 119, 120, 121, 122t, 123, 124, 125, 126, 127, 128, 129, 130; for appearances N^os. 99, 110, 120, 121. See also, generally "Supplementary Forms," post. To the Equity Rules: IV, XVII, and, as to pleadings, generally. Power of bankrupt to represent himself. — This general order gives the bankrupt the right to : represent himself, and being an attorney he may raise any question of law which could have 1192 Genekal Ordees. [V, VI. been rnls'fl had he been represented by another. In re Shaffer (D. C, N. Car.), 4 Am. B. E. 728, 104 Fed. 982. Powers of attorneys. — This order seems to give to the attorney of a bankrupt or creditor power to do any act In the bankruptcy matter which the bankrupt or creditor might do personally, and requires no other evidence of his authority than the fact of his admission to practice in the circuit or district court. Matter of Herzikopf (D. C, Col.), 9 Am. B. E. 90, 118 Fed. 1016; In re Gasser (C. C. A., 8th Clr.), 5 Am. B. E. 32, 104 Fed. 537. "The petition In an InToluntary bank- ruptcy proceeding may be made by the attorney In fact of the petitioning creditors." Rogers v. De Sota Placer Mining Co. (C. O. A., 9th Cir.), 14 Am. B. E. 252, 136 Fed. 407. But it has been held that this power of an attorney does not extend to the creditor's choice of a trustee nor to the making of an affidavit to the schedules of a petitioning debtor. In re Blankfein (D. C„ N. T.), 3 Am. B. E.165, 97 Fed. 191. An attorney in fa«t who is not an attorney at law may not examine the bankrupt at the first meeting of creditors. Matter of Looney (D. C, Tex.), 44 Am. B. E. 342, 262 Fed. 209. A creditor find a bankrupt jnay, with knowledge of the fnll situation, employ the same counsel. Matter of Prussian (D. C, Mich.), 43 Am. B. E. 13, 255 Fed. 857. V. FRAME OF PETITIONS. All petitions and the schedules filed therewith shall he printed or written out plainly, without ahbreviation or interlineation, except where such abbrevia- tion and interlineation may he for the purpose of reference. [First part of General Order XIV, 1867, without change.] Cross-references: To the law: As to petitions, § 18-arc; As to schedules, § 7(8) ;. As to referee's duty to examine schedules, etc., § 39-a(2); As to referee's duty to prepare schedules in certain cases, § 39-a(6). To the General Orders: IX, XI. To the Official Forms: Nos. 1, 2, 3, with the schedules. To the Supplementary Forms: Nos. 117, 118. To the Equity Rules: XX to XXV. Use of ditto marks and ahhreviations. — This order precludes the use of dots to indicate anything necessary to be stated. In re Orne, Fed. Cas. 10,582. And the use of ditto marks, in attempting to indicate a creditor's residence, is in violation of this order. Haach v. Theise, 16 Am. B. E. 609, 5 N. Y. Misc. 3, 99 N. Y. Supp. 905. The abbreviation of the resi- dence of a creditor as " 135 Bway" violates this rule. Sutherland v. Lasher, 11 Am. B. E. 780, 41 N. Y. Misc. 249. Use of printed blanks. — In the eastern district of North Carolina a written or typewritten schedule will not be accepted. The printed blank containing forms prescribed by the rules of the court must be used, otherwise the schedules will be returned to the parties without action. Mahoney v. Ward (D. C, N. Car.), 3 Am. B. E. 770, 100 Fed. 278. A mistake as to a creditor's name in the schedules will prevent the discharge of a debt.; Liesmn v. Kraus, 35 N. Y. Misc. 376, 71 N. Y. Supp. 1022. If a petition in involuntary bankruptcy contains the name of the judge such name must be given correctly. Anon., Fed. Cas. 459. See, generally. Matter of Harrell (D. C, N. Car.), 34 Am. B. E. 829, 222 Fed. 160. VI. PETITIONS IN DIFFERENT DISTRICTS. In ease two or more petitions shall be filed against the same individual in different districts, the first hearing shall be had in the district in which the debtor has his domicile, and the petition may be amended by inserting an allegation of an act of bankruptcy committed at an earlier date than that first alleged, if such earlier act is charged in either of the other petitions; and in case of two or more petitions against the same partnership in different courts, each having jurisdiction over the case, the petition first filed shall be first heard, and may be amended by the insertion of an allegation of an earlier act of bankruptcy than that first alleged, if such earlier act is charged in either of the other petitions; and, in either case, the proceedings upon the other petitions may be stayed until an adjudication is made upon the petition first heard; and the court which makes the first adjudication of bankruptcy shall retain jurisdiction over all proceedings therein until the same shall be closed. In case two or more petitions shall be filed in different districts by different members of the same partnership for an adjudication of the bankruptcy of said partnership, the court in which the petition is first filed, having jurisdiction, shall take and retain jurisdiction over all proceed- TI.] Petitions. 1193 ings in such bankruptcy until the same shall be closed; and if such petitions shall be filed in the same district, action shall be first had upon the one first filed. But the court so retaining jurisdiction shall, if satisfied that it is for the greatest convenience of parties in interest that another of said courts should proceed with the cases, order them to be transferred to that court. [General Order XVI, 1867, without change, except that the last sentence of Rule VI under consideration, is new.] Cross-references: To the law; As to where petitions may be filed, § 1(2) ; As to partner- ship petitions, § 5; As to transfer of cases, §§ 2(19), 32; Also generally to §§ 2(19), 18. To the General Orders: IV, VII, VIII. The tnie meaning of this general order is that where petitions are filed in different districts, the court whose ground of jurisdiction is that the bankrupt's domicile has been in that district during the greater portion of the six months next preceding the filing of the peti- tions is the court in which the firsti hearing should be had. In re Isaacson (D. C, N. Y.), 20 Am. B. R. 437, 161 Fed. 777. This rule contemplates a case in which each court has jurisdiction of the cause, and that question, when raised, must be first determined. In re Waxelbaum (D. C, N. Y.), 3 Am. B. R. 392, 295, 98 Fed. 589. The letter as well as the spirit of this general order confers exclusive" jurisdiction upon that court in which the petition is first filed, subject to the provision for the transfer of cases from one to another district court where the convenience of parties in interest demands it. As between two district courts of United States, it is the duty of the other court to yield jurisdiction and the control and direction of the entire proceeding to the one whose jurisdiction was first invoked. In re Sterne & Levi (D. C, Tex.), 26 Am. B. R. 259. It may be assumed that General Order No. 6 ia subject to the provisions of section 32 of the bankruptcy law, and that the case may be transferred and consolidated for the convenience of the parties, if brought within the provisions of section 32, in spite of the direction in the general order that the court first adjudicating shall retain jurisdiction until the proceedings are closed. In re Isaacson (D. C, N. Y.), 20 Am. B. R. 430, 161 Fed. 779. This order leaves no room for doubt, but that the court taking and retaining juris- diction shall have exclusive jurisdiction to determine the question of a transfer under section 32, for it expressly provides that the court " so retaining jurisdiction ( because the petition was first filed therein) shall, if satisfied that it is for the greatest convenience of parties in interest, that another of said courts shall proceed with the case, order them transferred to that court." In re Sterne & Levi (D. C, Tex.), 26 Am. B. R. 259, 262. Under this general order, in the ease of petitions against an individual, the first hearing shall be in the district of the domicile, while in the case of petitions filed against a partner- ship that first filed shall have priority of hearing, and the court _ acquiring the whole jurisdiction shall determine whether the greater convenience of parties requires that one of the other courts should proceed with the cases. Matter of United Button Co. (D. C, N. Y.), 12 Am. B. R. 761, 133 Fed. 378; Matter of New Era Novelty Co. (D. C, N. J.), 39' Am. B. R. 80, 341 Fed. 298. Geiieral Orders VI and VII are designed to relate simply to the consideration of proceed- ings. In re Strait (Ref., N. Y.), 2 Am. B. R. 308. " Greatest convenience " of " parties in interest " meaning of terms. — Neither the act nor the general order attempts to define the terms " greatest convenience " of " parties in interest." The interpretation placed upon them by the court in the .Matter of United Button Co., 13 Am. B. R. 454, 132 Fed. 378 — that the term "parties in interest," covers every party having any interest in or connection with the case, including priority, secured and unsecured creditors, as well as the bankrupts themselves, and that the term "greatest convenience," depends upon all the circumstances — proximity of a majority of creditors and the place of business of the bankrupts to the court, proximity of witnesses whose attendance is desired in any hearing, and perhaps numerous other factors — would seem to be the correct view. In re Sterne & Levi (D. C, Tex.), 26 Am. B. R. 259, 263. Corporations are -within the provisions of this order. — In re Elmira Steel Co. (D. C, N. Y.) , 5 Am. B. R. 484, 109 Fed. 456. The word " individual," as used in the clause providing that " in case two or more petitions shall be filed against the same individual in different districts, the first hearing shall be had in the district in which the debtor has his domicile," is equivalent to " person," and as such includes a, corporation. Matter of United Button Co. (D. C, Del.), 13 Am. B. R. 454, 132 Fed. 378. District of bankrupt's domicile definition. — The district in which an alleged bankrupt has resided during the greater portion of the six months next preceding the filing of a petition against him is the " district of his domicile " within the meaning of this general order, and the first hearing should be had therein unless, under the provisions of section 32 of the bankruptcy law, the proceeding is transferred and consolidated with a proceeding instituted in a district to which the alleged bankrupt had recently removed and established a residence. In re Isaacson (D. C, N. Y.), 20 Am. B. R. 430, 161 Fed. 779. 1194 Geneeal Oedees. [VIT, VIIL An application for the transfei of a case under this order may be denied in the discretion. . of the court. In re Sears (D. C, N. Y.), 7 Am. B. K. 279, 112 Fed. 58. Thus, where a petition has been filed against a corporation in the district of its domicile, and there- after a, petition is filed against it in a district in another State, the court in which the first petition is filed, unless satisfied that it is for the greatest convenience of all parties in interest that the case should be transferred, is required, under the provisions of this order, to retiiin jurisdiction until the proceedings are closed. In re Tybo Mining & Reduction Co. (D. C, Me.), 13 Am. B. R. 68, 72, 132 Fed. 697. Power of amendment; limitation of. — The provisions of this order by implication limit the power of amendment to the single case in which an earlier act of bankruptcy has been sought to be incorporated into the petition. In re Sears ( C. C. A., 2d Cir. ) , 8 Am. B. R. 713, 117 Fed. 294; Wilder v. Watts (D. C, S. C), 15 Am. B. R. 57, 68, 138 Fed. 426; Gleason v. Smith, Perkins & Co. (C. C. A., 3d Cir.), 16 Am. B. R. 602, 145 Fed. 895; Matter of Riggs Restaurant Co. (C. C. A., 2d Cir.), 11 Am. B. R. 508, 130 Fed. 691. A bank- ruptcy petition may be amended so as to allege grounds of bankruptcy subsequently occur- ring notwithstanding the provisions of this order. In re Hamriek (D. C, Ga.), 23 Am. B. R. 721, 175 Fed. 279. Other cases citing this order. — Bradley Timber Co. v. White (C. C. A., 5th Cir.), 10 Am. B. R. 329, 332, 121 Fed. 779, affg. 9 Am. B. R. 441; Matter of R. H. Pennington & Co. (D. C, Ky.), 35 Am. B. R. 832, 228 Fed. 388; Matter of Vanascope Co. (C. C. A., 2d Cir.), 36 Am. B. R. 778. VII. PRIORITY OF PETITIONS. Whenever two or more petitions shall be filed by creditors against a com- mon debtor, alleging separate acts of bankruptcy committed by said debtor on different days within four months prior to the 'filing of said petitions, and the debtor shall appear and show cause against an adjudication of bank- ruptcy against him on the petitions, that petition shall be first heard and tried which alleges the commission of the earliest act of bankruptcy; and in case the several acts of bankruptcy are alleged in the different petitions to have been committed on the same day, the court before which the same are pending may order them to be consolidated, and proceed to a hearing as upon one petition ; and if an adjudication of bankruptcy be made upon either petition, or for the coinmission of a single act of bankruptcy, it shall not be necessary to proceed to a hearing upon the remaining petitions, unless proceedings bn taken by the debtor for the purpose of causing such adjudication to b" annulled or vacated. [Greneral Order XV, 1867, without change other than that " four months " appears in th" new rule in place of " six months."] Cross-reference: See those to General Order VI, immediately cmte. Meaning end construction of order. — This order contemplates independent proceedings and provides for their disposition. Matter of Haff (C. C. A., 2d Cir.), 13 Am. B. R. 362, 135 Fed. 742. It must be strictly construed, and can be put in motion only by acts of the creditors and debtors combined. The mere filing of two or more petitions, one of which avers a prior act of bankruptcy, cannot put in action the enforcement of this rule. There are two things absolutely necessary. I'ir&t. Two or more petitions must be filed by creditors against a common debtor alleging several acts of bankruptcy committed by said debtor; and Second. Tlie debtor shall appear and show cause against an adjudication in bankruptcy against him on the petitions. Thus, where two petitions are filed, each alleging different' acts of bankruptcy, and the debtor answers only the one which alleges the earlier act of bankruptcy, this rule has no application. Had there been three petitions, it would have been equally necessary for the debtor to have answered all three. In re G. W. Harris (D. C., Ala.), 19 Am. B. R. 204, 155 Fed. 216. Other cases citing this order. — In re Strait (Ref., N. Y.), 2 Am. B. R. 308; In re Elmira Steel Co. (D. C, N. Y.), 5 Am. B. R. 484. 109 Fed. 456; Bradley Timber Co. v. White (C. C. A., 5th Cir.), 10 Am. B. R. 329, 333, 121 Fed. 779, affg. 9 Am. B. E. 441. Vni. PROCEEDINGS IN PARTNERSHIP CASES. Any member of a partnership, who refuses to join in a petition to have the partnership declared bankrupt, shall be entitled to resist the prayer of the petition in the same manner as if the petition had been filed by a creditor VIII.] Proceedings in Paetneeship Cases. 1195 of the partnership, and notice of the filing of the petition shall be given to him in the same manner as provided by law and by these rules in the case of a debtor petitioned against; and he shall have the right to appear at the time fixed by the court for the hearing of the petition, and to make proof, if he can, that the partnership is not insolvent or has not committed an act of bankruptcy, and to make all defenses which any debtor proceeded against is entitled to take by the provisions of the act; and in case an adjudication of bankruptcy is made upon the petition, such partner shall be required to file a schedule of his debts and an inventory of his property in the same manner as is required by the act in cases of debtors against whom adjudication of bankruptcy shall be made. [General Order XVIII, 1867, with no substantial change.] Cross-references: To the law: §§ 5, 18. To the General Orders: VI, VII. To the Official Forms: Nos. 2, 30. To the Supplementary Forms: No. 117. Meaning and application of order. — This order provides the only method of procedure 5n partnership cases. Its provisions are plain, specific and easily understood. They mean that whenever a person who is a member of an existing partnership, or who was a member oi a defunct partnership, desires to go into a court of banliruptcy, he must bring the firm and the other partners into court with him. Matter of Freund (Ref., la.), I Am. B. R. 25. It has no other purpose than to prescribe the practice for the class of cases where less than all the partners file a petition to have the partnership adjudged bankrupt. In re Ceballos (D. C., N. Y.), 20 Am. B. E. 459, 464, 161 Fed. 445. Although the bankruptcy law contains no provision expressly authorizing a partner to file a petition against his copartners, such power must be implied from this general order and § 8 of t!ie act. In re Caballos & Co. (D. C, N. Y.), 20 Am. B. E. 459, 465, 161 Fed. 445. It, is manifest that this order has no application to a petition by an individual who is a member of a firm to have himself and not the firm adjudicated a bankrupt. N. Y. Deaf and Dumb Institute v. Crockett, 17 Am. B. E. 233, 240, 117 App. Div. 269, 102 N. Y. Supp. 412. Since there should only be partnership bankruptcies in cases which show assets, this order refers only to such cases. In re Altman (Eef., N. Y.), 1 Am. B. R. 689. The Supreme Court in this general order seems to recognize the same distinction as it does in the prescribed forms, between an adjudication of a bankrupt and of an individual partner. In re Burden (D. C, N". Car.), 4 Am. B. E. 31, 101 Fed. 553. See, generally, In re Carleton (D. C, Mass.), 8 Am. B. R. 270, 115 Fed. 246. Notice of hearing how given. — Under the provisions of this order due notice must be given of the time fixed for a hearing upon a petition to declare a partnership a bankrupt. If the non-joining member or members of the firm can be found, in the district or out of it, personal service must be made; but if personal service cr.nnot be had, then, upon filing before the judge (or the referee, if the case has been referred by the clerk) an affidavit showing that personal service, cannot be made, an order of publication will be granted. In re Murray (D. C, la.), 3 Am. B. R. 601, 96 Fed. 600; In re Murray and Winters (D. C, la.), 3 Am. B. R. 90. Where one of the members of a copartnership petitions for an adjudication of bankruptcyi against the firm as well as the members of it, this must be clearly shown in the petition and notice of the hearing of the petition must be given to the non-joining partners before the firm can be adjudged bankrupt. In re Russell (D. C, la.), 3 Am. B.'R. 91, 97 Fed. 32. Objecting partners; filing schedules. — The objecting partners, thouph they have committed no act of bankruptcy and cannot be adjudicated individual bankrupts, must file a schedule of their individual debts and inventory their property, upon the adjudication of the part- nership and the petitioning partner. In re Ceballos & Co. (D. C, N. Y.), 20 Am. B. R. 467, 161 Fed. 451; Matter of Lenoir-Cross Co. (D. C, Tenn.), 35 Am. B. R. 774, 226 Fed. 227. This general order provides for the filing of schedules on the part of a solvent partner. Matter of Solomon & Carvel (D. C, N. Y.), 20 Am. B. R. 488, 163 Fed. 140. The non- assenting partner must file schedules of his individual estate and debts, as any surplus remaining after the discharge of his individual liabilities is an asset of the firm applicable to the payment of the liabilities of the partnership. In re Junk & Balthazard (D. C, Wis.), 22 Am. B. R. 298, 169 Fed. 481; Armstrong v. Fisher (C. C. A., 8th Cir.), 34 Am. B. R. 701, 224 Fed. 97. The fact that, without complying with gener-al order 23, a referee made an order on an unadjudicated member of a partnership, after it, and the other member had been adjudicated bankrupt, to file a schedule of his debts and an inventory of his property on or before nineteen days after the adjudication, was not fatal to the order of the court confirming such an order, because the unadjudicated member was required by the bankruptcy law and 1196 GrENEEAL OeDEES. [IX, X. general order 8 to make these finding within ten days after that adjudication. Armstrong V. Fisher (C. C. A., 8th Cir.), 34 Am. B. R. 701, 224 Fed. 97. Defense of non-joining partners. — ^All that a non-joining partner may do under this general order is to resist adjudication against the partnership as a separate entity. In doing so he can defend only against the allegations contained in the petition. If he considers the petition demurrable, he may demur. If not, he may answer. In re Ceballos & Co. (D. C, N. Y.), 20 Am. B. R. 459, 465, 161 Fed. 455. The non-assenting partner cannot set up the want of an act of bankruptcy as a defense to the petition, but he may set up the defense of solvency, and upon that issue he is entitled to a jury trial. In re Forbes (D. C, Mass.), 11 Am. B. R. 787, 128 Fed. 137. Under the provisions of this general order, it is open to any cue of the partners to contest an adjudication against the firm, and to defeat it by showing that the arm is not insolvent, or, If Insolvent, that it has not committed an act of bankruptcy. In re Laughlin (D. C, la.), 3 Am. B. K. 1, 96 Fed. 589. Assets of individual partners. — The individual assets of each partner are subject to the payment of partnership liabilities, and an order may be made that the trustee of the partnership take possession of such assets and administer them, unless, upon proper procedure, such partner is declared a bankrupt, and his creditors elect a trustee. General Order 8 provides for this. Matter of Hansley & Adams (D. C, Cal.), 30 Am. B. E. 1, 228 Fed. 5G4. Service of petition on special partner. — In a voluntary proceeding in bankruptcy by general partners, a copy of the petition should be served with the usual subpoena upon a special partner, but a failure to serve the petition may be supplied after service of the subpoena. Matter of Carrion & Co. (D. C, Porto Eico), 41 Am. B. E. 304, 10 P. E. Fed. 332. IX. SCHEDULE IN INVOLUNTARY BANKRUPTCY. In all cases of involuntary bankmptey in whicli the bankrupt is absent or cannot be found, it shall be the duty of the petitioning creditor to file, within five days after the date of the adjudication, a schedule giving the names and places of residence of all the creditors of the bankrupt, according to the best information of the petitioning creditor. If the debtor is found, and is served with notice to furnish a schedule of his creditors and fails to do so, the petitioning creditor may apply for an attachment against the debtor, or may himself furnish such schedule as aforesaid. [This general order is new.] Cross-references: To the law: As to bankrupt's duty to file schedules, § 7(8); As to referee's, § 39-a(6). To the General Orders: V. To the Official Forms: No. 1, with the schedules. To the Supplementary Forms: No. 84; and by analogy, No. 117. Filing schedules by bankrupt. — ^After an adjudication in bankruptcy all the creditors have a vested interest in the proceeding, and, pursuant to this order, the bankrupt can be compelled to file a schedule of his creditors, or if he is absent or cannot be found, it is the duty of the petitioning creditors to do so. The petition cannot be dismissed except with the consent of all the creditors. Matter of Levi & Klauber (C. C. A., 2d Cir.), 15 Am. B. R. 294, 142 Fed. 962. X. INDEMNITY FOR EXPENSES. Before incurring any expense in publishing or mailing notices, or in traveling, or in procuring the attendance of witnesses, or in perpetuating testimony, the clerk, marshal or referee may require, from the bankrupt or other person in whose behalf the duty is to be performed, indemnity for such expense. Money advanced for this purposes by the bankrupt or other person shall be repaid him out of the estate as part of the cost of administering the same. [This general order is new.] Cross-references: To the law: As to publishing and mailing notices, § 58; As to examina- tions of the bankrupt or others, §§ 7(9), 21-a; As to marshal's expenses, § 52; As to clerk's expenses, §§ 24, 25, 52, 71; In general, §§ 62, 64-b(3). To the General Orders: IX, XII, XXII, XXVI, XXXV. To the Supplementary Forms: By analogy, No. 169. Purpose and application of order. — The provisions of this order are intended to cover money which the bankrupt or some third party may be called upon to furnish after the initiation of the proceedings in order to meet expenses incurred by the officer for the purposes specially recited in the order, which purposes do not include the money deposited with the clerk to meet the fees (not expenses) of the clerk, referee and trustee. The purpose of the order is to protect the officers from personal loss in the performance of their duties under the XI- J Amendments. 1197 bankrupt act, but it is not the intent of the order that the bankrupt shall be repaid the money which presumably he took out of his estate to pay the fees of officers before he filed his petition in bankruptcy. In re Matthews (D. C, Iowa), 3 Am. B. R. 265, 97 Fed. 772. Under this order a bankrupt is entitled to be reimbursed for the amount advanced by him for the issuance, publication and mailing of necessary notices to creditors of an appli- cation for his discharge. In re Hatcher (D. C, Tex.), 16 Am. B. R. 722, 145 Fed. 658. The referee is not authorized to require the bankrupt to pay the statutory fee before he is given his discharge where such bankrupt has filed an affidavit of inability. In re Plimp- ton (D. C, Va.), 4 Am. B. R. 614, 103 Fed. 775. See, generally, Sellers v. Bell (C. C. A., 6th Cir.), 2 Am. B. R. 529, 552, 94 Fed. 801. In reimbursing the bankrupt or a creditor for money advanced under this general order to defray the expenses of the referee, marshal or clerk, such reimbursement has the same priority that the expenses themselves would have had; the one making the advancement, being subrogated to the rights of the officer whose expenses are advanced. Matter of Burke (D. C, Ohio), 6 Am. B. R. 502, 155 Fed. 703. Other eases citing this order.— In re Smith (D. C, N. Car.), 5 Am. B. R. 559, 564, 108 Fed, 39; Matter of McCubbin Co. (Sup. Ct., D. C), 33 Am. B. R. 277, 42 Wash. Law Rep. 774; Matter of Longhney (D. C, Wash.), 34 Am. B. R. 206, 218 Fed. 980; Matter of Wester (C. C. A., 3d Cir.), 40 Am. B. R. 89, 242 Fed. 465. XI. AMENDMENTS. The court may allow amendments to the petition and schedules on applica- tion of the petitioner. Amendments shall he printed or written, signed and verified, like original petitions and schedules. If amendments are made to separate schedules, the same must be made separately, with proper refer- ences. In the application for leave to amend, the petitioner shall state the cause of the error in the paper originally filed. [The last sentence is new. The rest of the general order is substantially the same as a part of General Order XIV, 1867.] Cross-references: To the law: §§2(6) (15), 39-a(2). To the Supplementary Forms: Nos. 81, 82, 83. To the Equity Rules: XXVIII to XXX. As to amendments to petitions, see disussion under § 18; as to amendments of schedules, see under § 7 ; and as to intervention by other creditors, see under § 59. Purpose and application of order. — The purpose of this order is to authorize the court to allow corrections to be made of errors, insufficiencies and uncertainty in the petition or schedules, but not practically to repeal the legislative declarations that petitions must be filed in duplicate within the four months specified. In re Stevenson (D. C, Del.), 2 Am. B. R. 66, 94 Fed. 110. This power of amendment is substantial and conferred for effecting the broad purposes of the act, and is not confined to niceties of diction or other imma- terial or merely formal matters. To hold that it does not embrace the insertion of material and essential averments in any stage of the proceedings before judgment would reduce it to a shadow. In re Mackey (D. C, Del.), 6 Am. B. R. 577, 586, 110 Fed. 355. It deals with amend- ments to a petition and schedules, but was not intended to abrogate or restrict the general power of amendment in other respects vested in the court. In re Bellah (D. C, Del.), 8 Am. B. R. 310, 116 Fed. 49. See also Gleason v. Smith, Perkins & Co. (C. C. A., 3d Cir.), 16 Am. B. R. 602, 145 Fed. 895. An application for leave to amend matters must set forth the allegations required by this order, and if such allegations are not set forth time may be granted to insert the same. In re Portner (D. C, Pa.), 18 Am. B. R. 89, 149 Fed. 799. See also In re Pure Milk Co., of Mobile (D. C, Ala.), 18 Am. B. R. 735, 154 Fed 682. No time is specified within which amendments may be allowed under this order. Columbia Bank v. Birkett (Ct. App., N. Y.), 9 Am. B. R. 481, 486, affg. 65 App. Div. 615. The application must state the cause of the error in the paper originally filed. Matter of Brincat (D. C., Ala.), 37 Am. B. R. 587, 233 Fed. 811. Amendment of exemption claim. — A bankrupt, making an imperfect claim to exemptions in his schedules, may be allowed to amend, but such amendment must relate to conditions existing at the time the imperfect claim was formulated. Matter of Crum^ (D. C. Ohio) 34 Am. B. R. 586, 221 Fed. 729. Verification of amendment. — Failure to verify an amendment to an involuntary petition, as required by this general order, may be subsequently corrected. International Silver Co. v. N. Y. Jewelry Co. (C. C. A., 6th Cir.), 37 Am. B. R. 91, 233 Fed. 945. Other cases citing this order. — ^In re Strait (Ref., N. Y.), 2 Am. B. R. 308; In re Meyers (D. C, N. Y.), 3 Am. B. R. 260. 97 Fed. 757; In re Shaffer (D. C, N. Car.), 4 Am. B. R. 728, 104 Fed. 982; White v. Bradley Timber Co. (D. C, Ala.), 8 Am. B. R. 671, 116 Fed. 768- In re Duffy (D. C, Pa.), 9 Am. B. R. 358, 118 Fed. 926; Matter of Haff (C. C. A., 2d Cir )' 13 Am. B. R. 362, 366, 135 Fed 742; Burke v. Guarantee Title & Trust Co. (C. C- A., 3d Cir )' .1198 General Oedees. [XII. 14 Am. B. R. 31, 134 Fed. 562; In re Fisher (D. C, Va.), 15 Am. B. R. 652, 654, 142 Fed, 203; In re Goodman (C. C. A., 5th Cir.), 23 Am. B. K 504, 174 Fed. 644; Brandt v. May- hew (C. C. A., 9th Cir.), 33 Am. B. R. 845, 218 Fed. 422. XII. DUTIES OF REFEREE. 1. The order referring a case to a referee shall name a day upon which the bankrupt shall attend before the referee; and from that day the bankrupt shall be subject to the orders of the court in all matters relating to his bank- ruptcy, and may receive from the referee a protection against arrest, to continue until the final adjudication on his application for a discharge, unless suspended or vacated by order of the court. A copy of the order shall forthwith be sent by mail to the referee, or be delivered to him per- sonally by the clerk or other officer of the court. And thereafter all the proceedings, except such as are required by the act or by these general orders to be had before the judge, shall be had before the referee. 2. The time when and the place where the referees shall act upon the matters arising under, the several cases referred to them shall be fixed by special order of the judge, or by the referee ; and at such times and places the referees may perform the duties which they are empowered by the act to perform. 3. Applications for a discharge, or for the approval of a composition, or for an injunction to stay proceedings of a court cr ofiicer of the United States, or of a State, shall be heard and decided by the judge. But he may refer such an application, or any specified issue arising thereon, to the referee to ascertain and report the facts. [Paragraph 1, except the last sentence, is the second paragraph of General Order TV, 1867, with slight changes. Paragraph 2 is derived from General Order V, 1867. Para- graph 3 is new ; its validity as a limitation on the power of the referee to grant stays is doubted (see p. 25), especially where the district judge has conferred such power on the referee hy § 38-a(4).] Cross-references: To the law: As to general jurisdiction and powers of referee, §§ 38, 39; As to orders of reference, §§ 18-f-g, 22; As to time and place when duties of referee will be performed, § 55; As to limitations on powers of referee, §§ 12-d, 14-b, 38-a(4), 39-b; As to allowance of claims, § 57; As to bankrupt's subjection to orders of court, § 7(2) As to orders of protection, § 9'-a. To the General Orders: IX, XI, XVI, XXI, XXII, XXIII, XXIV, XXV, XXVI, XXVII, XXIX, XXX, XXXIII, XXXV. To the Official Forms: Nos. 14, 15. Duties generally of referees after reference are discussed under sections 2, 9, 18, 38, 39, 55 and 57. For duties and compensation of special masters, see sections 12, 14, 18 and 72. Jurisdiction and authority of referee; in greneral. — The authority of the referee dates from the time the order of reference Is placed In his hands, not from the time of Its signing or filing. The phrase "forthwith be sent by mail to the referee" includes delivery as well as mailing, so that, whether the copy of order of reference be sent by mail or delivered personally, the juris- diction of the referee attaches only from the time of Its receipt by him. In re Floreken (D. C, Cal.), 5 Am. B. E. 802, 107 Fed. 241. .The last sentence of subdivision 1 is new and was evidently intended by the justices of the Supreme Court to apply to the new and enlarged jurisdiction of the referee under the present act. In re Scott (Eef., Mass.), 7 Am. B. E. 35. This order, together with § 38(4). confine a referee strictly within the limits of the order of reference, all original and ultimate power being vested In the judge. In re Quackenbush (D. C, N. Y.), 4 Am. B. E. 274, 102 Fed. 282. Section 9-a and Gen. Ord. Nos. 12 and 30 are in pari materia and should be construed together. United States ex rel. Kelly v. Peters, 22 Am. B. E. 177, 166 Fed. 613. The general authority of a referee in bankruptcy extends to the consideration of an intervening petitioner's claim to property or its proceeds in the hands of the trustee, alleged to be the property of the petitioner, and not of the bankrupt estate. In re Drayton (D. C, Wis.), 13 Am. B. E. 602, 135 Fed. 883. Suits for recovery of property. — The word "proceedings" in General Order XII (I) is used In its established meaning as applied to bankruptcy matters, and does not include suits brought by the trustee against third persona in respect to property not in the custody of the bankruptcy court. Matter of Weidborn (D. C, Mass.), 39 Am. B. E. 338, 243 Fed. 756. Compare Matter of Salm Baking Co. (D. C, Tex.), 43 Am. B. E. 511. Reference to special master. — ^IJpon petition for reclamation from bankrupt's trustee of property, the title to which is claimed by petitioners, the practice has been to refer the matter to a special master and not to the referee in bankruptcy; and although the referee may have Jurisdiction to determine such questions and thus save the expense of a reference, a change should- be made by the Supreme Court, in order that the practice may be uniform throughout the United States. In re Tracy (C. C. A., 2d Cir.), 24 Am. B. E. 539, 179 Fed. 366. The referee has no Jurisdiction XII.] Ditties of Eefeeee. 1199 to hear applications for discharge except upon reference to him, as special master. In re Taylor (D. C, Ala.), 26 Am. B. E. 143. Reference to referee as special master. — This General Order does not limit the District Court in appointing special masters to the cases named therein, but it may, in the exercise of sound discretion, refer issues to special masters and name a referee as such special master. United States V. Ward (C. C. A., 8th Cir.), 43 Am. B. K. 711, 257 Fed. 352. The proceedings required by the act to be had. before the judge are applications for discharge, for approval of compositions, for punishment for contempt, contested involuntary petitions in bankruptcy, and all petitions for adjudication when the judge is in the district. The proceedings other than those required by the general orders to be had before the judge are applications for injunctions to stay proceedings of a court or officer of the United States. Matter of the Abbey Press (C. C. A., 2d Cir.), 13 Am. B. R. 11, 14, 134 Fed. 51; United States V. Liberman (D. C, N. Y.), 23 Am. B. K. 734, 176 Fed. 161. In the following words from this general order, " and thereafter all the proceedings. . . . shall be had before the referee," the word " shall " is directory, and the jurisdiction of the judge over such of the said proceedings as may be brought before him in the first instance is not thereby ousted. Matter of Monaarrat (D. C, Hawaii), 25 Am. B. E. 815. Protection of bankrupt from arrest. — Section 9-a, subd. 2, providing that the bankrupit^ shall not be exempt from arrest where a debt or claim would not be released by his discharge, except when he is " in attendance upon a Court of Bankruptcy or engaged m the perform- ance of a duty imposed by the act," as construed by this general order, suspends the exer- cise of the right of arrest pending the bankrupt's application for discharge. In re Lewen- sohn (D. C, N. Y.), 3 Am. B. E. 594, 99 Fed. 73. Reference to special master. — The purpose of a reference under this order is to give to the court every aid which the referee can afford, to relieve the congested condition of the busi- ness which may be before the judge, and, when the report is filed, the court's attention must be directed to such parts thereof to which objection can be made, by exceptions -filed within twenty days as provided by rule 6i6 of the Equity Eules. Matter of Pierce, Jr. (D. C, Wash.), 32 Am. B. E. 96, 210 Fed. 389. Discharge; jurisdiction of referee.— The referee has no jurisdiction to determine the question as to discharge, but the court may refer the case to him, generally for a report. He aids the court like a master in chancery. He cannot finally determine the question of discharge or non-discharge, but he may be ordered to report the facts and his recommendation or conclusion as to .the matter. International Harvester Co. v. Carlson ( C. C. A., 8th Cir. ) , 33 Am. B. E. 178, 217 Fed. 736; Matter of Amer (D. C, Pa.), 35 Am. B. E. 627, 228 Fed. 576; Matter of C. H. Kendrick & Co. (D. C, Vt.), 35 Am. B. E. 630, 226 Fed. 980; In re Rauchenplat (D. C, Porto Eico), 9 Am. B. E. 763. But where an application for discharge must be heard and decided by the judge, such application or any specified issue arising thereon may be sent to the referee to ascertain and report the facts, and no one is preju- diced thereby. In re McDuff (C. C. A., 5th Cir.), 4 Am. B. E. 110, 101 Fed. 241. In the western district of Kentucky, where specifications of objections to a bankrupt's discharge have been filed, the practice is to refer ih.e application for discharge to a referee "to ascertain and report the facts under the third clause of this general order. Matter of Daugherty (D. C, Ky.) 26 Am. B. E. 550. 'Confirmation of a composition. — It seems that the judge may require the referee to report the facts concerning an application for confirmation of a composition. Adler v. Jones (C. C. A., 6th Cir.), 6 Am. B. E. 245, 109 Fed. 967. Claims of intervening petitioners. — ^No provision of the bankruptcy act or of the general orders requires the claim of an intervening petitioner, to property in the hands of the trustee, to be heard before the judge. In re Drayton (D. C, Wis.), 13 Am. B. E. 602, 135 Fed. 883. Injunctions. — The reason for this provision is obvious ; " the supreme court had in mind the dignity of other courts. Federal and State, and of other officers, and provided that they might only be interfered with by a tribunal of equal rank, and not by a subordinate official, unless for definitely described reasons action by the latter should be unavoidable." In re Berkowitz (D. C, Pa.), 16 Am. B. E. 251, 143 Fed. 598. Archibald, District Judge, in Ee Benjamin (D. C, Pa.), 15 Am. B. E. 351, 140 Fed. 320, says : " The right of a referee to award an injunction cannot be regarded as finally settled. For while it is sustained by some of the leading works on bankruptcy . . . it is denied by rule in certain jurisdictions . . . and limited in others. . . and is materially restricted, if not taken away, by the general orders of the supreme court. General Orders XII." Judge Lowell discussed the subject to some extent in Ee Steuer (D. C, Mass.), 5 Am. B. R. "214, but declined to decide the point. He says there, however, that " it is strongly implied "that the referee has some jurisdiction to issue injunctions to any party not an officer of the United States or of a State, unless the injunction stays the proceedings of the court." This -opinion is approved in In re Berkowitz (D. C, Pa.), 16 Am. B. E. 251, 255, 143 Fed. 598. Under this general order, it seems, that a petition to stay pending suits should be filed in the bankruptcy court. Continental Nat. Bank v. Katz (Super. Ct., 111.), 1 Am. B. E. 19. If, by consent of the parties in a case, the referee acquires jurisdiction to hear a motion for injunction, he may hear it, and advise the judge of his decision by filing it with the clerk of the court. But only the judge can issue the order. In re Siebert (D. C, N. J.), 13 Am. B. E. 348, 133 Fed. 7'81. 1200 General Obdees. [XIII, When power of referee to grant injunction immaterial. — ^Where the Disrict Court upon its own motion broadens and issues anew an injunction restraining the prosecution of a suit in the State court, it is immaterial whether the referee had power to order a stay in the first instance. In re Brown & Company (C. C. A., 8th Cir.), 28 Am. B. R. 336. Compensation of referee. — Where a contested application for a discharge is refused a» authorized by General Order 12, the court since the amendment to § 72 is without power to allow special compensation to the referee for his services in the matter. In re Wilcox (D. C, NQch.), 19 Am. B. R. 241, 156 Fed. 685. Where a case is referred to a referee to ascertain and report the facts upon an application for discharge, the referee is not entitled to any other compensation than that prescribed by the act itself. In re Troth (D. C, Ohio), 4 Am. B. R. 780, 104 Fed. 291. A referee is not entitled to special compensation for services on the reference of a petition to vacate an order of adjudication where the reference was made to him as "referee in bankruptcy." Matter of Langford, Felts & Myers (D. C, Cal.), 35 Am. B. R. 519, 225 Fed. 311. Other cases citing this order. — In re Huddle&ton (Ref., Ala.), 1 Am. B. R. 572; In re Parker (Ref., Kan.), 1 Am. B. R. 615; In re Logan (D. C., Ky.), 4 Am. B. R. 525, 102 Fed. 876; In re McGill (C. C. A., 6th Cir.), 5 Am. B. R. 155, 160, 106 Fed. 57; In re Lesser Bros. (C. C. A., 2d Cir.), 5 Am. B. R. 320; Mueller v. Nugent, 7 Am. B. R. 224, 232, 184 U. S. 1, 46 L. Ed. 405; In re Gutman & Wenk (D. C, N. Y.), 8 Am B. R. 252, 2S5, 114 Fed. 1009; Metcalf v. Barker, 9 Am. B. R. 36, 46, 187 U. S. 165; In re Rochford (C. C. A., 8th Cir.), 10 Am. B. R. 608, 611, 124 Fed. 182; Kentucky Nat. Bank of Louisville v. Oarley (C. C. A., 3d Cir.), 12 Am. B. R. 119, 127 Fed. 686; Moulton V. Coburn (0. S. A., 1st Cir.), 12 Am. B. R. 533, 131 Fed. 201, aflfg. 11 Am. B. R. 212; In re Rortiine {D: C, W. Va.), 14 Am. B. B. 785, 138 Fed. 837; Matter of Matthews Consolidated Slate Co. (Ref. Mass.), 15 Am. B. R. 779; Matter of Adler (C. C. A., 2d Cir.), 1« Am. B. R. 414, 144 Fed. 659; In re Knopf (D. C, S. Car.), 16 Am. B. E. 432, 439, 144 Fed. 245; Matter of Sonnabend (Ref., Mass.), 18 Am. B. R. 117; Matter of Cohn (Ref., Cal.), 18 Am. B. E. 786, 792; Matter of Back Bay Automobile Co. (D. C, Mass.), 19 Am. B. R. 33, 36, 158 Fed. 679; Knapp v. Spencer Co. v. Drew (C. C. A., 8th Oir.), 20 Am. B. R. 355, 160 Fed.-413; Matter of Berkowitz (D. C, N. J.), 22 Am. B. R. 227, 173 Fed. 1013; Norton v. Bielby (N. Y., Oneida County Court), 33 Am. B. R. 295, 86 Misc. 644; Matter of Komar (D. C, N. Y.) , 37 Am. B. E. 683, 234 Fed. 378. XIII. APPOINTMENT AND REMOVAL OF TRUSTEE. The appointment of a trustee by the creditors shall he suhject to he approved or disapproved by the referee or hy the judge ; and he shall be removable by the judge only. [As a rule of bankruptcy, this general order is new; but the former bankruptcy law itself contained similar provisions as to the approval of the choice of a trustee (Act of 1867, § 13, R. S., § 5034). Under that act a trustee could be removed not only by order of the court, but in some cases by a vote of the creditors with the approval of the court (Act of 1867, § 18, R. S., § 5039).] Cross-references: To the law: As to appointment of trustees, §S 2(17), 44, 45, 56; As to to removal of trustees, f 46. To the General Orders: XIV, XV, XVI, XVII, XXV. To the OfScial Forms: Nos. 22, 23, 24, 27, 52, 53, 54, 55. To the Supplementary Forms: No. 160. Meaning and application of order. — This provision means that a supervisory power is vested in the court to meet. contingencies which could not be definitely provided for in the act, and which must appeal to the good judgment and conscience of the court, and whereby the court would be armed with the power to prevent the selection of a person, who, in its judgment, and notwithstanding the expressed desire of the majority in number and amount of the cred- itors, or even of all the creditors, would not be a proper selection, and whose appointment might result in a defeat of the proper, just and equitable administration of the bankrupt law in that particular case. But the emergency should not be a trivial one; it should be one of grave character and due weight, and unless such an emergency appears, it is the duty of the referee to approve the selection, always subject, of course to a review of such action by the district judge. In re Hensohel (Eef., N. Y.) , 6 Am. B. R. 25. Kie approval by the referee and district judge of the appointment of a, trustee by the creditors is a matter of discretion, depending upon the circumstances of each case. The choice of the creditors should not be overruled by the referee or district judge except for substantial reasons, and the confirmation of such appointment should not be disturbed by the Circuit Court of Appeals unless an abuse of discretion appears Matter of Merrit ' Construction Co. (C. C. A., 2d Cir.), 33 B. E. 616, 219 Fed. 555; Wilson v. Continental Building & Loan Assoc. (C. C. A., 9th Cir.), 37 Am. B. R. 444, 232 Fed. 824. "This general order confers no power on a referee to announce that he will not appoint the trustee already appointed by the creditors. It does authorize him to disapprove such XIII.] Appointmbjstt and Eemoval of Trustee. 1201 appointment by order, and should. this be done at the time the appointment is made by the creditors it is probable that the creditors may proceed at once to appoint some other person . . .; but should they do this the matter should be reported to the judge, ■saho may remove the trustee appointed by the creditors, and order another appointment by the creditors. In no event can the referee ignore the appointment made by the creditors, and proceed summarily to appoint the trustee without holding another election." In re Hare (D. C, N. Y.), 9 Am. B. R. 520, 119 Fed. 246. Approval or disapproval of elections. — It is evident that the Supreme Court intended by this order to establish a rule concerning the approval or disapproval of elections by creditors similar to that which existed under the act of 1867. The decisions under the present law on this point show that such has been the understanding of our Federal courts. In re Eastlack (D. C, N. J.) , 16 Am. B. R. 529, 145 Fed. 68. Whenever a referee disapproves of a choice of trustee made by creditors, it is a good rule to permit them another opportunity to make a selection of one who is free from any " entangling alliances " that might interfere with the proper discharge of the duties devolving upon him. In re Van De Mark (D. C, N. Y.) , 23 Am. B. R. 760, 175 Fed. 287. The following cases establish the rule that the election of a trustee by the creditors is not to be disapproved, unless there is good reason for believing that the election has been directed, managed, or controlled by the bankrupt, or his attorney, or by some influence opposed to the creditor's interest. In Falter v. Reinhard (D. C, Ohio), 4 Am. B. R. 782, 104 Fed. 292, the votes of certain creditors were challenged on the ground that the letters of attorney to the person representing them had been procured through the influence and efforts of the bank- rupts for the purpose of controlling the election of the 'trustee. After hearing the evidence in the matter, the referee sustained the challenge. The opinion in that case shows that a plan for the election of the bankrupts' candidate was conceived and carried out in the bankrupts' place of business, and that the bankrupts themselves had, by preparing the proofs of claims for creditors without expense to them, and by the solicitation of creditors at their place of busi- ness to give their proxies to one of the bankrupts' clerks, attempted to direct and control the proceedings looking to the election of a trustee. The referee disapproved this action, and, on petition for review, the court affirmed the order of the referee. This decision was affirmed by the circuit court of appeals. In re McGill (C. C. A., 6th Cir.) , 5 Am. B. R. 155, 106 Fed. 57. Where the person appointed trustee of a bankrupt estate receives his appointment, in part, at least, as a result of the active efforts in the solicitation and voting of claims by a creditor which is his corporate employer and in which he is a stockholder, and such creditor holds security for a part of its debt and is charged with having received preferences, such person's appointment will be disapproved. Matter of Anson Mercantile Co. (D. C, Tex.), 25 Am. B. R. 429, 185 Fed. 993. In the case of In re Rekersdres (D. C, N". Y.), 5 Am. B. R. 811, 108 Fed. 206, an attorney representing the bankrupt and her regularly appointed attorney, who also held letters of attorney from three creditors, nominated a certain person for the trusteeship of the bankrupt. Objection being made in behalf of another creditor to the nomination, the referee sustained the objection, because the business association of the proposed trustee with the regularly appointed attorney of the bankrupt raised a presumption that the person nominated for trustee was nom- inated in fact by the bankrupt or her attorney, and was therefore not a suitable person to act in the interest of creditors. The district court approved the referee's action. Bankrupt had an estate of only $3,500, to be divided, after paying expenses among creditors having claims aggregating $9,000, over $7,000 of which claims were said to be owing to near relatives of the bankrupt or members of the family. One of the bankrupt's attorneys pre- sented the claims of and had powers of attorney from about 80 per cent, of these claimants at the first meeting of creditors, thus conroUing the appointment of the trustee and he insisted, over the objection of the other crediors, upon the selection of an attorney as trustee, who had an office in the building occupied by the bankrupt's attorneys. It was held that under this general order the appointment of a trustee by the majority of the creditors being subject to the approval or disapproval of the referee, the referee was justifled in disapproving, as contrary to public policy, a selection which would allow the bankrupt and his relatives to administer the estate. In re Sitting (D. C, N. Y.) , 25 Am. B. R. 682, 182' Fed. 917. In the case of In re Henschel (Ref., N. Y.) , 6 Am. B. R. 25, upon the election of a trustee, it was objected that the attorney by whose vote the trustees were elected held proxies obtained from creditors who were acting in combination with the bankrupt, and that the trustee was in fact the choice of the bankrupt and had announced in advance that if elected he would not prosecute certain actions which some of the creditors thought should be prosecuted. On a trial of the merits of the objection, the attorney refused to answer certain relevant questions, and -Uiis fact, together with the fact that a large number of the claims represented by the attorney were proven, and that the letters of attorney to him were executed before adjudication in bankruptcy, led to the disapproval of the election of the trustee. In the case In re Dayville Woolen Co. (D. C, Conn.), 8 Am. B. R. 85, 114 Fed. 674, the attorney of certain creditors was asked whether any of the claims intended to be voted by him had been assigned to any person or corporation in the interest of the bankrupt. He refused to answer the question. Notwithstanding this refusal, and the fact that he had acted as counsel for the bankrupt during the proceedings in insolvency, the referee permitted him to vote and 76 1202 Geneeal Oedees. [XIV, XV. approved the election. On these facts the court set aside the order of approval made by the referee. In the case of In re Blue Ridge Packing Co. (D. C, Pa.), 11 Am. B. R. 36, 125 Fed. 620, there were objections that the trustee elected by the creditors had previously advised the assignment for the benefit of creditors under the State law, which was the act of bankruptcy complained of, he being also the assignee, and that he was intimately associated with the attorney of certain stockholders of the bankrupt corporation who claimed also to be creditors. But the court held that these mere facts did not make the election an improper one, but called only for a close scrutiny of it. In passing on the point, the court said : " It is to be remembered in all such cases that the choice of a trustee is lodged by the law with the creditors constituting a majority in number and amount, and that their selection is not to be interfered with, unless it clearly imperils the fair and efficient administration of the estate." In the case of In re Machin (D. C, Pa.), 11 Am. B. R. 409, 128 Fed. 316, it was held that votes of creditors for a trustee could not be rejected, on the mere ground that the candi- date voted for had formerly been the attorney of the bankrupts. In the case of In re Gordon Supply & Manufacturing Co. (D. C., Pa.), 12 Am. B. R. 94, 129 Fed. 622, the trustee elected was only a stockholder in the bankrupt corporation, but had been associated closely as attorney and legal adviser with those who had theretofore been in control of the corporation. Inasmuch as their management appeared not only to be the subject of criticism, but might call for action on the part of the trustee to hold them personally responsible, it was held that the election could not be approved. In the case of In re Cooper (D. C. Pa.,) 14 Am. B. R. 320, 135 Fed. 196, it was held that the attorney who had been employed by the bankrupt to file his petition and whose obligation as attorney ceased at that point, and who had received no fee therefor, was not disqualified from voting on claims afterward received from creditors without his own solicitation or the procurement of the bankrupt. Review hy district judge. — An order of a referee approving the creditors' appointment of a trustee is subject to review by the district judge. In reJEanson (D. C., Minn.), 19 Am. B. R. 235, 156 Fed. 717. The proper way to take a review of the proceedings in the election of a trustee is by a petition for review of the order of the referee approving the appointment of the trustee by the creditors. Matter of Arti-Stain Company (D. C, Mass.), 32 Am. B. R. 643, 216 Fed. 942. Other cases citing this order.— In re MeGm (C. C. A., 6th Cir.), 5 Am. B. R. 155, 106 Fed. 67; Matter of Cohen (D. C, Mass.), 11 Am. B. R. 439, 442, 131 Fed. 391; In re Kenny & Co. (D. C, Ind.), 14 Am. B. R. 611. 617, 136 Fed. 451; In re Allert (D. C, N. Y.), 23 Am. B. R. 101, 105, 173 Fed. 691; Vulcan Metal Co. v. North Platte Valley Irrigation Co. (C. C. A., 8th Cir.), 33 Am. B. R. 686, 220 Fed. 106; Matter of Holden (D. C, N. Y.), 44 Am. B. R. 161, 258 Fed. 720. XIV. NO OFFICIAL OR GENERAL TRUSTEE. No official trustee shall be appointed by tlie court, nor any general trustee act in classes of cases. [Part of General Order IX, as amended in 1874, without substantial change.] XV. TRUSTEE NOT APPOINTED IN CERTAIN CASES. If the schedule of a voluntary bankrupt discloses no assets, and if no creditor appears at the first meeting, the court may, by order setting out the facts; direct that no trustee be appointed; but at any time thereafter a trustee may be appointed, if the court shall deem it desirable. If no trustee is appointed as aforesaid, the court may order that no meeting of the creditors other than the first meeting shall be called. [This general order is new. Its validity has been doubted. See cross-references below.] Cross-references: To the law: §§ 2(17), 44, 45, 56. See also §§ 6 and 47-a(ll), and read § 2 (11). To the General Orders: XIII, XIV To the Official Forms: No 27 To the Supplementary Forms: No 77 After the lapse of one year. — The court may appoint a trustee under this order, upon the petition of the assignee of a creditor alleging that the bankrupt died leaving property which he had fraudulently disposed of to defraud creditors. Clark v. Pidcock (C. C. A., 3d Cir.), 12 Am. B. R. 309, 129 Fed. 745. Exemptions may be set apart by the court where no trustee has been appointed, as provided in this order. Smallev v. Langenour, 196 U. S. 93, 13 Am. B. R. 692, 695. Other cases citing this order. — In re Soper and Slada (Ref., N. Y.), 1 Am. B. R. 193; In re Rung Bros. (Ref., N. Y.), 2 Am. B. R. 620, 622. XVI, XVII.] Duties of Trustee. 1203 XVI. NOTICE TO TRUSTEE OF HIS APPOINTMENT. It shall be the duty of the referee, immediately upon, the appointment and approval of the trustee, to notify him in person or by mail of his appoint- ment; and the notice shall require the trustee forthwith to notify the referee of his acceptance or rejection of the trust, and shall contain a statement of the penal sum of the trustee's bond. [General Order IX, 1867, with some slight additions as to the contents of the notice and with other minor changes.] Cross-references: To the law: §§ 44, SO-a-j-k. To the General Orders: XIII To the Official Forms: Nos. 24, 25, 26. To the Supplementary Forms: Nos. 167, 168. XVII. DUTIES OF TRUSTEE. The trustee shall, immediately upon entering upon his duties, prepare a complete inventory of all the property of the bankrupt that comes into his possession. The trustee shall make report to the court, within twenty days after receiving the notice of his appointment, of the articles set oif to the bankrupt by him, according to the provisions of the forty-seventh section, of the act, with the estimated value of each article, and any creditor may take exceptions to the determination of the trustee within twenty days after the filing of the report. The referee may require the exceptions to be argued before him, and shall certify them to the court for final determina- tion at the request of either party. In case the trustee shall neglect to file any report or statement which it is made his duty to file or make by the act, or by any general order in bankruptcy, within five days after the same shall bo due, it shall be the duty of the referee to make an order requiring the trustee to show cause before the judge, at a time specified in the order, why he should not be removed from office. The referee shall cause a copy of the order to be served upon the trustee at least seven days before the time fixed for the hearing, and proof of the service thereof to be delivered to the clerk. All accounts of trustees shall be referred as of course to the referee for audit, unless otherwise specially ordered by the court. [General Order XIX, 1867, with several slight changes.] Cross-references: To the law: Duty of trustees, in general, §§ 47, 49; As to filing bonds, § 50; As to exemptions, §§ 6, 7 (8), 47-a (11), as perhaps limited by § 2 (11) ; As to appraisals and sales, § 70-b. To the General Orders: XXIII, XXI (6), XXV, XXVIII, XXIX, XXXIII, XXXV. To the Official Forms: Nos. 40, 41, 47, 48, 49, 50, 51, and generally to the forms for sales, Nos. 42 to 46, inclusive. To the Supplementary Forms: Nos. 77 78, 79, 80 on exemptions, and Nos. 161, 162, 163, 164, 165 as to reports and distribution; also generally. Meaning of order. — Eemington, referee, in Ee Ellis (Eef., Ohio), 10 Am. B. E,. 754, 756, distinguishing In re White (D. C, Vt.), 4 Am. B. E. 613, 103 Fed. 774, says: "What the supreme court's General Order really means is, as it seems to me, simply this: the trustee must, within twenty days after his appointment, set apart the exemptions claimed by the bankrupt provided and so far as they are correct; the bankrupt may except as of course to his determination ; and the creditors shall not be bound in this particular by their trustee's acts, although they usually are bound by their trustee's acts, but may themselves also take exceptions. . . Were it not for the rule creditors would perhaps have no right to object at all except for fraud or collusion; but, that they did have the right, would have an indefinite time within which to except to the trustee's report, and thus tie up the question of exception indefinitely. By this rule the trustee is free from all exceptions on the part of any fault- finding creditors after twenty days. Of course there is no need of any such limitation in regard to the bankrupt's filing exceptions, for he is right on the spot when the exemptions are thus set off and will act without delay anyway if he wants to get more; and his delay, for that matter, would tie up nobody. . . Simply because the supreme court's General Order says 1204 General Oedbks. [XVII,, that creditors have twenty days' time within which they may file exceptions, does not mean that only creditors may file exceptions, but means simply what it says, namely that when creditors wish to file exceptions to the trustee's report they must file them within twenty days." Exemptions; setting apart. — ^It is provided by this order that the trustees shall set apart,, the exemptions and make report of his action, and that thereafter the creditor's will file exceptions, if they wish, to such report. In re Allen & Co. (D. C., Va.), 13 Am. B. E. 518, 521, 134 Fed. 620. The language of this order " and Form 47, as to the trustee's report of exempted property, indicates quite clearly that, without reference to any prior allowance of exemption by State ofiieials, it is the duty of the trustee to set apart the bankrupt's exemp- tion." In re Camp (D. C, Ga.), 1 Am. B. R. 165, 91 Fed. 745. See also In re Rung Bros. (Kef., N. Y.), 2 Am. B. E. 620. The trustee is to set apart bankrupt's exemptions and report the items and estimated value thereof, to the court as soon as practicable after his appointment. Sec. 47-a, cl. 11. And General Order XVII requires such report to be made w'ithin twenty days after receiving the notice of his appointment. In re Wishnefsky (D, C, N. J.), 24 Am. B. R. 798, 181 Fed. 896. It is the duty of the trustee under this order within twenty days after his appointment to set off to the bankrupt the property selected or such part of it as in his judgment the bankrupt is entitled to, and file an itemized report thereof with the referee. For the purpose of deter- mining the correct amount of such exemptions and setting them apart the trustee is entitled to the possession of the property although he does not take title thereto. Matter of McClintock (Ref., Ohio), 13 Am. B. R. 606. In order that the trustee may be able to report the article set oflF to the bankrupt by him, the bankrupt must comply with § 7, clause 8, of the bankruptcy act, requiring him to file a claim for his exemption within ten days. In re Wunder (D. C, Pa.), 13 Am. B. E. 701, 133 Fed. 821. The duties of a trustee to set apart the bankrupt's exemptions and report the items and value thereof to the court may not be neglected, or their discharge postponed, until an issue of fraud in regard to the disposition of property is tried. Matter of Harrell (D. C, N. Car.), 34 Am. B. R. 809, 222 Fed. 160. Selection of exemptions by bankrupt's assignee.^ Section 2(11) of the bankruptcy act which authorizes courts of bankruptcy to " determine all claims of bankrupts to their exemptions " and this general order, which requires a trustee to report to the court " the articles set off to the bankrupt by him," cannot be construed as denying the power of the court to recognize the right of a party other than the bankrupt, hold under a valid and effective assignment, conferring in express terms authority to make the selection in the name of the assignor. In re Hastings {C. C. A., 6th Cir.), 24 Am. B. R. 360, 181 Fed. 33. Valuation of property. — ■ This order requires that each article shall have an estimated value placed upon it, and thus requires a specification of items and a separate appraisal. This explicit direction cannot be neglected. In re Manning (D. C, Pa.), 7 Am. B. R. 571, 112 Fed. 948. Filing exceptions. — When the trustee has made his report to the referee the dissatisfied party may except thereto in the manner prescribed by this order, and at the request of either party it is made the duty of the referee to certify the exceptions for the final determination of the judge. But if no trustee has been appointed the record and findings certified by the referee will be returned with instructions to take the proper steps to secure the appointment of a trustee. In re Smith (D. C, Tex.), 2 Am. B. R. 190, 93 Fed. 791. General Order XVII clearly allows any creditor to make objections by filing exceptions to the trustee's report. Considering the source of the general orders, the familiarity of the Supreme Court with the practice as to taking exceptions to reports of master in chancery, it seems very probable that the intent was that exceptions to a trustee's report should be in the familiar form of exceptions to the master's report. In re Campbell (D. C. Va ), 10 Am. B. R. 723, 124 Fed. 417. A creditor, desiring to object to the trustee's report setting apart the bankrupt's exemptions, should file all of his objections within twenty days after the filing of said report as prescribed by this general order, and cannot come in after the expiration of that time and file objections or add new and additional grounds to his objections already on file. In re Cotton & Preston (D. C, Ga.), 25 Am. B. R. 532, 183 Fed. 190. A fraudulent concealment of property is not a sufficient ground of exception, under this order, to deprive a bankrupt of his right to exemptions guaranteed by the law of his domicile. In re Rothschild (Ref., Ga.) , 6 Am. B. R. 43. On objection that exceptions to a trustee's report were not filed within twenty days as reqitired bv General Order XVII, the court will be governed by the file marks and the record. Matter of Llbby (D. C, Fla.), 41 Am. B. R. 630, 253 Fed. 278. A. trustee is a "creditor" within the meaning of the provisions of General Order No. 17, that "any creditor may except to the determination of the trustee," etc., in allowing a claim of exemption, on the ground of the bankrupt's fraud. In re Rice (D. C, Pa.), 21 Am. B. R. 202, 164 Fed. 589. Time for Bling exceptions. — The provision in this order allowing twenty days for filing exceptions to the trustee's report, applies only to creditors, and not to the bankrupt. In re White (D. C, Vt.), 4 Am. B. R. 613; In re TurnbuU (Ref., Mass.), 5 Am. B. R. 231. Exceptions filed more than twenty days after the filing of the report must be dismissed. Matter of Amos (Ref., Ga.), 19 Am. B. R. 804; Matter of Cotton. & Preston (D. C, Ga.), XVIII. Sale of Peopeety. 1205 23 Am. B. R. 586, 588. The provision that any creditor may take exceptions to the determina- tion of the trustee as to articles set off to the bankrupt as exempt within twenty days after the filing of the report is mandatory and the District Court has no discretion to extend the time for presenting such exemptions. Matter of Krecun (C. C. A., 7th Cir.), 36 Am. B. R. 172, 229 Fed. 711. Allowance for auditing trustee's account. — It being the duty of the referee under this order, to audit all of the accounts of the trustees, he should not be allowed extra compensation therefor. Matter of McCubbin Co. (Sup. Ct., D. C), 33 Am. B. R. 277; Matter of Lacey & Company (Sup. Ct, D. C), 35 Am. B. R. 231. Other cases citing this order.— In re White (D. 0., Mo.), 6 Am. B. R. 451, 454, 109 PeJ., 635; McGahan v. Anderson (C. C. A., 4th Cir.), 7 Am. B. R. 641, 643, 113 Fed. 115; Matter of Ingalls Bros. (C. C. A., 2d Cir.) , 13 Am. B. R. 512, 137 Fed. 517; In re Soper (D. C, Neb.), 22 Am. B. R. 868, 173 Fed. 116; In re Gerber (C. C. A., 9th Cir.), 26 Am. B. R. 608, 617; Gregory Co. v. Bristol (C. C. A., 8th Cir.), 26 Am. B. R. 938, 191 Fed. 31; Sheridan State Bank v. Rowell (D. C, Ore.), 32 Am. B. R. 747, 212 Fed. 529; United States v. Sondheim (D. C, Mass.), 33 Am. B. R. 217, 188 Fed. 378; Matter of Dean (D. C, Cal., Ref.), 34 Am. B. R. 156; Matter of Humphreys (D. C, N. Car.), 34 Am. B. R. 655, 221, Fed. 997; Matter of Coles (D. C, Iowa), 35 Am. B. R. 339, 224 Fed. 170; Matter of Shriner (D. C, N. Car.), 35 Am. B. R. 404, 228 Fed. 794; Matter of French (b. C., N. Y.), 37 Am. B. R. 289, 231 Fed. 255; Wilson v. Continental Building & Loan Assoc. (C. C. A., 9th Cir.), 37 Am. B. R. 444, 232 Fed. 824. XVIII. SALE OF PROPERTY. 1. All sales sliall be by public auction unless otherwise ordered by tbe court. 2. Upon application to the court, and for good cause shown, the trustee may be authorized to sell any specified portion of the bankrupt's estate at private sale; in which case he shall keep an accurate account of each article sold, and the price received therefor, and to whom sold; which account he shall file at once with the referee. 3. Upon petition by a bankrupt, creditor, receiver, or trustee, setting forth that a part or the whole of the bankrupt's estate is perishable, the nature and location of such perishable estate, and that there will be loss if the same is not sold immediately, the court, if satisfied of the facts stated and that the sale is required in the interest of the estate, may order the same to be sold, with or without notice to the creditors, and the proceeds to be deposited in court. [Paragraph 1 is new; paragraph 2 is part of General Order XXI, 1867, without change; paragraph 3 is General Order XXII, 1867, with various changes.] Cross-references: To the law: § 70-b, and as to notices, § 58-a(4). To the General Orders: None. To the Official Forms: Nos. 42, 43, 44, 45, 46. To the Supplementary Forms: Nos. 182, 183, 184, 190, 191, 192. Petition for sale. — ^A sale should not be directed under this order upon a petition which simply alleges that the cost and expenses of keeping the property will be accumulative if a sale is not ordered. In re Harris (D. C, Ala.), 19 Am. B. R. 635, 155 Fed. 216. Appointment of appraisers. — A referee has generally authority to order a sale of the bankrupt's property and to appoint appraisers, but, when the property is in the hands of a receiver before adjudication, the district court is the only tribunal that can appoint appraisers or order a sale. In re Styer (D. C, Pa.), 3 Am. B. R. 424, 98 Fed. 290. Private sale. — " The discretionary power of the referee directing a private sale of a bank- rupt estate ought not to be disturbed, unless it clearly appears to have been improvidently exercised." In re Hawkins (D. C, N. Y.), 11 Am. B. R. 49, 125 Fed. 633. But a sale of bankrupt's property at private sale, by a trustee without its appraisal and without the order of the court and which has not been approved by the court, vests no title in the buyer. Matter of Monsarrat (D. C, Hawaii), 25 Am. B. R. 815, 819. , , , While the want of an appraisal does not necessarily invalidate a sale by a trustee of property of a bankrupt's estate, and a sale for a, reasonable price, without appraisal, may be confirmed, a private sale without appraisal for one hundred dollars, though ordered by the referee of property whick was worth five hundred dollars and which would probably have brought that sum ait puhlic auction, not allowed to stand unless the purchaser pays to the trustee the difference in value, with interest. As the alternative, the purchaser may return the property and have back the purchase price with interest, the property to be sold by the trustee at public auction after due advertisement; provided, that if the funds of the esta.tH shall be sufiicient" to pay the claims allowed and proper costs and expenses of 1206 General Oedees. [XIX, XX, XXi. administration, tlie property to be returned to tlie bankrupt. Matter of Monsarrat (D. C., Hawaii), 25 Am. B. R. 820. The words of this order, authorizing a private sale of " any specified portion of the bank- rupt's estate," have been taken to mean such portion thereof as is specified in the petition and order for sale, and do not prohibit an order authorizing the sale of the entire estate at private eale. Matter of Knox Automobile Co. (D. C, Mass.), 32 Am. B. E. 67, 210 Fed. 569. Perishable property may be sold under this order, even without notice to the creditors, and the courts have been very liberal in their construction of what is " perishable." This order cannofbe held to be in derogation of the statute. In re Edes (D. C, Me.), 14 Am. B. R. 382, 384, 135 Fed. 595. Perishability within the meaning of the term in bankruptcy involves physical deterioration of the property itself. Mere depreciation in value is not enough. A stock of hardware cannot be sold without notice to creditors as "perishable property," although by delay it is becoming unseasonable. Matter of Beutel's Sons (Ref., Ohio), 7 Am. B. R. 768. Contra. Matter of Eeinstein (D. C, Mass.), 39 Am. B. R. 856. Sales by receivers in bankruptcy are justified only when property is perishable or is rapidly depreciating in value on a falling market or for other reasons. In re Desbrochers (D. C, N. Y.), 25 Am. B. R. 703, 183 Fed. 991. Real estate may be considered perishable within the meaning and intent of this order, when it consists of buildings, rapidly deteriorating and in a dilapidating condition and requiring immediate expenditure of a large sum of money by the trustee to prevent absolute loss. In re Milne Mfg. Co. ( D. C, N. Y. ) , 21 Am. B. R. 468. Sale of property discharged of liens. — ^Assuming that a court has power to sell a bankrupt's real property discharged of liens, the court will not order such a sale unless it is 'satisfied that the interests of the general creditors would thus be advanced and the interests of the lien creditors not injuriously affected. In re Styer (D. C, Pa.) , 3 Am. B. R. 424, 98 Fed. 290. XIX. ACCOUNTS OF MARSHAL. The marshal shall make return, under oath, of his actual and necessary expenses in the service of every warrant addressed to him, and for custody of property, and other services, and other actual and necessary expenses paid by him, with vouchers therefor whenever practicable, and also with a state- ment that the amounts charged by him are just and reasonable. [Latter part of General Order XII, 1867, without any substantial change.] Cross-references: To the law: §§2(3) (5), 3-e, 52, 69. To the General .Orders: ' X. To the Official Forms: Nos. 8, 9, 10. XX. PAPERS FILED AFTER REFERENCE. Proofs of claims and other papers filed subsequently to the reference, except such as call for action by the judge, may be filed either with the referee or with the clerk. [This general order is new.] Cross-references: To the law: As to the duty of referees concerning papers filed with them, § 39-a; As to clerk's duties concerning same, § 51(3). See also § 42-b. To the General Orders: XXIV. XXL PROOF OF DEBTS. 1. Depositions to prove claims against a bankrupt's estate shall be correctly entitled in the court and in the cause. When made to prove a debt due to a partnership, it must appear on oath that the deponent is a member of the partnership; when made by an agent, the reason the deposition is not made by the claimant in person must be stated; and when made to prove a debt due to a corporation, the deposition shall be made by the treasurer, or if the corporation has no treasurer, by the officer whose duties most nearly correspond to those of treasurer. If the treasurer or corre- sponding officer is not within the district wherein the bankruptcy proceed- ings are pending, the deposition may be made by some officer or agent of the corporation having knowledge of the facts. Depositions to prove debts- existing in open account shall state when the debt became or will become due; and if it consists of items maturing at different dates the average due date shall be stated, in default of which it shall not be necessary to compute interest upon it. AH «UfJ» depositions shall contain an averment that no note has been received XXL] Peoop of Debts. 1207 for such accouat, nor any judgment rendered thereon. Proofs of debt received by any trustee sball be deliYered to the referee to whom the cause is referred. [Amended Nov. 1. 1915.] 2. Any creditor may file with the referee a request that all notices to which he may be entitled shall be addressed to him at any place, to be designated hy the post-office box or street number, as he may appoint ; and thereafter, and until some other designation shall be made by such creditor, all notices shall be so addressed; and in other cases notices shall be addressed as specified in tli3 proof of debt. 3. Claims which have been assigned before proof shall be supported by a deposition of the owner at the time of the commencement of proceedings, setting forth the true consideration of the debt, and that it is entirely unsecured, or if secured, the security as is required in proving secured claims. Upon the filing of satisfactory proof of the assignment of a claim proved and entered on the referee's docket, the referee shall immediately give notice by mail to the orig- inal claimant of the filing of such proof of assignment ; and, if no objection be entered, within ten days, or within further time allowed by the referee, he shall make an order subrogating the assignee to the original claimant. If objection be made, he shall proceed to hear and determine the matter. 4. The claims of persons contingently liable for the bankrupt may be proved in the name of the creditor when known by the party contingently liable. "When the name of the creditor is unknown, such claim may be proved in the name of the party contingently liable ; but no dividend shall be paid upon such claim, except upon satisfactory proof that it will diminish pro tanio the original debt. 5. The execution of any letter of attorney to represent a creditor, or of an assignment of claim after proof, may be proved or acknowledged before a referee, or a United States commissioner, or a notary public. When executed on behalf of a partnership or of a corporation, the person executing the instru- ment shall make oath that he is a member of the partnership, or a duly authorized officer of the corporation on whose behalf he acts. When the person executing is not personally known to the ofiicer taking the proof or acknowl- edgment, his identity shall be established by satisfactory proof. 6. When the trustee or any creditor shall desire the re-examination of any claim filed against the bankrupt's estate, he may apply by petition to the referee to whom the case is referred for an order for such re-examination, and thereupon the referee shall make an order fixing a time for hearing the petition, of which due notice shall be given by mail addressed to the creditor. At the time appointed the referee shall take the examination of the cred- itor, and of any witness that may be called by either party and if it shall appear from such examination that the claim ought to be expunged or dimin- ished, the referee may order accordingly. [General Order XXXIV, 1874, with slight changes.] Cross-references: To the law: As to proof of debts, generally, §§ 2(2), 57; As to provable debts, § 63; As to set-off of debts, §§ 60-c, 68. To the General Orders: XXIV, XXVIII, XXXIII. To the Official Forms: Noa. 20, 21, 31, 32, 33, 34, 35, 36, 37, 38, 39. To the Supplementary Forms: Nos. 170, 171, 172, 173, 174, 175. Title of court, necessity for. — ^A proof of claim otherwise good is not vitiated because the title of the court is not given in accordance with this general order and Form 31. In re Blue Ridge Packing Co. (D. C, Pa.), 11 Am. B. K. 36, 125 Fed. 619. Acknowledgments by justicfes of peace. — In States where justices of the peace are expressly authorized to take oaths the Supreme Court did not intend bv subdivision 5 of this general order to exclude such officials from taking acknowledgments. In re Roy (D. C, N Y ) 26 Am. B. R. 4. ..,.., A function of the oath required upon proof of a debt due to a partnershin is to guard against 1208 Geneeal Oedees. [XXI. mistake or fraud in the proof of the claim itself and does not refer to the question of the letter of the attorney. In re Finlay (Ref., JST. Y.), 3 Am. B. R. 738. The very fact that in subdivision 5 an oath is required in the case of a letter of attorney is evidence that it was the intention that the oath required by subdivision 1 should not be taken in place of the oath required by subdivision 5. Proof of claim by agent; sufficient reason. — It seems that a corporation may make proof in its claim by agent or attorney in fact when there is suflBcient reason why it should not be made by the officer designated. In the case of a French corporation the mere fact that the treasurer or proper officer was in France is not a sufficient reason why he should not have verified the proof of claim. Matter of Reboulin Fils: & Co. (Ref., N. J.), 19 Am. B. R. 215. This order provides that a proof of claim made by an agent should state the reason the deposition was not made by the claimants in person; it would seem as if the provision was for some purpose and that the reason must be a good and vrlid and sufficient reason. Matter of Reboulin Fils & Co. (Ref., N. J.), 19 Am. B. R. 215. The verification by an attorney which fails to assign a reason why thj claimants have not personally made it, although defective, may be amended. In re Medina Quarry Co. (D. C., N. Y.), 24 Am. B. R. 769, 179 Fed. 929. Itemizing accounts. — WTiile Order XXI does not directly provide that accounts made up of items shall be itemized, and would seem to relate to the fixmg of an average due date where items fall due at different dates, and provides a penalty for failure to fix the average due date by the forfeiture of interest on said account, yet the order is predicated on the theory that accounts consisting of items will be itemized. It is conforming to the simplest business method to set forth the items which make up the account which is to be presented to the debtor. It is very necessary that this should be done when the debtor's property has become a common fund for application ratably in the payment of his debts, for then all creditors have an interest in each account presented, and they can know nothing of the nature of the account except through the disclosures of the proof of debt. The statement of consideration should be sufBciently specific and full to enable creditors to pursue proper and legitimate inquiry as to the fairness and legality of the claim, and, if it is so meager and general in character as not to do this, it must be held insufficient. In re Scott ( D. C, Tex. ) , 1 Am. B. R. 553, 93 Fed. 418. Filing claims. — Where proofs of a claim have been received by the trustee within a year, as provided in the last sentence of this subdivision, it has been held that the claim was sufl5ciently filed. Orcutt Co. v. Green, 17 Am. B. R. 72, 204 U. S. 96, revg. 13 Am. B. R. 512. The provision that " proofs of debt received by any trustee shall be delivered to the referee to whom the cause is referred," does not confer jurisdiction to file a claim nunc pro tunc after the expiration of a year. Matter of Ingalls Bros. (C. C. A., 2d Cir.), 13 Am. B. R. 512, 137 Fed. 517. It seems that a trustee cannot file with himself his proof of his own claim against the estate of the bankrupt. Orcutt Co. v. Green, 17 Am. B. R. 72, 204 U. S. 96, revg. 13 Am. B. R. 512. Assigned claims. — Subd. 3, relating to the proof of assigned claims, applies to assignees of proven claims. Matter of Breakwater Co. (D. C, Pa.), 36 Am. B. R. 752. A proof of claim by a surety which is in the form of a petition for the establishment of its subrogated rights, and which very elaborately sets forth a history of the entire transaction, substantially complies with subd. 3 of this general order. Kilpatrick v. U. S. Fidelity & Guaranty Co. (C. C. A., 5th Cir.) , 37 Am. B. R. 36, 228 Fed. 587. A referee has jurisdiction under subdivision 3 of this General Order to determine a controversy ariaing in bankruptcy proceedings, consisting of the riglit, as between two claimants to a dividend based upon a claim which was assigned to them alter proof and the assignments entered on the referee's docket. Matter of Port Tampa Phosphate Company (D. C, Mass.), 41 Am. B. E. 154. A president of a corporation who performs the duties of the treasurer may sign a claim. Matter of Eisenberg (D. C, N. Y.), 40 Am. B. E. 864, 251 Fed. 427. Service of petition on claimant. — This general order does not recLUire the service of a copy of the petition upon the claimant, nor does it prevent the joining of all the claimants in one petition. Matter of Caledonia Coal Co. (D. C, Mich.), 43 Am. B. K. 93, 254 Fed. 742. As to what constitutes an assigned claim, see In re Finlay (Ref., N. Y.), 3 Am. B. E. 738. Claims of sureties. — Subdivision 4 is limited to persons who may be contingently liable for some debt or default of the bankrupt. Phenix Nat. Bank v. Waterbury (App. Div., N. Y.), 20 Am. B. E. 140, 145, affd. 23 Am. B. li. 250, 197 N. Y. 161. That is, it deals only with the claims of sureties. In re Ells (D. C, Mass.), 3 Am. B. E. 564, 5G8, 98 Fed. 967. The liability of the guarantor of the payment of rent under a lease to a partnership for the balance of the term at the date of the bankruptcy of the lessee, the lessors having taken no proceedings, is contingent, but the claim may, under this general order, subd. 4, be proven in the name of the lessors, for the amount for which the guarantor is contingently liable. Matter of Baker & Edwards (D. C, N. Car.), 35 Am. B. E. 460, 224 Fed. 611. Fower of attorney for individual or corporation; distinction. — A very clear distinction is made between a letter of an attorney executed on behalf of an individual and one executed on behalf of a partnership or of a corporation. The former may be proved or acknowledged. But In the caso of the latter two cases the person executing the instrument shall make oath. In re Finlay (Eef., N. Y.), 3 Am. B. E. 738. Oath contained in proof of debt. — The requirement of this order that the person executing a partnership letter of an attorney must take oath that he is a member of the firm, Is sufficiently complied with where the oath is contained in the proof of debt which accompanied and was executed the same day as the letter, and the attorney is entitled to represent the creditor at the election of a trustee. In re Blue Eidge Packing Co. (D. C, Pa.), 11 Am. B. E. 36, 125 Fed. 619. Proof of claims of foreiBn creditors. — The language of this subdivision is not exclusive and the different clauses taken together seem to Indicate that the proof of claims of foreign creditors was not within the contemplation of the court in afBrming the order; thus a power of the attorney acknowledged before a foreign counsel is sufficient to authorize proof of the claim of a foreign creditor. In re Sugenhelmer (D. C, N. Y.), 1 Am. B. E. 425, 91 Fed. 741. XXI.] Proof of Debts. 1209 Notice to creditors of proposed sale. — Under the law requiring that notices to creditors " shall be addressed as specified in the proof of debt," notice sent to a creditor whose name and address appear in the bankrupt's schedules of liabilities, is not notice to an assignee of the creditor, whose proof of claim, containing his address, was duly filed with the referee; unless the notice sent to the assignor reaches the assignee. Matter of Mousarrat (D. C, Hawaii), 25 Am. B. R. 820. Re-examination; who may procure. — The use of the word "creditor" in subd. 6 of this order, as one who has the right to take a review, should be confined to a review or appeal in case a creditor's individual claim is decided adversely; where the body of creditors is affected, the review must be taken by the trustee solely as their representative. Matter of Arti-Staiu Company (D. C, Mass.), 32 Am. B. R. 640, aflfd. 32 Am. B. R. 643, 216 Fed. 942. If any creditor or interested person desires a review he should request the trustee to take such action. In case of refusal by the trustee, the suitor's remedy is by motion or petition filed with the court, asking that the trustee be ordered to take a review as to any questions of procedure or allowance. Matter of Arti-Stain Company (D. C, Mass.), 32 Am. B. R. 640, affd. 32 Am. B. E. 643, 216 Fed. 942. It is not within the contemplation of this order to permit the trustee and creditors con- currently to pursue a re-examination of a claim, or to permit a creditor to do so when the trustee for sufficient reasons does not approve, or when in the interests of all it is desirable that the trustee should conduct the proceeding. Matter of Lewensohn (C. C. A., 2d Cir. ), 9 Am. B. R. 368, 121 Fed. 1. This provision authorizes a petition by a creditor at the appropriate stage of the proceeding when it may be desirable for the creditor to intervene. The word " desire " is used in the sense of intend. Matter of (Lewensohn ( C. C. A., 2d Cir. ) , 9 Am. B. R. 368, 121 Fed. 1. The right to apply by petition for a re-examination, under this order and section 57-k, seems to be limited to the trustee and to creditors who are dissatisfied with the amount allowed to some creditor of the bankrupt other than the petitioner. In re Chambers, Calder & Co. (Ref., R. I.), 6 Am. B. R. 707. The language of this subdivision clearly excludes action on the part of any one but the trustee or a creditor. And the bankrupt has no right to compel action on the part of a trustee when that oflP.cial or any of the creditors refuse to take such action after demand made. Matter of Levy (Ref., N.' Y.), 7 Am. B. R. 56. When there is a trustee in existence, proceedings for a re-examination of claims of creditors may be instituted only by him, and a creditor has no capacity to attack the claims of other creditors. Matter of Lewensohn (C. C. A., 2d Cir.), 9 Am. B. R. 368, 121 Fed. 1. The trustee in bankruptcy may institute a joint proceeding against several creditors. Matter of Lyon (Ref., N. Y.), 7 Am. B. R. 61. If the trustee should, without sufficient reason, refuse to proceed, the court by its order may compel him to do so or remove him for disobedience. Matter of Lewensohn ( C. C. A., 2d Cir. ) , 9 Am. B. R. 368, 121 Fed. 1. Time of re-examination. — A claim may be re-examined prior to the qualification of the trustee, as delays frequently ensue in the election and qualification of this officer, and it might be that evidence would be lost in the meantime. Matter of Lewensohn (C. C. A., 2d Cir.), 9 Am. B. E. 368, 121 Fed. 1. A re-examination cannot be had after the estate has been closed. Matter of Lewensohn (C. C. A., 2d Cir.), 9 Am. B. R. 368, 121 Fed. 1. Notice of hearing on petition for re-examination. — ^A trustee is not required to give notice of a re-examination to all the creditors. Notice to the claimant is suflScient. In re Mammoth Pine Lumber Co. (D. C, Ark.), 8 Am. B. R. 651, 661, 109 Fed. 308. Notice of a special meeting, called upon the petition of a creditor to have a re-examination of certain claims under this subdivision, should be sent out by the referee and not by the petitioner. In re Stoever (D. C, Pa.), 5 Am. B. R. 250, 105 Fed. 355. In a proceeding to obtain a re-examination of a claim the referee shall give notice to the creditor whose claim is contested of a hearing on the petition for re-examination. At this hearing the referee shall take the examination of the creditor and of any witness that may be called by either party, and if it shall appear from such examination that the claim ought to be expunged or diminished the referee may so order. The burden of proof is on the objecting party. In re Doty (Ref., N. Y.), 5 Am. B. R. 58. Petition for re-examination. — Answers or exceptions to claims, filed by a trustee may be treated as a petition for the re-examination of the claims. It would be better practice, however, to follow the general order. In re Mammoth Pine Lumber Co. {D. C^ Ark.), 8 Am. B. R. 651, 660, 109 Fed. 308. What claims may he re-examined. — This subdivision prescribes the method by which the trustee or a creditor may invoke the re-examination of a claim filed, and is broad enough to include any and all claims — secured and unsecured. It is quite as important to the estate and other creditors that the right of a secured or priority creditor to vote upon the excess of his claim over his security or priority should be correctly determined and limited to the proper amount as that the amount of any other claim asserted should be ascertained. Matter of Columbia Iron Works (D. C.,-Mich.), 14 Am. B. E. 526, 535, 142 Fed. 234. This paragraph refers to claims against the bankrupt that were in existence when the petition was filed, and not to claims against the estate for expenses of administration, such as a referee's account. In re Reliance, etc., Co. {D. C, Pa.), 4 Am. B. E. 49, 100 Fed. 619. 1210 General Oedees. [XXII. Relief on re-examination. — This subdivision limits proceedings with reference to a recon- sideration of claims to the mere matter of expunging or diminishing them. Fitch v. Richard (O. C. A., 1st Cir.) , 16 Am. B. R. 835, 837, 147 Fed. 196. A claim which has been allowed may be reconsidered and rejected on the petition of a creditor. Matter of Collins (D. C, La.), 37 Am. B. R. 692, 235 Fed. 937. There does not appear to be any authority for increasing the amount of a claim by a petition for re-examination. It would seem that the proper method for a creditor to pursue whose claim has been disallowed is for him promptly to file his petition for a review of the orders of the referee by the district court, or if through inadvertence the creditor has omitted to include in his proof of claim any items which are provable against the estate he should either file an amended proof of claim or a second proof of claim based upon such additional items. In re Chambers, Calder & Co. (Ref., R. I.), 6 Am. B. R. 707. Where a trustee petitions for a re-examination of a creditor's claim, the referee has no power to do more than allow the petition, expunge or diminish the claim, or refuse to do either, and he cannot pass upon and decide controversies involving questions of fact regarding the title or other legal rights to property between the trustee and third parties, thus depriving the parties of trial by jury as secured by the Constitution. In re Peacock (D. C., N. Car.), 24 Am. B. R. 159, 178 Fed. 851. A court of bankruptcy has jurisdiction by a summary proceeding to diminish or exptnigB an allowed claim unless the claimant pays to the trustee the value of the property of the bankrupt which he has taken and converted to his own use, without any prior claim to it, after the petition in bankruptcy was filed. In re Paterson Co. (C. C. A., 8th Cir.), 25 Am. B. R. 855, 186 Fed. 629. Other cases citing this order. — In re Soper and Slada (Ref., N. Y.), 1 Am. B. E. 193, 196; In re Pauly (Ref., N. Y.), 2 Am. B. R. 333, 335; In re Blankfein (D. C, N. Y.), 3 Am. B. R. 165, 168, 97 Fed. 191; In re Rider (D. C, N. Y.), 3 Am. B. R. 192, 96 Fed. 811; Hayer v. Comstock (Sup. Ct., Iowa), 7 Am. B. R. 493; In re Jones (D. C, Mich.), 18 Am. B. R. 206, 209, 151 Fed. 108; In re John Osborne Sons & Co. (C. C. A., 2d Cir.), 24 Am. B. R. 65, 177 Fed. 184; Davis v. Trust Co. (C. C. A., 6th Cir.), 25 Am. B. E. 621, 639, 181 Fed. 10; Matter of Goodman-Kinstler Cigar Co. (D. C, Cal.), 32 Am. B. E. 624; Matter of Siegel Company (D. C, Mass.), 32 Am. B. E. 645, 216 Fed. 943; Williams. v. U. S. Fidelity & Guaranty Co., 236 TJ. S. 549, 34 Am. B. R. 181; Matter of Krecun (C. C. A., 7th Cir.), 36 Am. B. R. 172, 229 Fed. 711. XXII. TAKING OF TESTIMONY. The examination of witnesses before the referee may be conducted by the party in person or by his counsel or attorney, and the witnesses shall be subject to examination and cross-examination, which shall be had in conformity with the mode now adopted in courts of law. A deposition taken upon an examina- tion before a referee shall be taken down in writing by him, or under his direction, in the form of narrative, unless he determines that the examination shall be by question and answer. When completed it shall be read over to the witness and signed by him in the presence of the referee. The referee shall note upon the deposition any question objected to, with his decision thereon; and the court shall have power to deal with the costs of incompetent, immaterial, or irrelevant depositions, or parts of them, as may be just. [General Order X, 1867, with changes, recognizing the right of the referee to decide objections raised as to the competency, relevancy and materiality of questions; and with other slight changes.] Cross-references: To the law: As to examinations, §| 7(9), 21, 38-a(2) ; As to casts, §2(18). To the General Orders: XXII. To the Official Forms: Nos. 29, 30, 56. To the Equity Rules: LXVH, to LXIX. Duty of referee in taking testimony. — It is the duty of the referee imder this order to receive the evidence which is offered, to note objections and to record the evidence; and, if either party persists in oflfering incompetent or irrelevant matter, the other party has a remedy, because the order provides that "the_ court shall have power to deal with the costs of incompetent, immaterial or irrelevant depositions or parts of them as may be just." The eqpity practice is to be followed by the referees. In re Sturgeon ( C. C. A., 2d Cir. ) , 14 Am. B. E. 681, 139 Fed. 608. A hearing before a referee in bankruptcy, being substantially a hearing in proceedings in equity, is governed by the rules of equity of the United States courts; and the general order in bankruptcy regulating the examination of witnesses before the referee, is almost identical in substance with rule in equity No. 67. In re Lipset (D. C, N. Y.), 9 Am. B. R. 32, 119 Fed. 379. XXIII.] Oedees of Refeeee. 1211 Referees in bankruptcy in taking testimony are governed by the rules in equity, and should not on simple objection excuse witnesses from answering questions, but it is his duty to note the objection and take the answer. Dressel v. North State Lumber Co. (D. C, N. Car.), 9 Am. B. K. 541, 119 Fed. 531. It is the duty of the referee to take all excluded testimony down and make the same a part of the record with his ruling on the objections and also the exceptions which may be taken noted in connection with such testimony. In re Lipset (D. C, N. Y.), 9 Am. B. R. 32, 119 Fed. 379. Contra, Matter of Wilde's Sons (D. C, N. Y.), 11 Am. B. R. 714. The referee, whether acting as such or as a special commissioner, must receive all the evidence offered upon a hearing before "him, noting the objections made, and he may refuse to stop the proceedings and certify questions raised on objections to testimony. Bank of Ravenswood v. Johnson (C. C. A., 4th Cir.), 16 Am. B. R. 206, 143 Fed. 463. Upon the hearing of objections to the granting of a bankrupt's discharge, he should preserve all testimony objected to, noting the objections and taking answers subject thereto, and report the same to the court, or if necessary, certify to the court on proper application any particular ruling. In re Isaacson (D. C, N. Y.), 23 Am. B. R. 665, 174 Fed. 406; United States v. Liberman (D. C, N. Y.),.32 Am. B. R. 734, 735, 176 Fed. 161. The referee in. taking testimony must have it taken down preferably' in narrative form, but upon objection raised, it is his duty to require the matter to be presented by question, to which the objection and reason thereof is to be clearly but briefly noted, then to enter his ruling thereon as to whether proper or not and although he may rule it to be improper, yet allow it to be answered. In re Romine (D. C, W. Va.) , 14 Am. B. R. 785, 788, 138 Fed. 837. Examination of absent bankrupts and witnesses. — This general order has somewhat regulated the practice of taking testimony in cases pending before a referee; but the Supreme Court does not seem to have especially regulated the practice of taking the testimony or an inquisitorial examination of absent bankrupts and witnesses. It seems that the original equity practice is the proper method of taking such testimony. In re Williams ( D. C, Tenn. ) , 10 Am. B. R. 538, 543, 123 Fed. 321. Admissibility of unsigned testimony. — Notes of testimony given by bankrupts on examina- tion at creditors' meeting, which was not completed because of their refusal to answer, are admissible in evidence in a proceeding to punish them for contempt, although not read to or signed by them as required by this general order, especially where their accuracy is proved by the stenographer who made them. Matter of Kaplan Brothers (C. C. A., 3d Cir.), 32 Am. B. R. 305, 213 Fed. 753. Where a creditor, objecting to a bankrupt's disctarge, dies pending the application, his testimony, taken by consent and given under oath, may be used, upon proof of the adminis- tration of the oath to testify, even though the testimony was not read over to the witness and signed by him as required by this general order. Matter of Blaesser (D. C, N. Y.), 36 Am. B. R. 795, 230 Fed. 528. An attorney in (act may not conduct the examination of witnesses. Matter of Looney (D. C, lex.), 44 Am. B. R. 542, 262 Fed. 209. Signing deposition. — The word "deposition" as used in General Order 22, means written testi- mony given upon the examination of a witness in bankruptcy procaediugs, whether upon general examination or not, and the referee has the power to order the bankrupt to sign testimony given by him on his general examination. Matter of Post (D. C, Ohio), 43 Am. B. R. 136, 256 Fed. 230. Examination of testimony by witneas. — ^A witness, although not a creditor but a party owing money to a bankrupt estate, is entitled to examine the minutes of his testimony before signing the same. Matter of Waters-Colver Co. (D. C, N. Y.), 32 Am. B. R. 379, 212 Fed. 761. Original proceeaing before referee. — The provisions of this General Order do not preclude a referee, acting as a judicial officer in a proceeding originally instituted before him, from excluding irrelevant evidence, nor require him to admit and record all the evidence offered whether under objection or not. In re Harrison Bros. (D. C, Pa.), 28 Am. B. R. 293. Other cases citing this order.— In re Hoyt & Mitchell (D. C.^ N. Car.), 11 Am. B. R. 784, 127 Fed. 868: Matter of Kinnane & Company (D. C, Ohio), 33 Am. B. E. 243, 217 Fed. 488. XXIII. ORDERS OF REFEREE. In all orders made hj a referee, it shall be recited, according as the fact may be, that notice was given and the manner thereof ; or that the order was made by consent; or that no adverse interest was represented at the hearing; or that the order was made after hearing adverse interests. [General Order VIII, 1867, with verbal changes.] Cross-references: To the law: Generally. To the General Orders: IV, XII. To the Equity Rules: LXXXV, LXXXVI. See In re Russell Card Co. (D. C, N. J.), 23 Am. B. R. 300, 174 Fed. 202. It is the duty of referees to make their orders conform to this rule. Faulk & Co. v. Steiner (C. C. A., 5th Cir.), 21 Am. B. E. 623, 165 Fed. 861. In In re Abbey Press (C. C. A., 2d Cir.), 13 Am. B. R. 11, 134 Fed. 51, the court said: " We do not think this order should be held to apply to a mere direction or ruling that a witneas be sworn or that he shall or shall not answer certain questions." Failure to recite notice in order. — ^An order of a referee, dismissing a claim unless the claimant surrender a preference, is not invalid because of its failure to recite notice as provided in this general order, especially where the claimant was not entitled to notice to 1212 General Oedees. [XXIV-XXVIL confer jurisdiction. MeCulloch v. Davenport Savings Bank (D. C, Iowa), 35 Am. B. K, 765,, 226 Ffed. 309. e i , . . Error without prejudice.— The fact that without complying with this order, the refereei i made an order on the unadjudicated member of a partnership, after it and the other member had been adjudicated bankrupt, to file the schedule of his debts and the inventory of his property on or before nineteen days after the adjudication, is not fatal to the order of the court confirming such an order, because the unadjudicated member was required hy the bankruptcy law and general order 8 to make these filings within ten days after that adjudica- tion. Armstrong v. Fisher (C. C. A., 8th Cir.), 34 Am. B. R. 701, 224 Fed. 97. Other cases citing this order.— Matter of Lacey & Company (Sup. Ct., D. C.) , 35 Am. B. E. 231, 43 Wash. L. E. 434. XXIV. TRANSMISSION OF PROVED CLAIMS TO CLERK. The referee shall forthwith transmit to the clerk a list of the claims proved against an estate, with the names and addresses of the proving creditors. [Compare General Order XI, 1867. This general order does not fit into the present system of administration, and is rarely observed.] Cross-references: To the law: §§ 39-a, 57. To the General Orders: XII, XX. To the Official Forms: No. 19. Taxation of costs. — The details of making taxation of costs may be attended to in thq oflSce of the clerk or the referee, as authorizSi by this order. Matter of Scott (Ref., Mass.), 7 Am. B. E., 710, 713. XXV. SPECIAL MEETING OF CREDITORS. Whenever, by reason of a vacancy in the office of trustee, or for any other cause, it becomes necessary to call a special meeting of the creditors in order to carry out the purposes of the act, the court may call such a meeting, specifying in the notice the purpose for which it is called. [This general order is new. Its necessity or even value is doubted.] Cross-references: To the law: As to meetings of creditors, § 55; As to meeting for choice of new trustee, § 44; As to notices of meetings, § 58. To the General Orders: XIII. To the Official Forms: Nos. 52, 53, S4, 55. See In re Louis Lewensohn (D. C, N. Y.), 3 Am. B. E. 299, 303, 98 Fed. 576. XXVI. ACCOUNTS OP REFEREE. Every referee shall keep an accurate account of his traveling and incidental expenses, and of those of any clerk or any officer attending him in the per- formance of his duties in any case which may be referred to him: and shall make return of the same under oath to the judge, with proper vouchers when vouchers can be procured, on the first Tuesday in each month. [First part of General Order XII, 1867, with substantial change. Referees usually keep accurate accounts, but the making of monthly returns of expenses is rare.] Cross-references: To the law: §§ 9-a, 42. To the General Orders: X, XXXV (2), and, by analogy, XIX. Cases citing this order.— In re Todd (D. C, N. Y.), 6 Am. B. R. 88, 91, 106 Fed. 265; In re Scott (Ref., Mass.), 7 Am. B. R. 35; In re Mammoth Pine Lumber Co. (D. C, Ark.), 8 Am. B. R. 651, 654, 109 Fed. 308; In re Daniels (D. C, la.), 12 Am. B. R. 446, 449, 130 Fed. 597; Matter of McCubbin (Sup. Ct., D. C), 33 Am. B. R. 277. XXVII. REVIEW BY JUDGE. When a bankrupt, creditor, trustee, or other person shall desire a review by the judge of any order made by the referee, he shall file with the referee his petition therefor, setting out the error complained of; and the referee shall forthwith certify to the judge the question presented, a summary of the evidence relating thereto, and the finding and order of the referee thereon. [General Order XVII, 1874, with changes.] Cross-references: To the law: §§ 2(101, 38-a. ?9-a(5). To the General Orders: By analogy, XXXVI. To the Supplementary Forms: Nos. 158, 159, and, by analogy, Nds. 146, 147, 148, 149. XXVII.] Eeview by Judge. 1213 Purpose of order. — ■ The purjwse of this general order is to proide a simple and eflFective method of procedure for securing early hearings and a speedy determination of litigated questions. In re Koenig & Van Hoogenhuyze (D. C, Tex.), 11 Am. B. R. 617, 127 Fed. 891. It is intended to carry into effect the provisions of § 39 so as to avoid as far as possible the sending of the original proofs to the judge and to substitute therefor vphere the ends of justice will permit a summary thereof. Cunningham v. German Ins. Bank (C. C. A., 6th Cir.), 4 Am. B. R. 192, 103 Fed. 932; Grin v. Woodford (C. C. A., 4th Cir.), 14 Am. B. R. 302, 306, 136 Fed. 34. This general order provides the only method for securing a review by the judge of an order or finding by the referee, In re Clark Coal & Coke Co. (D. C, Pa.), 23 Am. B. R 273, 173 Fed. 658; Matter of Octave Mining Co. (D. C, Ariz.), 32 Am. B. R. 474, 212 Fed. 457, and an attempted appeal from a decision of the referee confers no power on the court. Matter of Octave Mining Co. (D. C, Ariz.), 32 Am. B. R. 474, 212 Fed. 457. There can be no review unless a petition is filed; it is not suflScient for the referee to certify a question for review without a petition. Craddock-Terry Co. v. Kaufman (D. C, Tex.), 23 Am. B. R. 724, 175 Fed. 303. The certification of a question prevents disputes among counsel concerning the opinion presented and decided, and the summary of the evidence is required in order to save the judge the labor of examining what is often a mass of testimony on many different questions. In re Kurtz (D. C, Pa.), 11 Am. B. R. 129, 125 Fed. 992. Review under § 38. — This general order and § 38 of the act provide for review by the court of the orders of referees in the most general terms and are far from limiting the court to the rules which govern a chancery suit. Therefore, the district court may dis- regard the findings of the referee entirely, and proceed de novo to reject them for reasons of law, or refuse them or accept them in whole or in part without assigning reasons there- for. In re Pettingill & Co. (C. C. A., 1st Cir.), 14 Am. B. R. 757, 761, 135 Fed. 218. But a review under § 38 of the bankruptcy act cannot be had unless the procedure prescribed by this general order is followed. In re Home Discount Co. (D. C, Ala.), 17 Am. B. R. 168, 147 Fed. 538. Parties entitled to review. — Where by consegat certain creditors are permitted by an order of the court to become parties to a petition to review an order of the referee a district court has jurisdiction to review such order although the claim of the original petitioner has been simply filed with the referee and neither allowed or disallowed. Such petitioner, if not " a bankrupt creditor," is at least " such other person " as under this order is entitled to a, review. Allgair v. Fisher & Co. (C. C. A., 3d Cir.), 16 Am. B. R. 278, 143 Fed. 962. The use of the word " creditor " in this general order, as one who has the right to take a review, should be confined to a review or appeal in case a creditor's individual claim is decided adversely; where the body of creditors' interests is affected the review must be taken by the trustees solely as their representative. Matter of Arti-Stain Company (D. C, Mass.), 32 Am. B. R. 640, affd. 32 Am. B. R. 643, 216 Fed. 942. See also Matter of Siegel Od. (D. C, Mass.), 32 Am. B. R. 645, 216 Fed. 945. General review not intended. — This general order provides for " review by the judge of any or^er made by the referee," but it seems that a general review of the proceedings before the referee or a review of rulings not directly affecting an order made was not intended either by the act or by the orders. In re Kelly Dry Goods Co. ( D. C, Wis. ) , 4 Am. B. R. 528, 102 Fed. 747. Ordinarily a review by the judge of an order maide by the referee will be confined to the error pointed out in the petition for review. Matter of Natelle De Gottardi (D. C, Cal.), 7 Am. B. R. 723, 129, 114 Fed. 328. Specific questions, as they arise in the proceedings, are to be presented on certificate of the referee, or in the case of orders entered on petition for review. In re Kelly Dry Goods Co. (D. C, Wis.), 4 Am. B. R. 528, 102 Fed. 747. Application for review; when granted. — ^An applicaion for a review of the decision of the referee will be dismissed when the party objecting has not complied \\ath the requirements of this order. In re Schiller (D. C, Va.), 2 Am. B. R. 704, 96 Fed. 400; In re Scott (D. C, N. Car.), 3 Am. B. R. 625, 94 Fed. 404. Thus, a petition will be dismissed where it asks for a review of the decision of the referee instead of a review of the order of the referee. In re Chambers, Calder & Co. (Ref., R. I.), 6 Am. B. R. 709. Or where the referee simply transmits to the clerk the notice of testimony, his opinion and the creditor's petition for review. The precise questions ruled upon and the summary of the evidence relating thereto should always bei presented. In re Kurtz (D. C, Pa.), 11 Am. B. R. 129, 125 Fed. 992. But where the referee, believing that all the testimony would be needed to present the questions at issue failed to summarize the evidence, the court will not deprive the petitioners of their rights to a review. Crim v. Woodford (C. C. A., 4;th Cir.), 14 Am. B. R. 302, 306, 136 Fed. 34. If 0.1 y injustice is done a witness by an order of a. referee he has a right to review the same and to be heard thereon before a judge of the court under this order. Matter of Abbey Press (C. C. A., 2d Cir.), 13 Am. B. R..il, 17, 134 Fed. 51. The rulings of a referee cannot be reviewed, while the case is still pending before him, by simply filing in the district court exceptions to such ruling. In re Hawley (D. C, Iowa), 8 Am. B. R. 632, 116 Fed. 4i28. A referee can certify a question which he foresees may arise from a proceeding before him and upon which he desires to be advised. In re Beukauff Sons & Co. (D. C, Pa.), 14 Am. B. E. 344, 135 Fed. 251. 1214 General Oedees. [XXVIII. Whore the record presented to the court on an application to review an order of the referee holding that Bpecifications in opposition to the banlirupt's discharge had not been sustained, discloses no action taken by the contesting creditor in exception to the order or ruling of the referee looking to its review, and there is no petition setting forth the error complained of, and the referee has not certified the question presented for review together with a summary of the evidence relating thereto and his findings and order made thereon as required by General Order 27, there Is no Issue before the court, and it will return the record to the clerk. Matter of Stubblefleld (D. C, Tex.), 4? Am. B. E. 151, 260 Fed. 591. A statement by the referee that "if the claimant and his attorney desire to appeal the case, they win have ten days from this date, on paying all costs Incurred before the referee," would seem to cover inadmissible additions to what is required by the general order. West v. McLaughlin Co. (C. C. A., 6th dr.), 20 Am. B. E. 654, 657, 162 Fed. 124. Upon a reference, to ascertain facts designed alone to aid the court In determining whether a bankrupt should be discharged or not, a referee is not required to certify obections made to his rulings upon the testimony. In re Eomine (D. C, W. Va.), 14 Am. B. E. 785, 138 Fed. 837. A referee may not review his own order upon exceptions thereto. In re Greek Mfg. Co. (D. C, Pa.), 21 Am. B. E. Ill, 164 Fed. 211; In re Marks (D. C, Pa.), 22 Am. B. E. 568, 171 Fed. 281. Record. — ^A bankruptcy court will not review a decision of a referee in bankruptcy unless the record to be examined is made up and submitted in the manner provided by section 39 (5) and (9) of the Bankruptcy Act and this rule. Matter of Petersen (D. C, Nev.), 40 An>. B. E. 637, 252 Fed. 846. Filins petition. — This general order imperatively requires the referee to certify the question to the judge, not the next month nor the year following, but forthwith, in order that there may be an early determination of the questions at issue. In re Keenig & Tan Hoogenfuyze (D. C, Tex.), 11 Am. B. B. 617, 127 Fed. 891. The right to file a petition cannot be so exercised as unreasonably and necessarily to delay the distribution of the assets of the bankrupt. In re Grant (D. C, E. I.), 16 Am. B. E. 256, 143 Fed. 661. A referee's decision may be reviewed only by petition therefor under this general order. In re Eussell (D. C, Cal.), 5 Am. B. E. 566, 105 Fed. 501. The efCect of a special district rule, taken in connection with this general order considered, and held, that a decision of a referee may only be reviewed by petition and that such petition must be presented within ten days, the period specified by the rule, or afterward only by allow- ance of a Judge of the district court and that an order once entered is not subject to be reviewed or altered by the referee himself. In re Lesher & Son (D. C, Pa.), 5 Am. B. E. 218, 176 Fed. 650. See also Matter of Wister (D. C, Pa.), 36 Am. B. E. 809. Although no time limit for ^ling a petition for the -review of an order of the referee la fixed by the bankrupt act, or by the general orders, stiU, it seems that such patition should be presented promptly. Thus, a petition presented after eighteen months should be dismissed. In re Chambers, Calder & Co. (Eef., E. I.), 6 Am. B. E. 700. A petition for review under this order may be filed within a reasonable time from the date of the filing of the revised order. Crin v. Woodford (C. C. A., 4th Cir.), 14 Am. B. E. 302, 308, 136 Fed. 34. Such reasonable time may be fixed by a standing rule. In re Foss (D. C, Me.), 17 Am. B. E. 439, 147 Fed. 700. The petition should be filed within twenty days. Matter of Maloney (Sup. 'Ct., D. C), 21 Am. B. E. 502, 37 Wash. L. Eep. 147. Under the rule in the Eastern District of Pennsylvania the petition must be filed in ten days. In re Marks (D. C, Pa.), 22 Am. B. E. 568, 171 Fed. 281. Eleven months after the decision la not within a reasonable time. Matter of Octave Mining Co. (D. C, Ariz.), 32 Am. B. E. 474, 212 Fed. 457. A compliance with a local rule, requiring that petitions for review of orders of referees shall be filed w^ithin ten days from the date of the order sought to be reviewed, is gufflcient. Matter ot Kruse (D. C, la.), 37 Am. B. E. 687, 234 Fed. 470. Where a petitioner to review an order of a referee in bankruptcy filed Its petition by mistake with the clerk Instead of the referee as requird by this gen.-ral order, in the abseucs of a special rule prescribing an express' limitation of time for Initiating proceedings for such review, an application for special leave to file its petition anew is addressed to the discretion of the district court, even though the ten days which it has been customary to allow for making such applications have elapsed. In re Nippon Trading Co. (D. C, Wash.), 25 Am. B. R. 695, 182 Fed. 959. The petition for the review of an order of a referee, required by General Order 27, Is the foundation of authority and cannot be dispensed with. When the petition is filed the referee is bound to certify ; without it there is no authority to' review. Matter of Avoca SUk Co. (D. C Pa.), 39 Am. B. E. 391, 240 Fed. 607. An appeal may be taken to the circuit court of appeals ■ frmn the decision of the judge where the amount of the claim Is more than $500. Clendeninj v. Kat'lBank (Sup. Ct., N. D.), 11 Am. B. E. 245, 251. See § 25-a. Other cases citing this order. — ^In re Howard (D. C, Cal.), 4 Am. B. R. 69, .100' Fed. 630; Mueller v. Nugent, 7 Am. B. R. 224, 229, 184 U. S. 1; In re Arnett (D. C, Tenn.), 7 Am. B. R. 522, 113 Fed. 770; In re Hawley (D. C, Iowa), 8 Am. B. R. 629, 116 Fed. 429; In re Heebner (D. C, Pa.), 13 Am. B. R. 256, 132 Fed. 1003; In re Fisher & Co. (D. C, N. J.), 14 Am. B. R. 366, 135 Fed. 323; Bank v. Johnson (C. C. A., 4th Cir.), 16 Am. B. B. 206, 143 Fed. 463; Matter of Cohn (Ref., Cal.), 18 Am. B. R. 786, 793; Knapp & Spencer Co. v. Drew (C. C. A., 8tli Cir.), 30 Am. B. R. 355, 359, 160 Fed. 413; In re Peacock (D. C, N. Car.), 34 Am. B. R. 159, 163, 178 Fed. 851; Matter of Monsarrat (D. C, Hawaii), 35 Am. B. R. 815, 817; Matter of Katz (D. C, N. J.), 33 Am. B. R. 422. 316 Fed. 949; Matter of Arti-Stain Company (D. C, Mass.), 33 Am. B. R. 643, 216 Fed. 942; Peek v. Richter (C. C. A., 8th Cir.), 33 Am. B. R. 11, 217 Fed. 880; Matter of Humphreys (D. C. N. Car.), 34 Am. B. R. 655, 221 Fed. 907; Matter of Lacey & Company (Supp. Ct., D. C), 43 Wash. L. Rep. 434, 35 Am. B. R. 331; Matter of laert (D. C, Cal.), 35 Am. B. R. 431; Matter of Goldman Bros. (D. C, Pa.), 39 Am. B. R. 58, 341 Fed. 385; Matter of Capital Security Co. (D. C, Tenn.), 41 Am. B. R. 184, 251 Fed. 927. XXVIII. REDEMPTION OF PROPERTY AND COMPOUNDING OF CLAIMS. Whenever it may be deemed for the henefit of the estate of a bankrupt to redeem and discharge any mortgage or other pledge, or deposit or lien, upon any property, real or personal, or to relieve said property from any con- ditional contract, and to tender performance of the conditions thereof, or to- XXIX. j Payment of Moneys Deposited. 12i5 compound and settle any detts or other claims due or belonging to the estate of the bankrupt, the trustee, or the bankrupt, or any creditor who has proved his debt, may file his petition therefor; and thereupon the court shall appoint a suitable time and place for the hearing thereof, notice of which shall be given as the court shall direct, so that all creditors and other persons inter- ested may appear and show cause, if any they have, why an order should not be passed by the court upon the petition authorizing such act on the part of the trustee. [General Order XVII, 1867, with slight changes. This general order is an inheritance merely. Its value, save in so far as it refers to § 27, is doubted.] Cross-references: To the law: As to redemption of property from liens, none, save by' analogy, §§ 2 (7), 67; As to compounding of claims, §§ 27, 58-a (7), and by analogy, § 26. To the General Orders: XXXIII. The determining question is what action is for the best interests of the estate; that is,l the creditors as a whole. In re Kearney Bros. (D. C, N. Y.), 25 Am. B. K. 757, 760, 184 Fed. 190. Under this order not only the bankrupt, but his trustee, or any creditor who has proven his claim may, whenever it is for the benefit of the estate, redeem any mortgage or lien upon the bankrupt's property. In re Hasie (D. C, Tex.), 30 Am. B. B. 83, 88. Other cases citing this order. — In re Mammoth Pine Lumber Co. (D. C. Ark.), 8 Am. B. R. 651, 668, 109 Fed. 308; In re Wolf & Levy (D. C, Tenn.), 10 Am. B. E. 153, 122 Fed. 127; In re Grainger To the General OrdCTs: X, XII, XVII, XIX, XXVI, XXIX. To the Supplementary Forms; Nos. 166, 169. Fees of cleric. — The clerk has no authority to demand more than the statutory fees In re Langslow, Fowler & Co. (D. C, N. Y.), 1 Am. B. R. 258, 98 Fed. 809. 1220 Genekal Oedees. [XXXV. Compensation of referee; special allowance.— The performance by the referee of the ordinary gerviees following a general reference, or of services following a special reference having to do with any of the matters which the Supreme Court have said may he referred to the referee by the judge, authorizes the referee to receive only the compensation specially provided in the statute. But the performance of other services, not included within the above category, if referred to the referee, or to any other person as a special master, pursuant to the general power of the' court to call to its aid the services of a special master, would justify the allow- ance of special fees therefor. Matter of Langford, Felts & Myers (D. C., Cal.), 35 Am. B R 519, 225 Fed. 311. No construction of this general order will authorize any allowance to the referee except for the specific purposes named. In re Mammoth Pine Lumber Co. ( D. C., Ark. ) , 8 Am. U. K. 651, 664, 109 Fed. 308. It seems that the Supreme Court did not intend that additional compensation should be given to a referee. In re Wileox (D. C, Mich.), 19 Am. B. R. 241, 243, 156 Fed. 685. Additional compensation not allowed where business of bankrupt is continued by trustee. Bray v. Johnson (C. C. A., 4th Cir.), 21 Am. B. B. 383, 166 Fed. 57. A special allowance to a referee for services performed under the statute cannot be made, even with the consent of attorneys. The fees fixed by statute are in full compensation. Dressel v. North State Lumber Co. (D. C., N. Oar.) , 9 Am. B. R. 541, 547, 119 Fed. 531. The referee has no authority for charging a per diem in any case whatsoever. In re Pierce (D. C, Colo.), 6 Am. B. E. 747, 111 Fed. 516. Compensation of referees; when no assets. — This General Order and section 40 of the act recognizes no other compensation to the referee, where there are no assets than the preliminary fee deposited with the clerk. In re Langslow, Fowler & Co. (D. C, N. Y.), 1 Am. B. E. 258, 98 Fed. 869. Compensation of referee; services away from home. — A referee cannot charge extra for his own service merely because they are performed away from home. Matter of Elk Valley Coal Mining Co. (D. C, Ky.), 32 Am. B. R. 197, 213 Fed. 383. Advance payment of referee's fees. — Without an order of the judge the referee cannot demand an advance payment of his fees by the trustee. Matter of Borger (Sup. Ct., D. C), 43 Wash. L. Rep. 436, 35 Am. B. R. 238. Allowance for expenses. — The provision " in regard to expenses of mailing notices, traveling ■and perpetuating testimony,' refers to actual expenses; but a referee may make a genersQ charge, which should be a uniform charge in all cases, for blanks that may be used in each case, for notices to creditors, and orders which may be entered by him. He may make a similar charge for clerk hire where the business is such that clerks are needed." In re Keree (D. C, Colo.), 6 Am. B. R. 747, 111 Fed. 516. It is obvious that the cost of the publication of the necessary notices upon application for discharge, and for stationery, are expenses properly chargeable to the bankrupt or his estate, under this general order, but the referee is not entitled to charge for his own services. In re Dixon (D. 0., Cal.), 8 Am. B. E. 145, 114 Fed. 675. , Maintenance of an office, clerk hire in preparing and mailing notices to creditors and attendance to correspondence are " expenses necessarily incurred in the performance of their duties under the Act," and hence, upon being " allowed by special order of the judge," as provided in general orders 26 and 35, the referee should be entitled to reimbursement therefor. Matter of McCubbin Co. (Sup. Ct., D. C), 33 Am. B. R. 277; Matter of Lacey & Co. (Sup. Ct., D: C), 43 Wash. L. Eep. 434, 35 Am, B. E. 231. , While a referee is entitled to his own traveling expenses, he should not be allowed such expenses of his clerk, unless special circumstances are shown. Matter of Elk Valley Coal Mining Co. (D. C, Ky.), 32 Am. B. R. 197, 213 Fed. 383. A charge for mailing notices based upon a " fee " of 25 cents for each notice will not be allowed. The utmost that can be allowed for this service is the amount of proper " expenses " Incurred in mailing the notices as contemplated by the general order, and such amount must be shown by proper proof. Matter of Elk Valley Coal Iflning Co. (D. C, Ky.), 32 Am. B. R. 197, 213 Fed. 383. A charge of 40 cents for mailing notices of applications for discharge, based upon sections 828 and 840 of the U. S. Eev. Stat, is unauthorized. Matter of Longhney (D. C., Wash.), 34 Am. B. E. 206, 218 Fed. 980. Compensation of trustee. — This order limits the compensation of the trustee and is con- clusive. In re Carolina Cooperage Co. (D. C, N. Car.), 3 Am. B. E. 154, 96 Fed. 920. Addi- tional compensation will not be allowed to a trustee for services in investigating the bank- rupt's disposition of property and the loss of his stock by Are. In re Screws (D. C, Ga.), 17 Am. B. E. 296, 147 Fed. 989. An allowance of $2.50 to the trustee for his services as a lawyer not only violates this general order, but also the bankruptcy act itself. In re Felson (D. C, N. Y.), 15 Am. B. E. 185, 194, 139 Fed. 281. Motion for approval of additional expenses incurred by trustee allowed, such expenses being satisfactorily shown to be "neces- sarily incurred " by the trustee in the performance of his duties. Matter of Hart & Co. (D. C, Hawaii), 17 Am. B. E. 480. The trustee and receiver are allowed to employ attorneys whose compensation is part of the expense of the trusteeship or receivership. An attorney employed by creditors to oppose claims, after the appointment of a trustee, is not entitled to compensation for such XXXVI.] Appeals. 1221 services unless the trustee has improperly refused to make defense. In re Koadarmour (C. C. A. 6th Cir.), 24 Am. B. R. 49, 177 Fed. 379. Application of subdivision 4. — It is manifest that this subdivision relates only to cases in voluntary bankruptcy, and the language shows that there may be such cases in which the petitioning debtor is not required to pay the fees of the clerk, referee and trustee, be- fore or at the time of filing his petition, although he presents a schedule of property in excess of the exemptions allowed by the law of the State of his domicile and surrenders an estate in bankruptcy. Otherwise, it would be futile to provide that " the judge at any time during the pendency of the proceedings in bankruptcy may order those fees to be paid out of the estate." Sellers v. Bell (C. C. A., 5th Cir.), 2 Am. B. E. 529, 554, 94 Fed. 801. Application under pauper's oath. — The application of a party to proceed under the paupef 's oath will be denied and his petition will be dismissed unless within a reasonable time the deposit is made, where it appears that he is earning $30 per month. In re Collier (D. C, Tenn.), 1 Am. B. R. 182, 93 Fed. 191. A referee is unauthorized to require the bankrupt to pay the statutory fee before he is given his discharge, where such bankrupt has filed an affidavit of inability. In re Plimpton (D. C, Vt.), 4 Am. B. R. 614, 103 Fed. 775. Preparation and mailing of notices. — It was intended by this general order that the clerk should prepare or supervise the printing, mailing, etc., of the notices required, and did not intend that the field of the clerk should be invaded, and the prerogatives of his oflSce usurped, and an arm of the court impaired by uncertainty in the discharge of such fxmctiona of his office, by persons preparing the copies of the petition for discharge and notice, and require the clerk to certify and mail them. Matter of Longhney (D. C, Wash.), 34 Am. B. R. 206, 218 Fed. 980. Special or extra compensation is not allowable to the clerk of the court, under this gen- eral order, for mailing notices to creditors ; his clerical services in such matters — so far at least as no extraordinary expense is involved — being covered by the filing fee of ten doUars provided by section. 52, subd. a of the Bankruptcy Act. Matter of Iwanga (D. C, Hawaii), 36 Am. B. R. 285. Other cases citing this order.— In re Thoth (D. C, Ohio), 4 Am. B. R. 780, 104 Fed. 291; In re Epstein (D. C, Ark.), 6 Am. B. R. 191, 109 Fed. 878; In re Scot (Ref., Mass.), 7 Am. B. R. 35; In re Mammoth Pine Lumber Co. (D. C, Ark.), 8 Am. B. R. 651, 116 Fed. 731; In re Daniels (D. C, Iowa), 12 Am. B. R. 446, 130 Fed. 597; In re Dunn Hardware & Furniture Co. (D. C, N. Car.), 14 Am. B. R. 186, 134 Fed. 997; Matter of Motridge (0. C. A., 9th Cir.), 44 Am. B. R. 175, 258 Fed. 229. XXXVI. APPEALS. 1. Appeals from a court of bankruptcy to a circuit court of appeals, or to the Supreme Court of a territory, shall be allowed by a judge of the court appealed from or of the court appealed to, and shall be regulated, except as otherwise provided in the act, by the rules governing appeals in equity in courts of the United States. 2. Appeals under the act to the Supreme Court of the United States from a circuit court of appeals, or from the Supreme 'Court of a territory, or from the Supreme Court of the District of Columbia, or from any court of bank- ruptcy whatever, shall be taken within thirty days after the judgment or decree, and shall be allowed by a judge of the court appealed from, or by a justice of the Supreme Court of the United States. 3. In every case in which either party is entitled by the act to take an appeal to the Supreme Court of the United States, the court from which the appeal lies shall, at or before the time of entering its judgment or decree, make and file a finding of the facts, an/1 its conclusions of law thereon, stated separately ; and the record transmitted to the Supreme Court of the United States on such an appeal shall consist only of the pleadings, the judgment or decree, the find- ing of facts, and the conclusions of law. [This general order is practically new. Compare, however. General Order XXVI, 1867.] Cross-references: To the law: §§ 24, 25. To the General Orders: By analogy, XXVII. To the Official Forms: None. To the Supplementary Forms: Nos. 146, 147, 148, 149, and, by analogy, Nos. 150, 159. Subdivision 2; effect of. — The requirement, that appeals to the Supreme Court shall be taken within thirty davs Rfter iudgment, has the same effect as if written in the statute. Conboy v. Nat. Bank, 203 U. S. 147, 16 Am. B. R. 775. Where an appeal to this court was 1222 General Oedees. [XXXVIL taken within thirty days and the circuit court of appeals made the findings of fact and conclusions of law part of the record by an order made within thirty days, directing the same to be filed nunc pro tunc, as of the date of the judgment, there is a sufficient compli- ance with the provisions of said general order. Coder, Trustee, etc., v. Arts (Sup. Ct. ), 22 Am. B. R. 1, 213 U. S. 223. Writ of error; time within which to bring.— The statutes (R. S., § 1008, and the Act of March 3, 1891, cli. 517, §§ 4, 5), fix the time within which writs of error may be brought to this court, and a motion to dismiss a writ of error upon the ground that it was not sued out in time, because General Order No. 36 allows only thirty days for appeals, and upon the further ground that no bill of exceptions was filed will be denied. G-rant Shoe Co. V. Laird Co. (Sup. Ct), 21 Am. B. R. 484, 212 U. S. 445. Intention of subdivision 3. — It is not the intention of this subdivision that a circuit court of appeals shall, of its own motion, ascertain and determine in advance of its decision upon an appeal in bankruptcy, whether a question is raised upon which a party is entitled to allowance of an appeal to the Supreme Court. If such right is claimed, it should be called to attention in advance of decision, with requests for findings in the event of adverse ruling upon the question alleged to be appealable. ICnapp v. Milwaukee Trust Co. (C. C. A., 7th Cir.), 20 Am. B. R. 671, 673, 162 Fed. 675, affg. 19 Am. B. R. 491. See also Cruci- ble Steel Co. V. Holt (C. C. A., 6th Cir.), 23 Am. B. R. 302, 174 Fed. 127. Where, before a discharge is issued to the bankrupt, the opposing creditors by petition ask that separate findings of facts and conclusions of law be filed as provided in this gen- eral order, the order granting the discharge must be set aside and the prayer of the petition granted. In re Rauchenplat (D. C, Porto Rico), 9 Am. B. R. 763. Request for findings. — Findings of fact and conclusions of law under General Order in Bankruptcy No. 36, paragraph 3, will not ordinarily be made unless requested, and one who contemplates an appeal to the Supreme Court, if the conclusion of the Circuit Court of Appeals sliall be against him, should make a request for such findings before the decree of the Circuit Court of Appeals is entered. Washington v. Tearney (C. C. A., 4th Cir.), 28 Am. B. R. 633. Record on appeal; contents of: Where the record does not contain the findings of facts, and conclusions of law of the court below, as required by this order, the appeal will be dismissed and the omission cannot be supplied by reference to the opinion of the court below. Chapman v. Bowers, 18 Am. B. R. 844, 207 Fed. 89. While neither the bankruptcy act nor the general orders prescribe the practice to be adopted in proceedings on revisory petitions, the matters of law of which revision is sought should in some manner be clearly presented. Ross v. Stroh ( C. C. A., 3d Cir. ) , 21 Am. B. R. 644, 165 Fed. 628. Aij appeal to the Circuit Court of Appeals from an order or decree denying an adjudica- tion and dismissing an involuntary petition cannot be entered where the record contains none of the testimony, either in form or substance, returned by the referee and passed upon by the district court. Matter of Murphy (C. C. A., 9th Cir.), 36 Am. B. R. 712, 229 Fed. 988. Wliere a trustee in bankruptcy has filed a petition to sell all the stock in trade and other property of the bankrupt, and appellant has intervened to establish the lien of a chattel mortgage on such property to be satisfied out of the proceeds of sale, and the validity of such mortgage has been attacked by the trustee, it is a controversy arising in a bankruptcy pro- ceeding and the procedure upon appeal to the U. S. Supreme Court is the same as in like cases under the Court of Appeals Act of 1891, and no special findings of fact and conclu- sions of law in the circuit court of appeals are required, as General Order No. XXXVI, adopted pursuant to § 25-b of the bankruptcy act, does not apply to such a case. In re Standard Telephone & Elec. Co., 216 U. S. 545, 24 Am. B. R. 761, affg. 20 Am. B. R. 761. Other cases citing this order. — In re Abraham (C. C. A., 5th Cir.), 2 Am. B. R. 266, 292, 93 Fed. 767; First Nat. Bank of Denver v. Klug, 8 Am. B. R. 12, 186 U. S. 204; Ja- quith V. Alden, 9 Am. B. R. 773, 189 U. S. 78; Hiscock v. Varick Bank of N. Y., 18 Am. B. R. 1, 208 U. S. 28; Bacon v. Roberts (C. C. A., 3d Cir.), 17 Am. B. R. 421, 146 Fed. 729; Armstrong v. Fernandez, 19 Am. B. R. 746, 750, 208 U. S. 324; In re Cooper Bros. (D. C, Pa.), 20 Am. B. R. 392, 159 Fed. 956; Duryea Power Co. v. Sternbergh (Sup. Ct., U. S.), 25 Am. B. R. 66, 68, 218 U. S. 299; Hill v. Western Electric Co. (C. C. A., 6th Cir.), 32 Am. B. R. 332, 214 Fed. 243; Matter of Krecun (C. C. A., 7th Cir.), 36 Am. B. E. 172, 229 Fed. 711. XXXVn. GENERAL PROVISIONS. In tlie proceedings In equity, instituted for the purpose of carrying into effect the provisions of the act, or for enforcing the rights and remedies given by it, the rules of equity practice established by the Supreme Court of the United States shall be followed as nearlv as may be. In proceedings at law, instituted for the same purpose, the prnccice anl procedure in cases at law shall be fol- lowed as nearly as may be. But the judge may, by special order in any case, XXXVIII.] FoEMs. 1223 vary the time allowed for return of process, for appearance and pleading, and for taking testimony and publication, and may otherwise modify the rules for the preparation of any particular case so as to facilitate a speedy hearing. [Last half of Greneral Order XXII, 1867, without material change.] Equity practice. — The district court, being a court of equity in bankruptcy matters, is a. court of equity for all purposes in siich matters, and all the principles and rules of equity apply. In re Huddleston (Ref., Ala.), 1 Am. B. II. 572, 574. Under this general order the rules of equity practice "must be followed as near as may be." Ex parte Steele (D. C, Ala.), 20 Am. B. E. 575, 606, 162 Fed. 694. It is well settled that, except in certain specified particulars, proceedings in bankruptcy are of an equitable nature. In re Waugh (C. C. A., 9th Cir.), 13 Am. B. E. 187, 192, 133 Fed. 281. Application of order. — Shulte v. Patterson (C. C. A., 8th Cir.), 77 Am. B. E. 99, 102, 147 Fed. 509; Matter of Fleischer (D. C, N. Y.), 18 Am. B. R. 194, 197, 151 Fed. 81. Under the provisions of this general order, which extends the equity rules of the Supreme Court to " proceedings in equity," failure to file an answer to a petition seeking to ex- punge a claim justifies a decree pro confcsso under Eule 18, carrying the ordinary incidents and consequences of such a decree. In re Docker-Foster Co. (D. C, Pa.), 10 Am. B. R. 584, 123 Fed. 190. Where a petition in involuntary proceedings, in conformity with this general order, stated that the claims of the petitioning creditors were for goods sold and delivered, and that the alleged bankrupts purchased the same within one year from the date of the execu- tion of the petition, and were provable claims, it is unnecessary to state when the several amounts became due, the amount of the securities held nor the manner in which their value was fixed. Matter of Hark Bros. (D. C, Pa.), 14 Am. B. E. 400, 135 Fed. 603. Application of equity roles in bankruptcy proceedings. — This general order does not make the General Equity Rules applicable as rules of court in the performance of the administrative work of the courts of bankruptcy. They may be looked to for analogies but not for rules. International Harvester Co. v. Carlson (C. C. A., 8th Cir.), 33 Am. B. E. 178, 217 Fed 736- Matter of Hughes (C. C. A., 2d Cir.), 44 Am. B. R. 447, 262 Fed. 500. A proceeding for the confirmation of a composition is not one of those to which General Order HI makes .the Supreme Court equity rules applicable, nor is it covered by local rule 23, requiring all appealable dpcisions in equity or admiralty to be supplemented by a "formal decree giving effect thereto." Matter of Brookstone Mfg. Co. (C. C. A., 1st Cir.), 30 Am. B. H. 552, 239 Fed. 697. Summary proceedings. — This general order applies only to equity proceedings, properly so called, and not to summary proceedings by the trustee to compel the bankrupt to turn over money to him. Matter of Cunney (D. C, Mass.), 35 Am. B. E. 617, 225 Fed. 426. Other cases citing this order. — In re Keisler (Eef., Wis.), 2 Am. B. E. 79- In re Strait (Ref., N. Y.), 2 Am. B. E. 308; In re Lipset, Leviton & Co. (Ref., N. Y.), 9 Am B E. 32, 34; In re Glass (D. C, Tenn.), 9 Am. B. R. 391, 399, 119 Fed. 509; In re Williams (D. C, Tenn.), 10 Am. B. R. 538, 513, 123 Fed. 321; In re Henschel (Spe"c. Com., N Y ) 12 Am. B. E. 31; In re Barrett (D. C, Tenn.), 12 Am. B, E. 626, 636, 132 Fed. 362- In re Kenney & Co. (D. C, Ind.), 14 Am. B. R. 611, 615, 136 Fed. 451; Matter of Mclntyre & Co. (C. C. A., 2d Cir.), 24 Am. B. R. 4, 40, 176 Fed. 552; Matter of Pierce, Jr. (D. C Wash) 32 Am. B. R. 06, 210 Fed. 389; Matter of Loughran (C. C. A., 3d Cir.), 33 Am. B. E. 35o! XXXVIII. FORMS. The several forms annexed to these general orders shall be observed and used, with such alterations as may be necessary to suit the circumstances of any particular case. Construction of statute: orders and forms. — Seek the meaning and intent of the law first and follow that rather than the order or form, and if the latter are not harmonious each with the other, seek the meaning and intent of the order and follow it rather than the form. In re Soper and Slada (Ref., N. Y.), 1 Am. B. R. 193. Forms; use of. — The forms are not designed to effect any change in the law. They are " forms " and nothing more. Thus, it has been held that the failure of a bankrupt to pre- cisely observe " Schedule B ( 5 ) " in making a claim for exemptions is not fatal. Burke V. Guarantee Title & Trust Co. (C. C. A., 3d Cir.), 14 Am. B. E. 31, 134 Fed. 582. The brackets used in Form No. 1 for debtor's petition, containing the phrase "or has resided or has had his domicile " show that the Supreme Court meant that one or the other of the statements may be used; and they are inserted in the form by way of suggestion of such alterations as may be necessary to suit the circumstances of any particular case. In re Laskaris (Eef., N. Y.), 1 Am. B. R. 480. Other cases citing this order.— In re Gerber (C. C. A., 9th Cir.), 26 Am. B. R. 608, 617; Matter of Lenters (D. C, Pa.), 35 Am. B. E. 3, 22S Fed. 878; Pollack v. Meyer Bros. Drug Co. (C. C. A., 8th Cir.), 36 Am. B. R. 835. OFFICIAL FORMS AS PRBSCRIBEO BY THE SUPREME COURT OF THE UNITED STATES AT THE OCTOBER TERM OF 1898. [1225] OFFICIAL FORMS IN BANKRUPTCY. [N. B. — Oaths required by the act, except upon hearings in court, may be administcrrd by referees and by officers authorized to administer oaths in proceedings before the courts of the United States, or under the laws of the State where the same are to be taken. Bank- rupt Act of 1898, e. 4, § 80.] Farm No. 1. Debtor's petition, 1228. No. 2. Partnership petition, 1242. No. 3. Creditors' petition, 1244. No. 4- Order to show cause upon creditors' petition, 1245. No. 5. Subpoena to alleged bankrupt, 1246. No. . 6. Denial of bankruptcy, 1246. No. 7. Order for jury trial, V2A1. No. 8. Special warrant to marshal, 1248. No. 9. Bond of petitioning creditor, 1249. No. 10. Bond to marshal, 1250. No. 11. Adjudication that debtor is not bankrupt, 1251. No. 12. Adjudication of bankruptcy, 1252. No. IS. Appointment, oath, and report of appraisers, 1252. No. 14- Order of reference, 1254. No. 15. Order of reference in judge's absence, 1255. No. 16.. Referee's oath of office, 1255. No. 17. Bond of referee, 1256. No. 18. Notice of first meeting of creditors, 1257. No. 19. Ldst of debts proved at first meeting, 1258. No. 20. General letter of attorney in fact when creditor is not represented by attorney at law, 1259. No. 21. Special letter of attorney in fact, 1260. No. 22. Appointment of trustee by creditors, 1261. No. 23. Appointment of trustee by referee, 1262. No. 24. Notice to trustee of his appointment, 1262. No. 25. Bond of trustee, 1263. No. 26. Order approving trustee's bond, 1264. No. 27. Order that no trustee be appointed, 1264. No. 28. Order of examination of bankrupt, 1265. No. 29. Examination of bankrupt or witness, 1266. ' No. SO. Summons to witness, 1266. ; No. 31. Proof of unsecured debt, 1267. ,1. For the validity of these forma, see Section Thirty, amte. ' [1227] 1228 Official Foems. [No. L Form No. S2. Proof of secured debt, 1268. No. 33. Proof of debt due corporation, 1269. No. 34. Proof of debt by partnership, 1276. , No. 35. Proof of debt by agent or attorney, 1271. No. 36. Proof of secured debt by agent, 1272. No. 37. Affidavit of lost bill, or note, 1273. No. 38. Order reducing claim, 1274. No. 39, Order expunging claim, 1275. No. Jfi. Idst of claims and dividends to be recorded by referee and by him delivered to trustee, 1275. No. 41. Notice of dividend, 1276. No. 42. Petition and order for sale by auction of real estate, 1277. No. 43. Petition and order for redemption of property from lien, 1278. No. 44- Petition and order for sale subjed to lien, 1279. No. 45. Petition and order for private sale, 1280. No. Jfi. Petition and order for sale of perishable property, 1281. No. 47. Trustee's report of exempted property, 1282. No. 48. Trustee's return of no assets, 1283. No. 49. Account of trustee, 1284. No. 50. Oath to final account of trustee, 1285. No. 51. Order allowing account and discharging trustee, 1286. No. 52. Petition for removal of trustee, 1286. No. 53. Notice of petition for removal of trustee, 1287. No. 54. Order for removal of trustee, 1287. No. 55. Order for choice of new trustee, 1288. No. 56. Certificate by referee to judge, 1289. No. 57. Bankrupt's petition for discharge, 1289. No. 58. Specification of grounds of opposition to bankrupt' s discharge, 1391. No. 59. Discharge of bankrupt, 1291. ^ No. 60. Petition for meeting to consider composition, 1292. No. 61. Application for confirmation of composition, 1293. No. 62. Order confirming composition, 1294. No. 63. Order of distribution on composition, 1295. Form No. 1. Debtor's Petition.' To the Honorable , Judge of the District Court of the United States for the District of : The petition of , of , in the county of , and district and State of , [State occupation], respectfully represents: 8. Consult Sectdona Two, Four, Eighteen, in voluntary proceedings should be drawn and Fifty-nine. See also General Ordcirs amd verified in tripldoate and filed with n, IV, V, VI, VII. Petition' ajid schedules the clerk. No. 1.] Debtor's Petition. 1229 That lie has had his principal place of business [or has resided, or has had his domicile]* for the greater portion of six months next immediately- preceding the filing of this petition at , within said judicial district;* that he owes debts which he is unable to pay in full ; that he is willing to surrender all his property for the benefit of his creditors except such as is exempt by law, and desires to obtain the benefit of the acts of Congress relating to bankruptcy. That the sch^dule® hereto aimexed, marked A, and verified by your petitioner's oath, contains a full and true statement of all his debts, and (so far as it is possible to ascertain) the names and places of residence of his creditors, and such further statements concerning said debts as arp required by the provisions of said acts : That the schedule hereto annexed, marked B, and verified by your peti- tioner's oath, contains an accurate inventory of all his property, both real and personal, and such further statements concerning said property as are re^ quired by the provisions of said acts : Wherefore your petitioner prays that he may be adjudged* by the court to be a bimkrupt^ within the purview of said acts. ., Attorney. United States of America, District of , ss. ,8 I, , the petitioning debtor mentioned »nd described in flie foregoing petition, do hereby make solemn oath that the statements contained therein are true according to the best of niy knowledge, informa- tion, and belief. , Petitioner. Subscribed and sworn to before me this . . . day of , A. D. 19. . . {^Official character. ^ 8. Strike out some or all the words in 7. If partners petition, use Form No. brackets, as the facts may be. 117, post, omitting certain allegations if 4. § 2(1). all join. 5. § 7-a(8). 8. Verification. — See under section eigh- 6. i 18-g. teen, ante. 1230 Official Foems. [No. 1 (A) "Sh Is . "^ fc. 9 m s »&:§ SS^ a> l|| •a 111 •3 ill n ■e z ^"^ ^ 1-1 5 H fe O P -S Hal SB r •o S S S-o S I 6 1 if 3^3 3 ^« § > s: S 5 •g 2*5 "« 3M| No. 1 (A).] Debtoe's Petition. i2ai o OQ ^ ^S S.9 -^1 S S. j3 fg •§■3 •a o if so •0 b p) 1 >i 1^ Ph 1 1 w a i! Ill I" 'si 1^1 OJ in a - 2 3 e Q •3 1 o CQ 5 <1 o o o S o 1. o 1232 Official Forms. [No. 1 (A). ? s * .5 ^ » 1 1 Nature and consideration of the debt, and whether any judgment, bond, bill of exchange, promissory note, etc., and whether contracted as partner or joint con- tractor with any other person; and, if so with whom. Total So ■s . n S| gs II I? •6 i s 13 O a 6 2 •3 bo a CO No. 1 (A).] Debtor's Petition. 1233 EQ 1 ■< V «• SI IP Mi pi Total 8 _ ■§1 1. P s s Ed ■S3 1 8 1 Ph CQ o o o1 5 I B o 1234 Official Foems. [No. 1 (A). «5 IJ * S , P I! i " •25 "5. I- «t4 QQ s ^3 1 § .3 9> . ^ "■SO •g S I all ■a .a |M I d e •° 5 "■•■=11 3-3-3 1 = 8 si" 3 ° s ll Si ■SI ii za 0^ KS t^-o ■3 ^» o fl 03 8 ^ "i ^ fl o * 1— 1 o is t^ ■■SiJ • 2 2 3 ■ Q :| i.'e ffi 3 • 8 ■ ^ 2 " • O ^ 0) ■^ M ~-t^ fl) ^ u ai T3 TS •l-< TS ^ 1 U P ^ fc CQ c a ^ ^ i-^ o o < 11 1 1 K 1 1 s,^ i B a ^ §) 1 fo. 1 (B).] Debtor's Petitioit. 1239 I ^ o s _ o OD CO as u O o S i g s ^ en e o So .2 « ■5 >. 01 5- z pi a l-sl. &i5 Eh '3 > a b m n ..B 3 § ^ -s o o PI OQ 2 a, -s s ^ :^ a « .5 S ^ '- .2 -)i *-■ ff . ^ •2 '° .3 1^ 'H M >> CO ^ % . s u . « C W 2 P- . a -*^ ^ "^^ :j " m ^ ^^ ™ J3 d t2 oj g f« d .2 H o -g 1 1 1240 Official Eosms. [No. 1 (B). SOEEDULE B. (6) 22 Books, papers, deeds, and writings relating to bankrupts business and estate. The following ia a true list of all booka, papers, deeds, and writings relating to my trade, business, dealinga . estate, and effeols, or any part thereof, which, at the date of this petition, are in my possession or under my custody and control, or which are in the poaseaaion or custody of any person in trust for me, or for my use, benefit, or advantage; and also of all others which hare been heretofore, at any time, in my possession, or under my custody or control, and which are now held by the parties whose names are hereinafter set forth, with the reason for their suatody of the same. DMda. Paptn. Petitions, Oath to Schedule B.^ United States of America, District of , ss. : On this day of , A. D, 19 . ., before me personally came , the person mentioned in and who subscribed to the foregoing schedule, and who, being by me first duly sworn, did declare the said schedule to be a statement of all his estate, both real and personal, in accordance with the acts of Congress relating to bankruptcy. lOfficial character.J tS. Consult foot-note to Schedule B(l)'. S3. This oath is perhaps unnecessary, the petition, which refers to the schedules, being wrlfied. If used it should be changed into the form of an affidavit (as is that at the end of the petition itself), to be signed by the affiant, with the proper jurat to be signed by Hie officer administering the oath. No. l.J Debtor's Petition. 1241 I ^ a a ••© "^ £ fl »-* r-t ^ tH (N eO Tl< lO ^c!lC^NC^C^^(Nc!lNc!|«««WWM«Tl E.^.2 5 ft 1.2 o g s a S Eighteen, and Fifty-nine; for time to file denial (answer), see § 18-b, as amended by the act of 1903. See also Mather v. Coe, 1 Am. B. R. 504, 93 Fed. 333. 33. For form of " General Answer," see Form No. 127; for "Answer Alleging More than Twelve Creditors," see Form No. 128; and for other useful forms in involuntary cases, see " Supplementary Forms," post. 34. For pleadings in equity, see Equity Eules generally. 35. The demand for a jury trial is often in a separate paper; see Form No. 126. 36. This order is not used in the southern district of New York. 37. This follows as a, matter of course the timely filing of a denial in the shape of Form No. 6, provided the denial puts at issue either insolvency or the commission of an act of bankruptcy; or, if such an issue is made by an answer and demand of jury trial in the method suggested by Forms Nos. 126 and 127. 38. For practice on jury trials consult Section Nineteen, ante. See also General Order III. For costs in contested adjudi- cations, see General Order XXXIV. 1248 Official Foems. [No. 8. Fonn Ko. 8. Special Wairant to MarshaLs^ In the District Court of the United States for the District of In the Mattee of "■In Bankruptcy. To the marshal of said district or to either of his deputies, greeting : Whereas a petition for adjudication of bankruptcy was, on the .... day of , A. D. 19 , filed against , of the county of and State of , in said district, and said petition is still pending ; and whereas it satisfactorily appears that said has committed an act of bankruptcy {or has neglected or is neglecting, or is about to so neglect his property that it has thereby deteriorated or is thereby deteriorating or is about thereby to deteriorate in value] , you are therefor© authorized and required to seize and take possession of all the estate, real and personal, of said , and of all his deeds, books of account, and papers, and to hold and keep the same safely subject to the further order of the court. Witness the Honorable , judge of the said court, and the seal thereof, at , in said district, on the of , A. D. 19... J seal of ^ I the court J Clerk. EETUEN BY MAESHAI, THEEEOIT. By virtue of the within warrant, I have taken possession of the estate of the within-named , and of all his deeds, books of account, and papers which have come to my knowledge. 39. This form is somewhat of an Inherit- ance from the law of 1867. It is useful in seizures of property authorized by §§ 3-e and 69. It is suggestive when a receiver is appointed under § 2 (3) and given power to take possession of the bankrupt's prop- Marshal [or Deputy Marshal]. erty under § 2(15). See the appropriate Sections of this work; also General Orders III, X, XIX, and Equity Rule XV. The oath at the end of the form may be taken before any of the officers mentioned in § 20. No. 9.] Bond of Petitioning CEEDrroB. 1S49 Fees and Expenses. 1. Service of warrant S. Neceaaary travel, at the rate of six cents a mile each vay , 3. Actual expenses in custody of property and other services, as follows [Here state the particulars.] Marshal [or Deputy Marshal]. District of , A. D. 19 . . . Personally appeared before me the said , and made oath that the above expenses returned by him have been actually incurred and paid by him, and are just and reasonable. • • ....... .^ Referee in Bankruptcy. Form No. 9. Bond of Petitioniag Cieditor.M Know all men by these presents : That we, , as prin- ■cipal, and , as sureties, are held and firmly bound unto , in the full and just sum of dollars, to be paid to the said , executors, administrators, or assigns to which payment, well and truly to be made, we bind ourselves, our heirs, executors, and administra>tors, jointly and severally, by these presents. Signed and sealed this day of , A. D. 19 . . . The condition of this obligation is such that whereas a petition in bank- jTuptcy has been filed in the district court of the United States for the district of against the said , and the said has applied to that court for a warrant to the marshal of said district directing him to seize and hold the property of said , subject to the further orders of said district court: ITow, therefore, if such a warrant shall issue for the seizure of said prop- erty, and if the said shall indemnify the said for such damages as he shall sustain in the event such seizure 40. This bond Beems to conform to the TequirementB of § 69. It can be used also 79 in seizures under { 3-e. Form No. 8. See foot-note to 1250 Official Foems. [Ifo. 10. ehall prove to have been wrongfully obtained, then the above obligation to be void; otherwise to remain in full force and virtue. Sealed and delivered in presence of — : [seal.] [S£AL.] [seal.] Approved this day of • ...... . . ., A. D. 19 . . . > District Judge. Form No. 10. Bond to MaishaMi Know all men by these presents : That we, , as prin- cipal, and , as sureties, are held and firmly bound unto , marshal of the United States for the district of in the full and just sum of dollars, to be paid to the said , his executors, administrators, or assigns, to which pay- ment, well and truly to be made, we bind ourselves, our heirs, executors, and administrators, jointly and severally, by these presents. Signed and sealed this day of , A. D. 19 . . . The condition of this obligation is such that whereas a petition in bank- ruptcy has been filed in the district court of the United .States for the district of , against the said , and the said court iias issued a warrant to the marshal of the United States for said district, directing him to seize and hold property of the said , subject to the further order of the court, and the said property has been seized by said marshal as directed, and the said district court, upon a petition of said , has ordered the said property to be released to him: Now, therefore, if the said property shall be released accordingly to the said , and the said , being adjudged a bankrupt, shall turn over said property or pay the value thereof in money to the trustee, then the above obligation to be void; otherwise to remain in full force and virtue. Sealed and delivered in the presence of — [seal.] [seal.] [seal.] Approved this day of , A. D. 19 . . . District Judge. M. Se« footrnotee to Forms No8. 8 and 9, This bond seems to apply only to § 60. No. 11.] Debtoe Not a Bankeupt. 1261 Fonn No. 11. Adjudication that Debtor is Not Bankrupt.42 In the District Court of the United States for the District of In the Matter of In Bankruptcy. At , in said district, on day of , A. D. 19 ... , before the Honorable , judge of the district of This cause came on to be heard at , in said court, upon the petition of that be adjudged a bankrupt within the true intent and meaning of the acts of Congress relating to bankruptcy, and [h&re state the proceedings, whether there was no opposition, or, if opposed, state what proceedings were had.'\ And thereupon, and upon consideration of the proofs in said cause [and the arguments of counsel thereon, if any], it was found that the facts set forth in said petition were not proved; and it is therefore adjudged that said was not a bankrupt, and that said petition be dismissed, with costs. Witness the Honorable , judge of said court, and the seal thereof, at , in said district, on the day of , A. D. 19... f Seal of 1 I the court. | 42. This form is the converse of Form No. 12. See, generally, Sections Two, Three, Four, Five (if against a partnership). Eighteen, and Fifty-nine; General Orders Clerk. IV, V, VI, VII, XXXIV; and compare Equity Rules LXXXV and LXXXVI. Nu- merous forms in point by analogy will be found in " Supplementary Forms," poat. 1252 Officiax Foems. [No3. 12, 13 Form No. 12. Adjadication of Bankiuptcy.^s In the District Court of the United States for the District of In the Matter of Bankrupt >-In Bankruptcy. At , in said district, on the day of , A. D. 19 . . . , before the Honorable , judge of said court in bankruptcy, the petition of that**' be adjudged a bankrupt, within the true intent and meaning of the acts of Congress relating to bankruptcy, having been heard and duly considered, the said is hereby declared and adjudged bankrupt accordingly. Witness the Honorable , judge of said court, and the seal thereof, at , in said district, on the day of A. D. 19... ( Seal of 1 , ^ the court I Qlgj.jg^ Form K meni" 1254 Official Forms. [Fo. 14. Form No. 14. Order of Reference.*^ In the District Court of the United States for the District of In the Matter of Bankrupt . >■ In Bankruptcy. Whereas , of , in the county of and district aforesaid, on the day of , A. D. 19 . . ., was duly adjudged a bankrupt upon a petition filed in this court by [or, against] him on the day of , A. D. 19. . ., according to the provisions of the acts of Congress relating to bankruptcy. It is thereupon ordered, that said matter be referred to . . . ; , one of the referees in bankruptcy of this court, to take such further pro- ceedings therein as are required by said acts; and that the said shall attend before said referee on the day of at , and thenceforth shall submit to such orders as may be made by said referee or by this court relating to said bankruptcy. Witness the Honorable , judge of the said court, and the seal thereof, at in said district, on the day of , A. D. 19... f Seal of 1 1 the court, f Clerk. 47. This order is discussed in the text. See Sections Eighteen and Tweaty-two. Consult also General Order XII. Nos. 15, 16.] Oedek of Refeeence; Oath of Refbkbe. 1255 Form TSfo. 15. Order of Reference in Judge's Absence.^s In the District Court of the United States for the District of « In the lilATTEB OF ""In Bankruptcy. Whereas on the day of , A. D. 19 ... , a petition was filed to have , of , in the cotmty of and district aforesaid, adjudged a bankrupt according to the provisions of the acts of Congress relating to bankruptcy ; and whereas the judge of said court was absent from said district at the time of filing said petition \_or, in case of involuntary hanJcruptcy, on the next day after the last day on which, pleadings might have been filed, and none have been filed by the bankrupt or any of his creditors] , it is thereupon ordered that the said matter be referred to , one of the referees in bankruptcy of this court, to consider said petition and take such proceedings therein as are required by said acts ; and that the said shall attend before said referee on the day of , A. D. 19 . . , at Witness my hand and the seal of the said court, at , in said district, on the day of , A. D. 19. . . f Seal of 1 > I the court j Clerk. Form Nio. 16. Referee's Oath of Office.^e I, , do solemnly swear that I will administer justice without respect to persons, and do equal right to the poor and to the rich, and that I will faithfully and impartially discharge and perform all the duties incumbent on me as referee in bankruptcy, according to the best of my abilities and understanding, agreeably to the Constitution and laws of the United States. So help me God. Subscribed and sworn to before me,- this day of , A. D. 19... Disirict Judge. 48. See foot-notes to Form No. 12. 49. See Section Thirty-six. This oath can be taken before any oflScer mentioned in i 20. 1256 Official Foems. [No. 17. Form No. 17. Bond of Referee.so Know all men by these presents : That we, of , as principal, and of and of , as sureties, are held and firmly bound to the United States of America in the sum of dollars, lawful money of the United States, to be paid to the said United States, for the payment of which, well and truly to be made, we bind our- selves, our heirs, executors, and administrators, jointly and severally, by these presents. Signed and sealed this day of , A. D. 19 . . . The condition of this obligation is such that whereas the said has been on the day of , A. D, 19 . . . , appointed by the Honorable , judge of the district court of the United States for the district of , a referee in bankruptcy in and for the county of , in said district, under the acts of Congress relating to bankruptcy: Now, therefore, if the said shall well and faiiibfuUy dis- charge and perform all the duties pertaining to the said office of referee in bankruptcy, then this obligation to be void; otherwise to remain in full force and virtue. Signed and sealed in the presence of — [I-S.J [l-s.] [I- s.] Approved this day of , A. D. 19 . . . District Judge. (0. This bond is required by { 50. Now 18.] Notice of Meeting of Cbeditobs. 125T Form Ho. 18. Notice of First Meeting of Creditors.si In the District Court of the United States for the District of In the Mattes of Bankrupt ^ In Bankruptcy. To the creditors of , of , in the county of , and district aforesaid, a bankrupt. Notice is hereby given that on the .... day of , A. D. 19 . . . , the said was duly adjudicated bankrupt ; and that the first meeting of his creditors will be held at in , on the day of , A. D. 19 . . . , at .... o'clock in the noon, at which time the said creditors may attend, prove their claims, appoint ■ a trustee, examine the bankrupt, and transact such other business as may 'properly come before said meeting. Referee in Bankruptcy. ., 19. SI. The use of tliis form is quite uni- ' versal. With some changes it can be adapted to fit all of the notices given by the referee, and not by the clerk. See Forms No. 176, 177, 178, in "Supple- mentary Forms," post. For proofs of mail- ing and of publication, see Forms Nog. 170, 180. For notices given by the olerk in the form of orders to show cause, see Forms Kos. 96, 108, 138. Consult also Section Fifty-eight, generally, and Gieneral Order XXI (a). 1258 Official Foems. PTo. 19. Form Ko. 19. List of Debts Proved at First Meeting.S2 In the District Court of the TJnited States for the District of In thb Matteb of Bankrupt , In Bankruptcy. At , in said district, on the day of , A. D. 19 . . . , before , referee in bankruptcy. The following is a list of creditors who have this day proved their debts : Names of creditore. ReBidence. Debts proved. DoUs. Cts. Referee in Bankruptcy. 52. This form is archaic. It does not fit Sections Thirty-nine and Fifty-seven of this the present law or practice, and is rarely, work. The referees keep a list in their if ever, used. See' General Order XXIV, claim book and transmit dividend lists to which is also practically a dead letter, and the trustee. "No. 20.] Gbnbkal Letter of Attoenet. 1259 Form No. 20. General Letter of Attorney in Fact when Creditor is not Represented by Attorney at Law.n In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy. To I , of , in the county of and State of , do hereby authorize you, or any one of you, to attend the meeting or meetings of creditors of the bankrupt aforesaid at a court of bankruptcy, wherever advertised or directed to be holden, on the day and at the hour appointed and notified by said court in said matter, or at such, other place and time as may be appointed by the court for holding suck meeting or meetings, or at which such, meeting or meetings, or any adjourn- ment or adjournments thereof may be held, and then and there from time to time, and as often as there may be occasion, for me and in my name to vote for or against any proposal or resolution that may be then submitted under the acts of Congress relating to bankruptpy; and in the choice of trustee or trustees of the estate of the said bankrupt, and for me to assent to such appointment of trustee ; and with like powers to attend and vote at any other meeting or meetings of creditors, or sitting or sittings of the court, which may be held therein for any of the purposes aforesaid ; also to accept any composition proposed by said bankrupt in satisfaction of his debts, and to receive payment of dividends and of money due me under any compo- sition, and for any other purpose in my interest whatsoever, with full power of substitution. In witness whereof I have hereunto signed my name and affixed my seal the day of , A. D. 19. . . ., [l. s.] Signed, sealed, and delivered in presence of — J Acknowledged before me, this day of , A. D. 19 . . . [^Official character,^ 58. See $$ 1 (9), 57, and General Orders attorney in law representing a creditor is IV and XXI (5). Consult also discussion a bankruptcy proceeding, in Section Fifij^ of the necessity of power of attorney to an eix, ante. See foot-note to Form No. Bl. 1260 Official Foems. [No. 21. Form No. 21. Special Letter of Attoiney in Fact.M Ik the Matteb of Bankrupt In Bankruptcy. To I hereby authorize you, or any one of you, to attend the meeting of cred- itors in this matter, advertised or directed to be holden at , on the day of , before , or any adjournment thereof, and then and there for and in name to vote for or against any proposal or resolution that may be lawfully made or passed- at such meeting or adjourned meeting, and in the choice of trustee or trustees of the estate of the said bankrupt. , [l. s.] In witness whereof I have hereunto signed my name and affixed my seal the day of , A. D. 19 . . . Signed, sealed, and delivered in presence of — Acknowledged before me, this 54. In view of the provisions of subd. 5 of General Order XXI, it vpould seem desir- able to add to this form and Form No. 30 preceding, when made on behalf of a part- nership or corporation, an affidavit of the person executing the power of attorney . day of , A. D. 19... > [^Official character.] that he is a member of the partnership, or a duly authorized officer of the corporation on whose behalf he acts. See foot-note to Form No. 20. This form is for use when the attorney is not given general authority. It is rarely used. No. 22.] Appointment ov Trustee by Cbeditobb. 1261 Fonn No. 22. Appointment of Trustee by Creditor8.B5 In the District Court of the United States for the District of In the Mattee ob- Bankrupt . >■ In Bankruptcy. At , in said district, on the day of , A. D. 19 . . . , before , referee in bankruptcy. This being the day appointed by the court for the first meeting of cred- itors in the above bankruptcy, and of which due notice has been given in the' Ihere insert the names of the newspapers in which notice was pvhlished], we, whose names are hereunder written, being the majority in number and in amount of claims of the creditors of the said bankrupt, whose claims have been allowed, and who are present at this meeting, do hereby appoint , of , in the county of and State of , to be the trustee. . of the said bankrupt's estate and effects. Siguaturee of creditors. liesidence of the eame. Amount of debt. Dolls. CtB. Ordered, that the above appointment of trustee . . be, and the same is hereby approved.*^ Referee in Bankruptcy. 56. Cross-references: For who appoints trustees, §§ 2 (17), 44; for qualifications of trustees, § 45; for meetings of creditors, § 55; for who may vote at such meetings, § 56; for notices of mec^tings of creditors, § 58-a-b. See ' also General Orders XIII, -XIV, XV. 56. This form is also somewhat archaic. It IB not often used. Beferees having the right to approve or disapprove the choice of creditors (G neral Order XIII), a brief order of approval and fixing the bond, but without requiring the signatures of cred- itors, is suggested as a substitute. See Form No. 160. For order dispensing with the appointment of trustee (G«neral Order XV), see Form No. 27 and compare Form No. 77. 1262 Official Foems. [N'os. 23, 24. Form No. 23. Appointment of Trustee by Referee.ST In the District Court of the United States for the District of In the Mattee of Bankrupt yin Bankruptcy. At , in said district, on the day of , A. D. 19 , . .^, before , referee in bankruptcy. This being the day appointed by the court for the first meeting of creditors under the said bankruptcy, and of which due notice has been given in ther > [here insert the names of the newspapers in which notice was published] I, the undersigned referee of the said court in bankruptcy, sat at the time and place above mentioned, pursuant to such notice, to take the proof of debts and for the choice of trustee under the said bankruptcy ; aiid I do hereby certify that the creditors whose claims had been allowed and were present, or duly represented, failed to make choice of a trustee of said bankrupt's estate, and therefore I do hereby appoint , of , in the county of and State of , as trustee of the same. Referee in Bankruptcy. Form No. 24. Notice to Tiustee of His Appointment's In the District Court of the United States for the District of . j-srs- •— — ^ In the Mattee of Bankrupt >■ In Bankruptcy. To , of , in the coimty of , and district aforesaid : 67. See foot-note to Form No. 32. Form 58. This form seems to be required by No. 160 can easily be adapted to fit the General Order XVI. It is, however, little facts outlined above. _. used. As to the trustee's bond, see § 50. No. 25.] BoN-D OF Trustee. 1263 I hereby notify you tliat you were duly appointed trustee [or one of the trustees] of the estate of the above-named bankrupt at the first meeting of the creditors, on the day of , A. D, 19 . . . and I have approved said appointment. The penal sum of your bond as such trustee has been fixed at dollars. You are required to notify me forthwith of your acceptance or rejection of the trust. Dated at the day of , A. D. 19. . . Referee in Bankruptcy. Form No. 25. Bond of Tiustee.59 Know all men by these presents : That we, , of ........ as principal, and , of , and , of , as sureties, are held and firmly bound unto the United States of America in the sum of dollars, in lawful money of the United States, to be paid to the said United States, for which payment, well and truly to be made, we bind ourselves and our heirs, executors, and adminis- trators, jointly and severally, by these presents. Signed and sealed this day of , A. D. 19 . . . The condition of this obligation is such, that whereas the above-named was, on the day of , A. D. 19 ... , appointed trustee in the case pending in bankruptcy in said court, wherein is the bankrupt, and he, the said , has accepted said trust with all the duties and obligations pertaining there- unto: Now, therefore, if the said , trustee as aforesaid, shall obey such orders as said court may make in relation to said trust, and shall faithfully and truly account for all the moneys, assets, and effects of the estate of said bankrupt which shall come into his hands and possession, and shall in all respects faithfully perform all his official duties as said trustee, then this obligation to be void ; otherwise, to remain in full force and virtue. Signed and sealed in presence of — : , [seal.] , [seal.] , [seal.] 59. The court must " receive " evidence of done by adding an affidavit as to proper^ ihe actual value of the securities. Where to the bond. Thus see Form No. 167, pottm they are natural persona this can best be 1264 Official Foems, [Nos. 26, 27. F»nn "So. 26. Older AppTOTinx Tnutee's Bond.W At a court of bankruptcy, held in and for the District of ....... at , this day of , 19. . , Before , referee in bankruptcy, in the District Oonzt of the United States for the .^ . . . . District of Iir THE Mattxb of Bankrupt <■ In Bankrupt^. It appearing to the court , of , and in said. district, has been duly appointed trustee of the estate of the abbve-named bankrupt, and has given a bond with sureties for the faithful performance of his official duties, in the amount fixed by the creditors [or by order of the court] , to wit, in the sum of dollars, it is ordered that the said bond be, and the same is hereby, approved. > Referee in Bankruptcy. Form Ko. 27. Order that No Tmstee be Appointed.^ I& the District Court of the United States for the District of . .:ry.» In the Matteb of Bankrupt <■ In Bankruptcy. It appearing that the schedule of the bankrupt discloses no assets, and that no creditor has appeared at the first meeting, and that the appointment 60. This order is not so phrased as to 61. See General Order XV and foot-notei. give certain important facta when recorded Consult also Sections Six and Fortj-seven. in a record office (f Sl-e). Hence Form If this form is used it may, perhaps, be Ka 168, po$t. See also Section* Twenty- supplemented as to the bankrupt's exempt OM and Fifty «f thia work. property by Form Ka 109. No. 28.] Obdbb fob Examination of Bankbupt. 1265 of a trustee of the bankrupt's estate is not now desirable, it is hereby ordered that, until further order of the court, no trustee be appointed and no other meeting of the creditors be called. Referee in Bankruptcy. Form Ko. 28. Order for Ezaimiuition of Baiikrupt.<2 In the District Court of the United States for the District of In the Matteb of Bankrupt >■ In Bankruptcy. At , on the day of , A. D. 19 . . . Upon the application of , trustee of said bankrupt [^or creditor of said bankrupt], it is ordered that said bankrupt attend before , one of the referees in bankruptcy of this court, at on the day of , at o'clock in the noon, to submit to examination under the acts of Congress relating to bank- ruptcy, and that a copy of this order be delivered to him, the said bankrupt, forthwith. Referee in Bankruptcy. 62. See Sections Seven and Twentj-one, also Sectipn Twelve. Compare General Order XII (1). This form is rarely used; the bankrupt appears without a formal 80 order and is examined at the first meeting of creditors or adjournments thereof. Where the testimony of one not the bank- rupt is desired Form No. 30 is used. 1266 Officiai Toems. [Nob. 29, 30. Form No. 29. Kxamination of Bankrupt or Witness, as In the District Court of the United States for the District of In the Mattek of Bankrupt . >. In Bankruptcy. At , in said district, on the day of , A. D. 19 . . , before , one of the referees in bankruptcy of said court, J of , in the county of , and State of being duly sworn and examined at the time and place above mentioned, upon his oath says: IHere insert substance of examination of party.] Referee in Bankruptcy. Form No. 30. Summons to Witness."* To : Whereas , of , m the county of , and State of , has been duly adjudged bankrupt, and the proceed- ing in bankruptcy is pending in the district court of the United States for the district of These are to require you, to whom this summons is directed, personally to be and appear before , one of the referees in bank- ruptcy of the said court, at . .' , on the .... day of , at . . . o'clock in the noon, then and there to be examined in relation to said bankruptcy. Witness the Honorable , judge of said court, and the seal thereof at , this day of , A. D. 19 . . . Clerk. 63. This is archaic. The bamkrupt or ■ In Bankruptc7. On this day of , A. D, 19 . . . , before me came , of , in the county of and State of , and makes oath, and says that he did, on , the day of , A. D. 19 ... , personally servo , of , in the county of and State of , with a true copy of the summons hereto annexed, by delivering the same to him; and he further makes oath and says that he is not interested in the proceeding in bankruptcy named in said summons. Subscribed and sworn to before me, this 19^... day of , A. D. Form No. 31. Proof of Unsecured Debtss In the District Court of the United States for the . District of IiT THE Mattee of Bankrupt >■ In Bankrupto]r. At , in said district of , on the day of , A. D. 19 ... , came , , of , in the county of , in said district of , and made oath, and 65. Consult Section Fifty-seven. See also General Order XXI. If this form does not fit the latter special clauses must usually be added. Thus (1) that no note is held to or judgment entered on the debt, and (2) concerning the average due date on an account maturing at different times, and ( 3 ) if on open account, when such 1268 Official Fobms, [No. 32. says that , the person hy \_or against] whom a peti- tion for adjudication of bankruptcy has been filed, was at and before the filing of said petition, and still is, justly and truly indebted to said d*eponent in the sum of dollars ; that the consideration of said debt is as follows : that no part of said debt has been paid [except ; ]; that there are no set-offs or counterclaims to the same [except • •••••]; and that deponent has not, nor has any person by his order, or to his knowl- edge or belief, for his use, had or received any manner of security for said debt whatever. J Creditor. Subscribed and sworn to before me, this day of , A. D, 19... 66 J {Official character.] Form ITo. 32. Proof of Secured Debt.*' In the District Court of the United States for the District of Iw THE Matter of Bankrupt . In Bankruptcy. At , in said district of , on the day of , A. D. 19. .,., came , of , in the county of , in said district of , and made oath, and says that account became or will become due, and 66. This can be sworn to before persons (4) if by a corporation (see Form No. 33) "authorized to administer oaths in pro- ,whj the claim is not verified by its treas- ceedings before the courts of the United urer, and(5) if the claim has been assigned States, or under the laws of the State after the bankruptcy, certain other allega- where the same are to be taken." See § 20. tions as to the assignment. For these spe- 67. See foot-notes to S'orm 31. cktl clauses see Form No, 170. No. 33.] Peoof of Debt Due Cobpoeatioh. 1269' , the person by \_or against] whom a petition for adjudi- cation of bankruptcy .has been filed, was at and before the filing of said petition, and still is, justly and truly indebted to said deponent, in the sum of dollars ; that the consideration of said debt is as follows ; that no part of said debt has been paid [except ] ; that there are no set-offs or counterclaims to the same [except ] ; and that the only securities held by this deponent for said debt are the following: > Creditor. Subscribed and sworn to before me, this day of , A. D. 19... lOfficial character,] Form No. 33. Pioof of Debt Due CoTporatioii.es In the District Court of the United States for the District of . . .:• , Iir THE Mattee of Bankrupt >- In Bankruptcy. At , in said district of , on the day of .., A. D. 19 ... , came , of , in the county of , and State of , and made oath, and says that he is of the , a corporation incorporated by and under the laws of the State of , and carrying on business at , in the county of and State of , and that he is duly authorized to make 68. See foot-notce to Form 31. Am. B. E. 215, — Fed. — . When proof Proof by corporation should be made by is not made by the treasurer insert the treasurer. May be made through its agent following clause : " That the reason this or attorney when sufficient reason is shown proof is not made by the treasurer is that why it is- not- made by treasurer, or if it . . . etc. [stating reason], and that has none, by the officer whose duties most deponent is an officer of such corporation nearly correspond to those of treasurer as whose duties most nearly correspond to provided by General Order No. XXI. Mat- those of treasurer." ter at Reboulin Fils Co. (D. C, N. J.), 19 1270 Official Foems. [No. 34. this proof, and says that the said , the person by [or against] whom a petition for adjudication of bankruptcy has been filed, was at and before the filing of the said petition, and still is justly and truly indebted to said corporation in the sum of ; dollars ; that the' con- sideration of said debt is as follows :..... 5 that no part of said debt has been paid [except ] ; that there are no set-oflFs or counterclaims to the same [except ] ; and that said corporation has not, nor has any person by its order, or to the knowledge or belief of said deponeut, for its use, had or received any manner of security for said debt whatever. of said Corporation. Subscribed and sworn to before me, this day of , A. D. 19... [^Official character.] Porm No. 34. Ptoof of Debt by Partneisliip.es In the District Court of the United States for the District of In the MiTTEB OF ► In Bankruptcy. Bankrupt . At , in said district of , on the day of A. D. 19 ... , came , of , in the county of , in said district of , and made oath, and says that he is one of the firm of , consisting of himself and , of , in the county of and State of ; that the said , the person by [or against] whom a peti- tion for adjudication of bankruptcy has been filed, was at and before the filing of said petition, and still is, justly and truly indebted to this deponent's said firm in the sum of dollars ; that the consideration of said 68. See foot-notes to Form No. 31. No. 35.] Peoob" of Debt by Agent ok Attoeney. 1271 debt is as follows : that no part of said debt has been paid [except ] ; that there are no set-offs or counterclaims to the same [except J ; and this deponent has not, nor has his said firm, nor has any person by their order, or to this deponent's knowledge or belief, for their nse, had or received any manner of security for said debt whatever. Creditor, Subscribed and sworn to before me, this day of , A. D. 19... > [Official character.] Form No. 35. Proof of Debt by Agent oi Attorney.TO In the District Court of the United States for the District of In the JVIattee of Bankrupt In Bankruptcy. At , in said district of , on the day of , A. D. 19 ... , came , of , in the county of , and State of , attorney [or authorized agent] of , in the county of , and State of , and made oath and says that , the person by [or against] whom a petition for adjudication of bankruptcy has been filed, was at and before the filing of said petition, and still. is, justly and truly indebted to the said , in the sum of dollars ; that the consideration of said debt i« as follows : •■ • • > that no part of said debt has been paid [except ■ • ]; and that this deponent has not, nor has any person by his order, or to this deponent's knowledge or belief, for his use had tr received any manner of 70. See foot-noteB to Form No. 31. 1272 Offictat, Forms. [No. 36. secxirity for said debt whatever. And this deponent further says, that this and that he is duly authorized by his principal to make this affidavit, and that it is within his knowledge that the aforesaid debt was incurred as and for the consideration above stated, and that such debt, to the best of his knowledge and belief, still remains unpaid and unsatisfied. Subscribed and sworn to before me, this day of , A. D. 19.... > '■ > [^Official character.] IV>nn Ho. 36. Proof of Secured Debt by Agent.Ti In the District Court of the United States for the District of Ih the Mattes of Bankrupt ..In Bankruptcy. At , in said district of , . , on the day of , A. D. 19 ... , came . , of , in the county of , and State of , attorney ' [or authorized agent] of ^ in the county of , and State of , and made oath, and says that , the person by [or against] whom a petition for adjudication of bankruptcy has been filed, was, at and before the filing of said petition, and still is, justly and truly indebted to the said in the sum of dollars ; that the consideration of said debt is as follows : that no part of said debt has been paid [except that there are no set-offs or counterclaims to the same [except . ■ J; • i; 71. Bee foot-notes to Form Ko. 31. No. 37.J Affidavit of Lost Bill oe Note. 1273 and that the only securities held by said for said debt are the following 5 and this deponent further says that this deposition cannot be made by the claimant in person because and that he is duly authorized by his principal to make this deposition, and that it is within his knowledge that the aforesaid debt was incurred as and for the consideration above stated. Subscribed and sworn to before me, this day of , A. D. 19... [Official character.] Form ITo. 37. AiEdavit of Lost Bill, or Note.Tz In the District Court of the United States for the Distript of . . . . , In the Mattee of ^ In Bankniptcy. Bankrupt On this day of , A. D. 19 ... , at , came , of , in the county of , and State of , and makes oath and says that the bill of exchange [^or note] , the particulars whereof are underwritten, has been lost under the following circumstances, to wit, and that he, this deponent, has not been able to find the same; and this deponent further says that he has not, nor has the said , or any person or persons to their use, to this deponent's knowledge or belief, negotiated the said bill {^or note], nor in any manner parted with or assigned the legal or beneficial interest therein, or any part thereof ; and that he, this deponent, is the person now legally and beneficially interested in the same. 72. See foot-notes to Form No. 31. 1274 Official Forms. [Ko. 38. Bill or note above referred to. Date. Drawer or maker. Acceptor. 3um. Subscribed and sworn to before me, this day of , A. D. 19... \_Official character. 1 Porm No. 38. Order Reducing Claim.TS In the District Court of the United States for the District of IW THE MaTTEE of Bankrupt . " In Bankruptcy. At , in said district, on the day of , A. D. 19 . . . Upon the evidence ''* submitted to this court upon the claim of against said estate [and, if the fact he. so, upon hearing counsel thereon], it is ordered, that the amount of said claim be reduced from the sum of , as set forth in the affidavit in proof of claim filed by said creditor in said case, to the sum of , and that the latter-named sum be entered upon the books of the trustee as the true sum upon which a dividend shall be computed [i/ with interest, with interest thereon from the day of , A. D. 19... J. Referee in Bankruptcy. 78. See, generally, Section Fifty-seven, ante. Read also $ 2(2), and General Order XXI (6). 74. For forms for petition and notice on an application to reduce or expunge, see Forms No». 171 and 172, post. ' Nos. 39, 40. J List of Claims and Dividends. 1275 Form No. 39. Order Expunging Claim.7B In the District Court of the United States for the District of In the Mattee of Bankrupt ,. In Bankruptcy. At , in said district, on the day of , A. D. 19 . . . Upon the evidence submitted to the court upon the claim of against said estate [and, if the fact he so, upon hearing counsel thereon], it is ordered that stfid claim be disallowed iand expunged from the list of claims upon the trustee's record in said case. Referee in Bankruptcy. Form No. 40. Liat of Claims and Dividends to be Recorded by Referee and by him Delivered to Trusteeje In the District Court of the United States for the District of In the Matter of Bankrupt „ In Bankruptcy. At . , in said district, on the day of , A. D. 19 . 75. See foot-note to Form No. 38. 76. This form fits into § 39-a(l).. As a rule, however, dividend sheets are prepared by the trustee from the files and record- book of the referee. The practice here is somewhat archaic. See Forms Nos. 166 and 168 for use of a part of the form in con- nection with an order declaring a dividend and ordering it paid and the practice there outlined. Consult also, generally. Sections Thirty-nine and Sixty-five,, ante. 1276 Official Foems. [No. 41. A list of debts proved and claimed under the hankruptcy of with dividend at the rate of per cent this day declared thereon hy , a referee in bankruptcy. No. Creditors. (To bo placed alphabetically, and the names of all the parties to the proof to be carefully set forth.] Sum proved. Dividend. DoUara. Cents. DoUara. Centa. Referee in Bankruptcy. Form No. 41. Notice of Divideiid.77 In the District Court of the United States for the District of .... In the Mattee of Bankrupt 'In Bankruptcy. At , on the day of , A. D. 19 . , To Creditor of , bankrupt : I hereby inform you that you may, on application at my oflSce, , on the day of , or on any day thereafter, between the hours of , receive a warrant for the dividend due to you out of the above estate. If you cannot personally attend, the warrant will be delivered to your order on your filling up and signing the subjoined letter. Trustee. 77. This form is an inheritance from the law of 1S6T. It IB rarely used. Consult, generally, Sections Thirty-nine and Fifty- seven, and for the notice now required, Sec-, tion Fifty-eight. See also { 65 and General Order XXIX. For notice of final meeting, see Form No. 176, which, by the substitution of the divi- dend clause in Form No. 177, can be adapted to a notice for the declaration and payment of a dividend. Compare also Forms Nos. 162, 164, 165. Kd. 42.] Sale by AtrcTioir or Real Estate. 1277 Creditor's Letter to Trustee. To , Trustee in bankruptcy of the estate of , bankrupt : Please deliver to the warrant for dividend payable out of the said estate to me. Creditor. Form Ko. 42. Petition and Order for Sale by Auction of Beal Estate.Ts In the District Court of the United States for the District of .... In the Mattee of >. In Bankruptcy. Bankrupt Biespectfully repreisenta- . , , trustee of the estate of said bankrupt, that it would be for the benefit of said estate that a certain portion of the real estate of said bankrupt, to wit: [Zfere describe it and its estimated valued diould be sold by auction, in lots or parcels, and upon terms and conditions, as follows : Wherefore he prays that he may be authorized to make sale by auction of said. real, estate., as aforesaid. Dated this day of , A. D. 19 . . . Trustee. The foregoing petition having been duly filed, and having come on for a hearing before me, of which hearing ten days' notice was given by mail to creditors of said bankrupt, now, after due hearing, no adverse interest being represented thereat \^or after hearing in favor of said 78. Bead Section Seventy, ante, and con- public sale of bankrupt's assets, Official suit General Order XVIII on sales. See Form No. 43 should be followed, which pre- also for notice § 58-a (4) and the sale clause scribes a petition by the trustee to the ref- in Form No. 177, when inserted, as there eree asking leave to sell the property at explained, in Form No. 176. public sale. Notice of such petition is given It is also suggested that an adaptation of to creditors and on the return thereof the this form to the framework of Forms Nos. referee if he sees fit, directs a sale which 190 and 191, or if after notice, to Forms is then carried on by the trustee without Nos. 190 and 193, will be more in accord further notice. In re Nevada-Utah Mines with modern methods and the practice out- & Smelters Corporation (D. C, N. Y.), 28 lined in the law and the general orders. Am. B. R. 409, affd. (C. C. A., ad Cir.), 29 Use of form. — In order to bring about a Am. B. E. 754. 1278 Official Foems. [No. 43. petition and in opposition thereto] , it is ordered that the said trustee be authorized to sell the portion of the bankrupt's real estate specified in the foregoing petition, by auction, keeping an accurate account of each lot or parcel sold and the price received therefor and to whom sold ; which said account he shall file at once with the referee. Witness my hand this day of , A. D. 19 . . . Referee in Bankruptcy. Form No. 43. Petition and Order for Redemption of Property from Lien.TO In the District Court of the United States for the District of In the Mattek of Bankrupt > In Bankruptcy. Eespectfully represents , trustee of the estate of said bankrupt, that a certain portion of said bankrupt's estate, to wit: \_Here describe the estate or property and its estimated valuel is subject to a mortgage [describe the mortgage'], or to a conditional contract {^describing if], or to a lien [describe the origin and nature of the lien]^ [or if the property be personal property, has been pledged or deposited and is subject to a lien] for [describe the nature of the lien], and that it would be for the benefit of the estate that said property should .be redeemed and discharged from the lien thereon. Wherefore he prays that he may be empowered to pay out of the assets of said estate in his hands the sum of , being the amount of said lien, in order to redeem said property therefrom. Dated this day of , A. D. 19 . . . » Trustee. The foregoing petition having been duly filed and having come on for a hearing before me, of which hearing ten days' notice was given by mail to creditors of said bankrupt, now, after due hearing, no adverse interest being 79. The redemption of property from liens law of 1867. See, generally. Sections is not common under the present law. This Twenty-seven and Sixty-seven. As to no- form, however, fits into General Order tice, see g 58-a(7). See also foot-note to XXVIII, which is an inheritance from the Form No. 42. No. 44.] Sale Subject to Lien. 1279 represented thereat [or after hearing in opposition thereto], it is ordered that the said trustee be authorized to pay out of the assets of the bankrupt's estate specified in the foregoing petition the sum of , being the amount of the lien, in order to redeem the property therefrom. Witness my hand this day of , A. D. 19 . . . Referee in Bankruptcy. Form No. 44. Petition and Order for Sale Subject to Lien.80 In the District Court of the United States for the District of .... In the Matter of Bankrupt >■ In Bankruptcy. Eespectf ully represents , trustee of the estate of said bankrupt, that a certain portion of said bankrupt's estate, to wit: \Here describe the estate or property and its estimated value] is subject to a mortgage {^describe mortcjage'], or to a conditional contract {^descrihe it], or to a lien [^describe the origin and nature of the lien], or [if the property he personal property] has been pledged or deposited and is subject to a lien for [describe the nature of the lien] , and that it would be for the benefit of the said estate that said property should be sold, subject to said mortgage, lien, or other incumbrance. Wherefore he prays that he may be authorized to make sale of said property, subject to the incumbrance thereon. Dated this day of , A. D. 19 . . . Trustee. The foregoing petition having been duly filed and having come on for a hearing before me, of which hearing ten days' notice was given by mail to creditors of said bankrupt, now, after due hearing, no adverse interest being represented thereat \^or after hearing in favor of said petition and in opposition thereto] , it is ordered that the said trustee be authorized to sell the portion of the bankrupt's estate 80. See foot-notes to Forms Nos. 42 and form, see In re Thockmorton (C. C. A., 0ti> 43. Ab to effect of failure to follow this Cir.), 88 Am. B. R. 487. 1280 OrMoiAi, FoEMs. [No. 45. specified in the foregoing petition, by auction [^or, at private sale] , keeping an accurate account of the property sold and the price received therefor and to whom sold ; which said account he shall file at once with the referee. Witness my hand this day of , A. D. 19 . . . Referee in Bankruptcy. Form No. 45. Petition and Order for Private Sale.si In the District Court of the United States for the District of .... — In the Matteb of Bankrupt y In Bankruptcy. Respectfully representa , duly appointed trustee of the estate of the aforesaid bankrupt. That for the following reasons, to wit, it is desirable and for the best interest of the estate to sell at private sale a certain portion of the said estate, to wit : Wherefore he prays that he may be authorized to sell the said property at private sale. Dated this day of , A. D. 19 . . . Trustee. The foregoing petition having been duly filed and having come on for a hearing before me, of which hearing ten days' notice was given by mail to creditors of said bankrupt, now, after due hearing, no adverse interest being represented thereat l_or after hearing in favor of said petition and in opposition thereto] , it is ordered that the said trustee be authorized to sell the portion of the bankrupt's estate specified in the foregoing petition, at private sale, keeping an accurate account of each 81. See sections of the statute and Sections of this work, referred to in the foot- notes to Forms Nos. 43, 43, and 44. See also General Order XVIII (3). No. 46.] Sale or Pbeishable Peopektt. 1281 article sold and the price received therefor and to whom sold; which said account he shall file at once with the referee. Witness my hand this day of , A. D. 19 . . . Referee in Bankruptcy. Form TSo. 46. Petition and Order for Sale of Perishable Property .82 In the District Court of the United iStates for the District of .... Ik thb Mattee of Bankrupt In Bankruptcy. EespectfuUy represents the said bankrupt, [_or, a creditor, or the receiver, or the trustee of the said bankrupt's estate]. That a part of the said estate, to wit, now in , is perishable, and that there will be loss if the same is not .sold immediately. Wherefore he prays the court to order that the same be sold immediately as aforesaid. Dated this day of , A. D. 19 . . . The foregoing petition having been duly filed and having come on for a hearing before me, of which hearing ten days' notice was given by mail to the creditors of the said bankrupt, \^or without notice to the creditors], now, after due hearing, no adverse interest being represented thereat, \_or after hearing in favor of said petition and in opposition thereto] I find that the facts are as above stated, and that the same is required in the interest of the estate, and it is therefore ordered that the same be sold forthwith and the proceeds thereof deposited in court. Witness my hand this day of , A. D. 19 . . . Referee in Bankruptcy. 82. See foot-notes to Forms Nos. 43, 43, Seventy, ante, and General Order 44, and 45, and, as to sales of perishable XVIII(3). ^operty generally. Sections Fiffy-eight and 81 1S8S Opficial Forms. [No. 47. Form ITo. 47. Trustee's Report of Exempted Piopeity.ss In the District Court of the United States for the District of In the Mattee of Bankrupt •■ In Bankruptcy. At , on the day of , 19 . . . The following is a schedule of property designated and set apart to be retained by the bankrupt aforesaid, as his own property, under the provisions of the acts of Congress relating to bankruptcy. General head. Particular deacxiption. Value. llfiUtary uniform* anna, and equipments. PnpertF exempted by State lawa(2) Dolls. Cta. Trustee. 83. See, generally. Sections Six, Seven, ' and Forty-seven, ante. CJonsult also }{ 8(11) and 70-b of the statute. This iorin fits into General Order XVII, but should be verified and specify the State statute under which the exemptions are set apart. For other useful forms on exemptions, see Nos. 77, 78, 79 and SO. No. 48.J Rbtuen of No Assets- 1283 Form Ko. 48. Trustee'8 Return of No A88ets.84 In the District Court of the United States for the Distrist of . . Iw THB Matter of Bankrupt . ,.In Bankruptcy. At , in said district, on the day of ....,..., A. D. 19 .. . On the day aforesaid, before me comes , of , in the county of and State of , and makes oath and says that he, as trustee of the estate and effects of the above-named bankrupt , neither received nor paid any moneys on account of the estate. Subscribed alid sworn to before me at , this day of ......... A. Ut i. «7 . • . Referee in Bankruptcy.'' 84. Consult, generally, Section Forty- seven; also General Order XVII. See also, for the other forms for trustees' reports. Forma Noa. 165 and 167. 85. This return should be signed by the trustee and verified, but not necessarily b» fore the referee; see { SO. 1284 Official FonMs. [No. 49. m e> izi 1 S a Cl a. H H a ,« -v kH o a H e 3 «/3 09 O -1- CD.- ^ a ti « .2 o ,J5 -4J -QJ Hi ^ . (u ' s ^ Si? tn is CO .5 02 "is n I '^9 " o a =8 CI e 5 o « fe o! td - 2 ^ to -^ M .S rt O a.-s « " * *-• -*^ to 03 ^5 OJ m « S o £. S'« 2 Ho. 50,J Oath to Tinal Account. 1285 Form No. 50. Oath to Final Account of Xrustee.sT In the District Court of the United States for the District of ....>. In the Mattes of Bankrupt ,- In Bankruptcy. On this day of , A. D. 19 . . . , before me come , of , in the county of and State of , and makes oath, and says that he was, on the day of , A. D. 19 . . . , appointed trustee of the estate and effects of the above>-named bankrupt, and that as such trustee he has conducted the settlement of the said estate. That the account hereto annexed, containing sheets of paper, the first sheet whereof is marked with the letter [reference may here also he made to any prior account filed hy said trustee] is true, and such account contains entries of every sum of money received by said trustee on account of the estate and effects of the above-named bankrupt , and that the payments purporting in such account to have been made by said trustee have been so made by him. And he asks to be allowed for said payments and for commission and expenses as charged in said accounts. Trustee. •Subscribed and sworn to before me, at , in said district of , this day of , A. D. 19 . . . [Official character.} 87. This form seems hardly necessary, save when used as suggested in the foot-note to Form No. 49. - See the practice outlined in Forms Kos. 162 and. 163. 1286 Official Foems. [ifos. 51, 52. Porm No. 51. Older Allowing Account ss and Discharging Trustee. In the District Court of the United States for the District of In the Mattee of Bankrupt , In Bankruptcy. The foregoing account having been presented for allowance, and having been examined and found correct, it is ordered that the same be allowed, and that the said trustee be discharged of his trust. Referee in Bankruptcy. Form No. 52. Petition for Removal of Trustee.89 In the District Court of the United States for the District of .... In the Mattee of Bankrupt >■ In Bankruptcy. To the Honorable , Judge of the District Court of the District of : The petition of , one of the creditors of said bankrupt, respectfully represents that it is for the interest of the estate of said bankrupt that , heretofore appointed trustee of said bankrupt's estate, should be removed from his trust, for the causes following, to wit : \_Here set forth the particular cause or causes for which such removal is requested.l M. When the practice outlined in Forms 89. This form fits into General Order* No8. 167 and 168 is followed, this fornj will XIII and XVII. Trustees being rarely re- Bot be used. It is to the same effect as a moved it is not important. See §§ 2(17). dause in Form No. 164. See Section Fortv- 44 and 46. • ■even and the foot-notes to Forms Nos. 49 and SO. Nos. 53> 54.] Eemovai. of Teustek. 1287 Wherefore pray that notice may be served upon said ......... trustee as aforesaid, to show cause, at such time as may he £xed by the court, why an order should not be made removing him from said trust. Form No. 53. Notice of Petition for Removal of Trustee.so In the District Court of the United States for the District of In the Mattee of Bankrupt ► la Bankruptcy. At To ., on the day of , A. D. 19. Trustee of the estate of , bankrupt: You are hereby notified to appear before this court, at on Ae day of , A. D. 19 . . . , at ... o'clock ... m., to show cause (if any you have) why you should not be removed from your trust as trustee as aforesaid, according to the prayer of the petition of one of the creditors of said bankrupt, filed in this court on the day o^ , A. D. 19. . ., in which it is alleged [here insert the allegation of the petition]. Cleric. Form No. 54. Order for Removal of Trustee.si In the District Court of the United States for the District of Iw THE Mattes of Bankrupt - In Baiikrupt«7. Whereas ^ of , did on the day of , A. D. 19. . ., present his petition to this court, praying that foT 90. See foot-note to Form No. 58. 91. See foot-note to Form No. 53, 1288 Official Fobms. [No. 55. the reasons therein set forth, , the trustee of the estate of said , bankrupt, might be removed : Now, therefore, upon reading the said petition of the said and the evidence submitted therewith, and upon hearing counsel on behalf of said petitioner and counsel for the trustee, and upon the evi- dence submitted on behalf of said trustee. It is ordered that the said be removed from the trust as trustee of the estate of said bankrupt, and that the costs of the said petitioner incidental to said petition be paid by said trustee lor, out of the estate of the said , subject to prior charges] . Witness the Honorable , judge of the said court, and the seal thereof, at , in said district, on the day of , A. D. 19 . . . I the tourt. \ Clerk. Form No. 55. Order for Choice of New Trustee.sz In the District Court of the United States for the District of .... Ijst the Matter of Bankrupt >■ In Bankruptcy. At , on the day of , A. D. 19 . . . Whereas by reason of the removal [or the death or resignation] of , heretofore appointed trustee of the estate of said bankrupt, a, vacancy exists in the offtce of said trustee, It is ordered that a meeting of the creditors of said bankrupt be held at , in , in said district, on the day of , A. D. 19. . ., for the choice of a new trustee of said estate. And it is further ordered that notice be given to said creditors of the time, place, and purpose of said meeting, by letter to each, to be deposited in the mail at least ten days before that day. Referee in Bankruptcy. 92. See foot-note to Form No. 52. Noa, 56, 67.] Petition fob Dischabob. 1289 Form No. 56. Certificate by Referee to Judge.»3 In the District Court of the United States for the District of . ••..•• IW THE MaTTEE of Bankrupt y In Bankruptcy. I, , one of the referees of said court in bankruptcy, do hereby certify that in the course of the proceedings in said cause before me the following question arose pertinent to the said proceedings: {^Here state the question, a summary of the evidence relating thereto, and the finding and order of the referee thereon.] And the said question is certified to the judge for his opinion thereon. Dated at , the day of , A. D. 19 . . . Referee in Bankruptcy. Form No. 57. Bankrupt's Petition for Discharge.^ In the Matter of Bankrupt >lii Bankruptcy. To the Honorable , Judge of the District Court of the United States for the District of : , of , in the county of and State of , in said district, respectfully represents that on the day of 93. This form is hardly sufficient for the reviews, see Forms Nos. 97, 104, 109, 145, practice under the present law. Now the 158, 166, 169, iu "Supplementary Forms," referee rarely certifies questions to the post. See also §§ 2(10),.39-a(5) and Gen-^ judge for decision. It suggests, however, eral Order XXVII. On reviews, consult the certificate on review. For certificates Section Thirty-nine, ante. for referees in various matters, including 94. This form and the " Order of Kotioe 1290 Officiai, Foems, [No. 57. , last past, he was duly adjudged bankrupt under the acts of Congress relating to bankruptcy ; that he has duly surrendered all his property and rights of property, and has fully complied with all the requirements of flaid acts and of the orders of the court touching his bankrupcty. Wherefore he prays that he may be decreed by the court to have, a full discharge from all debts provable against his estate under said bankrupt acts, except such debts as are excepted by law from such discharge. Dated this day of , A. D. 19 . . . BcmhrupL Order of Notice Thereon, Katrict of , ss. : " On this day of , A. D. 19 . . . , on reading the foregoing petition, it is — Ordered by the court, that a hearing be had upon the same on the day of , A. D. 19 , before said court, at , in said district, at . . . o'clock in the noon ; and that notice thereof be published in , a newspaper printed in said district, and that all known creditors and other persons in interest may appear at the said time and place and show cause, if any they have, why the prayer of the said petitioner should not be granted. And it is further ordered by the court, that the clerk shall send by mail to all known creditors copies of said petition and this order, addressed to them at their places of residence as stated. Witness the Honorable ., judge of the said court,- and the seal thereof, at , in said district, on the day of , A. D. 19 . . . f Seal of 1 • • • • • ••} I the court j Clerk. hereby depose, on oath, that the foregoing order was published in the on the following ...... days, viz. : On the day of and on the day of , in tEe year 19 . . . District of Therein " following it has caused much con- eight, ante. See also suggested " Order to fusion. The petition itself is within the Show Cause," heing Form No. 126. For law (see also General Order XXXI), and other forms in discharge proceedings, see if verified by the bankrupt may be used. Forms Nos. 105, 106, 107, 108, 109, 110, But the order, at least in so far as it re- 111, 113 and 113 in " Supplementary quires the clerk to send to the creditors Forms," post. Consult also §§ 17, 38-a (4); topiea of the petition, is clearly wronj^, and 58-a (2)-b. Seej generally. Sections Fourteen and Fifty- Nos. 58, 59.] DiscHABGE OF Bankeupt. 1291 ' ,19... Personally appeared , and made oath that the fore- going statement hj him subscribed is true. Before me, , [^Official character.] I hereby certify that I have on this day of , A, D. 19 . . ., sent by mail copies of the above order, as therein directed. J Clerk. Form Ho. S8. Speeification of Grounds of Opposition to Banktupt's Di3dtarK«.w> In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy. , pf , in the county of and State of , a party interested in the estate of said , bankrupt, do hereby oppose the granting to him of a discharge from his debts, and for the grounds of such opposition do file the following specifica- tion: {Here specify the grounds of opposition.} Creditor. Form ITo. 59. ^ Discharge of BankruptM District Court of the United S'tates, District of Whereas, of in said district, has been duly adjudged a bankrupt, under the acts of Congress relating to bankruptcy, and appears to have conformed to all the requirements of law in that behalf, it 96. This form should have a verification. 96. This difiTers from the discharge certifi- 8ee, for another form, Form No. Ill, post. eate under the law of 1867. The use of For grounds of objection to discharge and , this form js universal. , For effect, consult the practice, consult Section Fourteen, ante. Section .Fourteen, ante. See also General Order XXXII. 1292 Official Foems. [No. 60, is therefore ordered by this court that said be discharged from all debts and claims which are made provable by said acts against his estate, and which existed on the day of , A. D. 19 . . . , on which day the petition for adjudication was filed ...... him ; excepting such debts as are by law excepted from the operation of a discharge in bankruptcy. Witness the Honorable , judge of said district court, and the seal thereof this day of , A. D. 19 . . . f Steal of ] ^ tba court j Clerk. Ponn No. 60. Petition for Meeting to Consider Composition.sT IMstrict Court of the United States for the District of. In the Mattee of >- In Bankruptcy. Bankrupt To the Honorable , Judge of the District Court of the United iStates for the District of : The above-named bankrupt respectfully represent that a composition of per cent, upon all unsecured debts, not entitled to a priority in satisfaction of debts has been proposed by to creditors, as provided by the acts of Congress relating to bankruptcy, and verily believe that the said composition will be accepted by a majority in number and in value of creditors whose claims are allowed. Wherefore, he pray that a meeting of creditors may be duly called to act upon said proposal for a composition, according to the provisions of said acts and the rules of court. Bankrupt. 97. This form is never used, as oflFer an,1 acceptances are filed and implication made at once to confirm. See Section Twelve, ante. No. 61.] CONFIEMATION OF CoMPOSITIOlT. 1293 Form No. 61. Application for Confinnation of Compositioii.88 In the District Court of the United States for the District of . . .— . . .^ In the Matteb of Bankrupt In Bankruptcy. To the Honorable , Judge of the District Court of the United States for the District of : At , in said district, on the day of , A. D. 19 . . . , now comes , tjie above-named bankrupt, and respectfully represents to the court that, after he had been examined in open court \_or at a meeting of his creditors] and' had filed in court a schedule of his property and a list of his creditors, as required by law, he offered terms of composition to his creditors, which terms have been accepted in writing by a majority in number of all creditors whose claims have been allowed, which number represents a majority in amount of such claims; that the consideration to be paid by the bankrupt to his creditors, the money necessary to pay all debts which have priority, and the costs of the proceedings, amounting in all to the sum of dollars, has been deposited, subject to the order of the judge, in the National Bank, of , a designated depository of money in bankruptcy cases. Wherefore the said respectfully asks that the said composition may be confirmed by the court. Bankrupt. 98. This form, when verified by the bank- 94, 95, 96, 97, 98, 99, 100, 101, 102 and nipt, is sufficient to bring a proposed com- 103 for a complete practice on composition, position before the court. Consult Section See also § S8-a(2) and General Order Twelve, generally. See alao Fomu Nos. XXXII. 1294 O^piciAL, roBMs. [No. .62. Form No. 62. Order Confirming Composition.ss In the District Court of the United States for the District of In the Mattee of ^lu Bankruptcy. Bankrupt An application for the confirmation of the composition offered by the bankrupt having been filed in court, and it appearing that the composition has been accepted by a majority in number of creditors whose claims have been allowed and of such allowed claims; and the consideration and the money required by law to be deposited, having been deposited as ordered, in such place as was designated by the judge of said court, and subject to his order; and it also appearing that it is for the best interest of the creditors; and that the bankrupt has not been guilty of any of the acts or failed to perform any of the duties which would be a bar to his discharge, and that the offer and its acceptance are in good faith and have not been made or procured by any means, promises, or acts contrary to the acts of Congress relating to bankruptcy: It is therefore hereby ordered that the said compo- aition be, and it hereby is, confirmed. Witness the Honorable j judge of said court, and the eeal thereof, this ...... day of , A. D. 19 . . . f Steal of I I the court, j Clerk. 99. For another form adapted to a refusal to confirm, and containing also directions for distribution. See Form No. 103, post. Consult Section Twelre, generally. Ifo. 63.] Obdee of Distbibdtion. 1295 I I'M I II.. I. .. „ ■. I ■ — ...» — I I I I. — ■ I — 1^— Eona Bo. 63. Order of Distribution on Composition.ioo United States oir Ameeica : In the District Court of the United States for the District of . .ttj-«^ Ik the Mattee of Bankrupt >■ In Bankruptqr. The composition offered by the above-named bankrupt in this case having been duly confirmed by the judge of said court, it is hereby ordered and decreed that the distribution of the deposit shall be made by the clerk of the court as follows, to wit: 1st, to pay the several claims which have priority; 2d, to pay the costs of proceedings ; 3d, to pay, according to the terms of the composition, the several claims of general creditors which have been allowed, and appear upon a list of allowed claims, on the files in this case which list is made a part of this order. Witness the Honorable , judge of said court, and the seal thereof, this day of , A. D. 19 . . . J Seal of 1 I the court. J CTeri. 100. It is thought this order should be combined with that confirming the compo- sition. See foot-note to Form No. 62, and compare lorm is'o. 103, post, SUPPLEMENTARY FORMS. PREFATORY NOTE. These forms are in no sense oflSicial. Many of them are based upon the practical experience of referees and practitioners. Some of them are taken from Hagar and Alexander's Bankruptcy Forms (2d ed.). No effort has been made to supply forms for every contingency that may arise in a bank- ruptcy proceeding; but simply to afford the profession hints as to the more common steps and, largely, where no forms are now available. The supplementary forms are later indexed In with the official forms and the general orders. For convenience of reference, a list, arranged by the sections of the statute to which they are peculiarly appropriate, is also given. It is suggested that reference be made to Hagar and Alexander's Bank- ruptcy Forms (2d ed.), where forms for every step in bankruptcy proceed- ings will be found. This work will be found of great value in ascertaining the correct practice in all the various bankruptcy proceedings which have been discussed in the text of Collier on Bankruptcy. [1297] SCHEDULE OF FORMS. SECTION TWO. FoBU No. 64. — Petition for Appointment of Eeceiver before Adjudication. No. 65. — Order Appointing .Receiver before Adjudication. No. 66. — Petition for Appointment of Eeceiver after Adjudication and Reference. No. 67. — Order Appointing Receiver after Adjudication and Reference. No. 68. — Petition by Receiver to Continue Business of Bankrupt. No. 69. — Order Authorizing Receiver to Continue Business of Bankru^it. No. 70. — Order that Receiver Complete Contracts. No. 71. — Report of Receiver. '- No. 71a. — Receiver's Account and Oath to Same. / • No. 71b. — Report of Special Master on, Receiver's. iAc,counts. No. 71c. — Notice of Motion to Confirm Report of Special Maater on Receiver's Account. No. 73. — Order Confirming Report of Special Master on Receivers' AccciUnts. No. 73. — Petition for Injunction other than against Suits. No. 74. — Referee's Stay and Show Cause other than against Suits. No. 75.— Referee's Order that Writ of Injunction Issue. No. 76. — Order that Writ of Injunction Issufe, after Referee's Stay and Show Cause SECTION SIX. No. 77. — Order Determining Exemptions when no Trustee Appoiiited. No. 78. — Exceptions to Trustee's Report Setting off Exemptions. No. 79. — Order Determining Exemptions after Trustee's Report. No. 80. — Petition by Bankrupt for Review of Referee's Order on Exemptions. SECTION SEVEN. No. 81. — Petition for Order Amending Schedules. No. 82. — Order to Show Cause on Amendment of Schedules. No. 83. — Order Amending Schedules. No. 84. — Affidavit to Schedule of Creditors, when Bankrupt Cannot be Found. No. 85. — Petition that Bankrupt Turn Over Concealed Assets. No. 86. — Order that Bankrupt Turn Over Concealed Assets. SECTION NINE. No. 87. — Petition for Order, of Protection. No. 88.Tr- Order of , Protection. SECTION ELEVEN, No. 89. — Petition for Stay of Pending Suit. No. 90. — Referee's Stay and Show Cause on Pending Suit. No. 91. — Stipulation that Show Cause b6 Heard by Referee. No. 93. — Decision and Report of Referee on Application for Stay -StipulateU before Him. No. 93. — Order that Writ of Injunction IsWe. SECTION, TWELVE. No. 94. — Offer of Composition. No. 95. — Notice to Creditors. No. 96. — Acceptance of Cqinposition. No. 97. — Referee's Certificate in Composition. No. 98. — Order to Show Cause in Composition. J- No.-99;^i^ Appearance of Objecting Creditor in Composition. No. 100. — Specification of Objection in Composition. ' - [12991 * = ' ■ 1300 Supplementary Forms. FOKM No. 101.— Order of Reference to Special Master In Composition No. 102. — Report of Special Master in Composition. No. 103.— Order Confirming ( or ' Refusing to Confirm) Composition. No. 104. — Pertition to Set Aside Composition. No. 104a. — Order Setting Aside a Composition. SECTION FOURTEEN. Ko. 105. — Petition for Extension of Time to Apply for Discharge. No. 106. — Referee's Certificate on Application for Extension of Time. No. 107. — Order Extending Time to Apply for Discharge. ' No. 108.— Order to Show Cause on Application for Discharge. No. 109. — Referee's Certificate of Conformity on Discharge. No. 110. — Appearance by Objecting Creditor on Discharge. No. 111. — Specification of Objection to Discharge. No. 112. — Exceptions to Specifications. No. 113. — Order of Reference to Special Master on Discharge. No. 114. — Notice of Hearing before Special Master. No. 115. — Report of Special Master on Discharge. No. 116. — Order Denying Discharge, after Reference to Special Master. SECTION EIGHTEEN. No. 117. — Voluntary Petition of Partnership, all Partners npt Joining. No. 118. — Involuntary Petition by Three Creditors. No. 119. — Involuntary Petition by One Creditor Against a Partnership. No. 120. — Petition for Service by Publication. No. 121. — Order Directing Service by Publication. No. 122. — General Appearance in Involuntary Case. No. 123. — Appearance by Intervening Creditor. No. 124. — Petition to Intervene. No. 125. — Order Allowing Intervention. No. 126. — Application for Jury Trial in Involuntary Case. No. 127. — General Answer in Involuntary Case. No. 128. — Answer Alleging More than Twelve Creditors. No. 129. — Demurrer to Petition. No. 130. — Notice of Argument of Demurrer. No. 131. — Order of Reference to Special Master in Involuntary Cases. No. 132. — Notice of Hearing Before Special Master. No. 133. — Notice of Trial in Involuntary Proceeding. No. 134. — Report of Special Master in Involuntary Case. No. 135. — Exceptions to Report of Special Master in Involuntary Case. No. 136. — Order upon Report of Special Master Dismissing Petition. No. 137. — Petition of Petitioning Creditors for Dismissal in Involuntary Case. No. 138. — Order to Show Cause on Petition for Dismissal in Involuntary Case. No. 139. — Order of Dismissal on Petition of Petitioning Creditors. and after Notice in Involuntary Case. No. 140. — Order of Adjudication and Reference. No. 141. — Order Denying Adjudication. No. 142. — Petition to Vacate Adjudication. No. 143. — Notice of Motion to Vacate Adjudication. SECTION NINETEEN. No. 144. — Demand for Jury Trial. SECTION TWENTY-TWO. No. 145. — Referee's Certificate of Disqualification. SECTIONS TWENTY-FOUR AND TWENTY-FIVE. No. 146. — Petition to Revise in Matter of Law. No. 147. — Order' of District Coutt" Allowing Petition for Revision in Matter of Law. No. 148. — Notice to Respondent on Revision. Schedule of Forms. 1301 Form No. 149. — Order of Circuit Court of Appeals on Revision. No. 150. — Citation on Appeal. No. 151. — Notice of Motion for Stay Pending Review. No. 152. — Order Staying Proceedings Pending Petition for Review under § Si^b. * No. 153. — Petition for Writ of Error from Supreme Court to a Circuit Court of Appeals. No. 154. — Writ of Error from Supreme Court to Circuit Court of Appeals. SECTION TWENTY-SEVEN. No. 155. — Petition for Meeting of Creditors to Consider Proposed Coippromiae. No. 156. — Notice to Creditors of Special Meeting. No. 157. — Order Authorizing Compromise. ' SECTION THIRTY-NINE. No. 158. — Petition for Review of Referee's Order. No. 159. — Referee's Certificate on Review. SECTION FORTY-FOUR. No. 160. — Order Approving Appointment of Trustee. SECTION FORTY-SEVEN. No. 161. — Trustee's First Report. No. 163. — Order Declaring and Ordering First Dividend Paid. No. 163. — Trustee's Final Report and Account. No. 164. — Final Order of Distribution. No. 165. — Trustee's Combined Dividend Check and Receipt. SECTION FORTY-EIGHT. No. 166. — Referee's Certificate of Fees Payable. SECTION FIFTY. No. 167. — Bond of Trustee, with Justification of Sureties. No. 168. — Order Approving Trustee's Bond. SECTION FIFTY-ONE. No. 169. — Certificate of Referee as to Falsity of Pauper AfSdavit. SECTION FIFTY-SEVEN. No. 170. — Special Clauses for Proofs of Debt (to Conform to General Order XXI) No. 171. — Petition for Reconsideration and Rejection of Claim. No. 172. — Notice of Petition for Reconsideration and Rejection of Claim. No. 173. — Proof of Secured Debt. No. 174. — Order Expunging or Reducing Proof of Debt. No. 175. — Order Allowing Claim. SECTION FIFTY-EIGHT. No. 176. — Notice of Final Meeting. No. 177. — Special Clauses for Notices to Creditors. No. 178. — Combined Notice to Creditors. No. 179. — Affidavit of Publication of Notice. No. 180. — Affidavit of Mailing of Notice. SECTION SIXTY-TWO. No. 181. — Order Appointing Attorney for Trustee. 1302 STTPPLE'ilElirTAEY-'FbKMS. SECTION SEVENTY. FoBU No. 182. — Petition for Instruction as to Burdensome Property. No. 183. — Order on Petition as to Burdensome Property. Nd. 184. — Order Allowing Trustee to Continue Business. No. 185.-:- Petition for Leave by Trustee to Sue. No. 186. — Order Authorizing Trustee to Sue. No. 187. — Demand in RecIama.tioD. ' - No. 188. — Petition to Reclaim. No. 189. — Answer in Reclamation. No. 190.— Petition for Sale under General Order XVin(2). No. 191.— Order for Sale under General Order XVIII (2). No. 192.— Petition to Confirm Sale. No. 193. — Order Confirming Sale after Notice, to Creditors. No. 194. — Petition for Private Sale by Trustee. No. 195. — Order for Private Sale by Trustee. No. 196. — Petition for Sale Free and Clear of Liens. No. 197. — Notice of Motion for Sale Free and Clear of Liens. No. 198. — Order Directing Sale Free and Clear of Liens. SUPPLEMENTARY FORMS. Ponn No. 64. Petition for Appointment of Receiver Before AdjttdicatioB.1 In the District Court of the United States for the District of In the Matteb of y In Bankruptcy Ko. . . . Bankrupt To the Hon , District Judge : Your petitioners respectfully show: That their petition for the adjudication of , of the of , in said district, to be a bankrupt was filed herein on the day of , 19 . . . ; that such proceeding is still pending, and will not be determined for some time. That, as your petitioners are informed and believe, the estate of said bankrupt consists of and is worth substantially as follows :" That it is absolutely necessary for the preservation of said estate that a receiver be appointed to take charge of the same' , for the following reasons :* 1. See, generally, Section Two, ante. And compare §§ 3-e and 59 with Forms Koa. 8, 9, and 10. 2. Here recite the property, under the two general heads of real and personal, in sufficient detail, showing in whose posses- sion it is and whether there are any adverse claimants. 3. Or a specified pari of it, stating it. 4. Here state the reasons, as, for in- stance, ( 1 ) that " the bankrupt has ab- sconded and abandoned the same;" or (2) that " the bankrupt is selling the same at prices much less than such property is worth, to wit or has threatened or is liable so to do;" or (3) that "thie bank- rupt is neglecting such property and the. same is deteriorating or liable so to do." The petition should state that the appoint- ment of a receiver is absolutely necessary for the preservation of the estate. In re Oakland Lumber Co. (C. C. A. 2d Cir.), 23 Am. B. R. 181, 174 Fed. 634; In re Rosenthal (D. C, N. J.), 16 Am. B. R. 448, 144 Fed. 548. [1303] 1304 SUPPLEMEN-TAEY FoBMS. [No. 64. That your petitioners file herewith the bond of > i^ $ , as required by § 3-e of the bankruptcy act of 1898.^ That® it will be for the best interests of said bankrupt and his creditors that his business, located at No street, in the of J in said district, be continued until the hearing and decision on the petition for adjudication herein, for the following reasons : That no previous application has been made to this or any other court for the order hereinafter asked. Wherefore your petitioners pray that , of , in said district,' be appointed receiver herein, with power to take charge of and hold said estate'^ and to continue said basiness, and for such other order as shall be just and lawful. Dated, , , , , 19 . . . Petitioners.' State of . . . County of City of >ss. I (We), , the petitioner . . mentioned and described in the foregoing petition, do hereby (severally) make solemn oath that the statements of fact therein contained are true, according to the best of my (our) knowledge, information, and belief. Subscribed and sworn to before me, this day of , 19 . 5. For bond, see Form No. 9, changing re- 7. Or a speciaed part of it, stating it. citals to fit this kind of an application and 8. This application can be made by one the condition clause to fit § 3-e. petitioner only. If made by attorney, show 6. Omit this paragraph if the reoeiTer is in affidavit of verification why petition was t« be a custodian only. not made by the creditors. !N"o. 65. j Oedee Appointing Receiveb. 1305 Fonn No. 65. Order Appointing Receiver Before Adjudication.9 In the District Court of the United States for the District of In the Matter of Bankrupt ^ In Bankruptcy Ko. . . . Whereas, a petition for adjudication of hankruptcy was, on the day of , 19 . . . , filed against , of the of , in said district, and said petition is still pending, and whereas it satisfactorily appears that it is absolutely necessary for the preservation of the estate of said bankrupt that a receiver be appointed to take charge of and to hold such estate, and that he continue the business of said bankrupt, and a bond'^" having been filed, as provided in § 3-e of the bankruptcy act of 1898 ; now, on motion of , Esq., attorney for the petitioner. It is ordered: That said bond be and the same hereby is approved, both as to its form, sufficiency, and manner of execution. That , of , in said district, be, and he hereby is, appointed receiver of the estate of said bankrupt^-^ on filing an additional bond as receiver in the sum of $ , with sufficient sureties, to be approved by this court, and that thereupon such receiver take charge of and hold such estate until further order. That^^ said receiver continue the business of such bankrupt, at No. . . street, in the of , in said district, until further order.^* It is further ordered that, should be adjudicated a bankrupt, said receiver continue as such, with the powers herein con- ferred, until the appointment and qualification of a trustee of said bankrupt. 9. This order follows Form No. 64. See 11. Or a specified part of it, stating it. foot-notes to same. 12. Omit this paragraph, if the receiver 10. The order should require the bond of is to be custodian only. the petitioning creditors be filed before the 13. Here add any limitations as, for' in- rcceiver takes possession of the property. stance, concerning the borrowing of money, Matter of Haff ( C. C. A., 2d Cir. ) , 13 Am. the buying of new goods, etc. B. R. 354, 135 Fed. 472, 68 C. C. A. 340. 1306 Sdpplementaey Foems. [No. 66. Witness the Honorable , judge of the said court, and the seal thereof, at the city of , in said district, on the day of ,19... f Seal of 1 , i the court I Qi^^jg^ Ponn ITo. 66. Petition for Appointment of Receiver After Adjudication and Seference.i^ In the District Court of the United States for the District of In the Matter of Bankrupt >■ In Bankruptcy No. To , Esq., Referee in Bankruptcy: Your petitioner respectfully shows : That your petitioner was adjudicated a bankrupt herein on the , day of , 19 . . . , and on the same day this proceeding was duly referred. That your petitioner's estate consists of and is wOrth substantially aa follows:*' That it is absolutely necessary for the preservation of said estate that a receiver be appointed to take charge of the same, for the following reasons :*' That " it will be for the best interests of your petitioner's creditors that his business, located as above stated, be continued until a trustee can be appointed and qualify, for the following reasons : That no previous application has been made to this or any other court for the order hereinafter asked. Wherefore your petitioner prays that a receiver may be appointed herein, 14. This form is chiefly valuable in volun- 16. Here state the reasons, as, for in- tarj cases to protect assets until a trustee stance; ( 1 ) that " a portion of said estate can be appointed. It can, of course, be made ig perishable, to wit and should be by a creditor as well as the bankrupt. See, goij at once;" or (2) that "such prop- generally. Section Two, ante. ^^ty jg without protection from theft or 16. Here recite the property under the ^^^ elements, and not insured." two general heads of real and personal, in jy Q^^^ ^■^^^^ paragraph, if the receiver efficient detail, showing m whose posses- .^ ^^ ^ custodian only, ■ion it IB, and whether there are any ad- Teive claimants. No. 66.J Petition fok Receiver and Refebencb. 1307 with ^* power to continue said business, and for such other order as shall be just and lawful. Dated, , , , , 19. . . } Petitioner. State of ,'^ County of City of >ss. I, , the petitioner mentioned and described in the foregoing petition, do hereby make solemn oath that the statements of fact therein contained are true, according to the best of my knowledge, informa- tion, and belief. Subscribed and sworn to before me, this day of , 19 . Consent of Creditors.io We, the undersigned, creditors of said bankrupt, holding unsecured claims in the amounts set opposite our names, do hereby join in the annexed petition, and do nominate , of the of , in said district, for receiver. Dated, , , , , 19... 18. So also this clause may be omitted. See "Practice" on receiverships in See- 19. While not essential to secure the con- tion Two, ante. sent of creditors, the practice is advised. 1308 '' ' StrPPLEMENTARY FoEMS. [No. 67. Form No. 67. Order Appointing Receiver After Adjudication and Reference.20 At a Court of Bankruptcy, held in and for the District of at , this day of , 19 . . . Present : , Esq., Eef eree. In the Matter of Bankrupt >■ In Bankruptcy No. . . . Application having been made for the appointment of a receiver herein, and that he be given power to continue the business of the bankrupt, and creditors, in a total of $ , having joined in such applica- tion and nominated , to be such receiver ; now, on motion of , Esq., attorney for said It is ordered : That , of the of , in said district, be, and he hereby is, appointed receiver of the estate of said bankrupt, on filing a bond in the sum of $ , with sufficient sureties, to be approved by this court. That ^^ said receiver continue the business of said bankrupt, at !N'o. . . street, in the of , in said district. That ^ said receiver have power also to That said receiver continue as such until the appointment and qualifica- tion of a trustee herein. Referee in Bankruptcy. 20. This form follows Form No. 66. See 22. Use only when the receiver is given foot-notes to same. ■ special powers. 21. Omit this paragraph, if receiver is to he custodian only. No. 68.] Petition to CoNTiiiruE Bfsiness. 1309 Form No. 68. Petition by Receiver to Continue Business of Bankrupt. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 65.) United States District Court, for the District of IiT THE Matter of Banhrupi > In Bankruptcy No. To the District Court of the United States, for the District of : The petition of respectfully shows : That by an order of this court, dated , your petitionei was duly appointed temporary receiver herein, and duly qualified by filing the required bond. That on entering upon his duties herein as receiver, your petitioner has taken possession of the property, assets and effects of the bank rupt, consisting of at street, That he has made a careful investigation of the condition of the bankrupt's business and finds that said bankrupt has on hand a large number of unfilled orders, from which it is estimated the sum of $. . . . . . could be realized upon completion of same. That there is also a large stock of material on hand, consisting of ....... and largely available for the purpose of completing such orders. That this property will be greatly enhanced in value by making it up into manufactured goods ; otherwise, but a small amount will be realized for the creditors in disposing of the property in its present condition. Your petitioner believes it to be to the best interests of this estate that he be permitted to carry on the business. for a limited period and fill these orders. (That at the time the petition in bankruptcy was filed against the said bankrupt, he was endeavoring to effect a settlement with his creditors, and said bankrupt as your petitioner is informed, believes that he can now effect such settlement with his creditors, if the business be continued and the good will preserved.) Wherefore, your petitioner respectfully prays that he be permitted and empowered to continue the business as conducted by the bankrupt for a period 1310 Supplementary Forms, [No. 69. of days, and that in the conduct of the business, he be permitted to incur such expense and enter upon such contracts as in his judgment may seem proper in the premises. Dated , ,19... Petitioner. \_Verification.'\ Form No. 69. Order Authorixing Receiver to Continue Business of Bankrupt. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 66.) At a stated term of the United States District Court held in and for the District of , at the Court House in the City of , on the , day of , 19 . . . Present : Hon , District Judge. In the Matter of Bankrupt . On the annexed petition , temporary receiver herein, verified the day of , 19 . . . , and sufficient reason appearing to me therefor it is hereby Ordered that , as receiver herein, be and he hereby is permitted, authorized and empowered to continue and carry on the business as conducted by the bankrupt herein, for a period of days, from date hereof, and in the conduct of said business, to make such contracts and incur such expense as in his discretion may be necessary. D.J. Nos. 70, 71.] Report of Eeceivee. 1311 Form Ho. 70. Order that Receiver Complete Contracts. (Ha^ar and Alexander's Bankruptcy Forms [2d Ed.], No. 60.) At a stated term of the District Court of the United States for the District of , held at the Court House, City oi , on the day of , 19 . . . Present : Hon , District Judge. In the Mattes of Bankrupt Upon reading and filing the annexed petition of , temporary receiver herein, verified the day of , 19 , . . , and flie annexed consent dated , 19 . . . , and on motion of , attorney for receiver, it is Ordered that said , receiver herein, be and he hereby is permitted and allowed to complete the orders which have come into his posses- sion and which are in the course of manufacture or unfilled, and to dispose of the same when completed, in the regular course of business, for cash, and to make such expenditures in relation thereto as may become necessary. D.J. Form No. 71. Report of Receiver. (Hagar and^lexander's Bankruptcy Forms [2d Ed.], No. 75.) United States District Court, for the District of . . . In the Matter of Bankrupt . "In Bankruptcy No. To the United States District Court, for the District of : I, , do hereby make and file my report and account as temporary receiver of the estate of the above-named bankrupt: 1312 SUPPLEMENTAEY FoEMS. [ISTo. 71. 1. I was appointed temporary receiver herein on the day of , 19 . . . , and required to file a bond in the penalty of ($ ). Having been notified of my appoint- ment, I obtained a certified copy of the order thereof, and filed my bond in the penalty required, and in company with the attorney for the petitioning creditors, I visited the premises of the alleged bankrupt, No street, I there met and interviewed , the secretary of the company, and others. Subsequently other officers of the alleged bankrupt arrived at the premises, and after consultation with attorney, turned over the premises to me. I placed a custodian in charge of the premises and took possession of the books, etc. I found that the bankrupt was a corporation, engaged in the manufacture and sale of I had a long consultation with the officers of the company and with various large creditors, in regard to the advisability of continuing the business, inasmuch as the company had on hand orders to be executed, amounting to about $ , and a large supply of material, I also learned that the company had been accustomed to obtain advances upon all its invoices and that almost all of the accounts due the company had been assigned for these advances. That upwards of $ of book accounts had been so assigned and no estimate could be then formed as to what, if any, equity the alleged bankrupt might have in said accounts. I finally decided that it would be of advantage to the estate to apply for an order authorizing me as receiver to continue the business for a period of twenty days, with leave to apply for a further extension, if desirable. 1 directed the custodian to take an inventory of all the property and sent all of the outstanding insurance policies to the various companies for transfer of interest. 2. On , 19. . ., I obtained an order allowing me to con- tinue the business for a period of days. I called an informal meeting of the creditors to meet at the bankrupt's premises, attended at the said meeting and remained in consultation with the attorneys and creditors for a considerable period. Also had consultations with the attorneys for the bankrupt company and , attorneys for creditor?. I made a careful examination of the stock on hand and of the books, employed an expert accountant and obtained a general idea of the condition of the business. Revised and reduced the payroll as much as possible. I made arrangements with a number of supply houses to sell goods on credit and had various interviews with credit men. [Insert any additional or special allegations as to services, etc.] On ,19..., I obtained the consents of creditors repre- senting a majority in amount of claims, for an order extending my time to run the business for an .additional twenty days, inasmuch as there w^re-a No. Yl.J Eepoet of Receivee. 1313 large number of unfilled orders yet on liand and an order was signed to that effect. Subsequently I verified a petition for the appointment of appraisers and for a sale. On , 19 ... , an informal meeting of creditors was held on the bankrupt's premises, for which I prepared a detailed state- ment of the general condition of the business. That in carrying on the business of the bankrupt company it was necessary for me to devote a large amount of time to the details of the said business and to visit the premises of the bankrupt frequently. That I employed about persons, including the factory, office and sales departments and the weekly payroll averaged $ to $ That at the time I commenced to carry on the business, there were about $ in orders on hand and I subsequently obtained about $ additional orders. That as receiver I purchased merchandise and supplies, amounting to about $ , as shown in Schedule E, hereto annexed. I manufactured, fiUed and shipped all of the orders above mentioned, which were deemed profitable to fill. Annexed hereto is my verified account as receiver, showing receipts and disbursements in the conduct of the busi- ness. The merchandise and plant were sold at public auction pursuant to order of this court. I have received no compensation for my services as receiver and in con- ducting the business of the bankrupt under the order of this court. Wherefore, I respectfully pray that my said account be passed as filed, that suitable allowances be made to , my attorneys, and to the duly appointed appraisers and to myself as receiver, and for carrying on the business of said bankrupt, and that I be discharged as receiver herein. All of which is respectfully submitted. Dated , , , ...., 19... Receiver. 83 1314 Supplementary Fobms. [No. 71a. Form No. 71a. Receiver's Account and Oath to Same. (Hag&r and Alexander's Bankruptcy Forms (2d Ed.), No. 70.); United States District Court, District of : In Bankruptcy. In the Matter OF Bankrupt. No. Account of , Receiver. EECBIPTS. I charge myself as follows: 19 Total receipts DISBUESEMENTS. I credit myself as follows: 19 Total disbursements SUMMARY STATEMENT. Total receipts Total disbursements Balance in hands of Receiver. . $. Dated , 19... Receiver. No. Ylb.J Kept, of Special Master on Eeceivee's AcoorwT. 1316 United States District Court, District of : In. Bankruptcy. In the Matter OF Bankrupt. No. On the day of , 19 ... , before me comes , and makes oath, and says he was on the day of , 19 . . . , appointed receiver of the estate and effects of the above named bankrupt ; that as such receiver he has conducted the adminis- tration of the estate ; that the account hereto annexed, containing sheets of paper, subscribed by him is true, and such account contains entries of every sum of money received by the said receiver on account of the estate of the above named bankrupt, and that the payments purporting in such account to "have been made by such receiver, have been so made by him, and he asks to be allowed for such paymen-ts and expenses as charged in said account. Subscribed and sworn to before me at the City of , in the District of , this day of , 19 . . . [Annex vouchers for all payments.] Form No. 71b. Keport of Special Master on Receiver's Account (Hagar and Alexander's Bankruptcy Forma (2d Ed.), No. 80.) United States District Court, for the .... District of : In the Matter OF Bankrupt. In Bankruptcy No. To the Honorable, Judge of the above named Court: I, , one of the Eef erees in Bankruptcy, to whom, as Special Master, have been referred the report and account of , as receiver herein, together with the application of the said receiver for an allowance in payment of his services and disbursements as such ; and also the application of , for an allowance in payment of his services and disbursements as attorney for the said receiver; and also the application of , and for an allowance for their services as appraisers appointed by the court to appraise the estate of the bankrupt in the hands of the said receiver, due notice 1316 Supplementary Fobms. [^o. 71b. having been given to tbe creditors herein as required by the rule of this court, having been duly attended by the parties and 'creditors and having heard and considered the allegations and proofs, do hereby respectfully report as follows: I vf&s duly attended, upon the hearings herein, by , the said receiver and by , his attorney, by , the duly appointed trustee in bankruptcy herein and certain creditors. No objections were made or filed tO' the account of the said receiver. I have carefully examined the said report and account, together with the vouchers submitted in support thereof, and find the same in all respects correct and true, and recommend that same be passed and allowed as filed. The petition was filed herein on the day of , 19 . . The bankrupt was adjudicated on the day of , 19 . . . The said temporary receiver was duly appointed ., 19. . ., and immediately qualified and took possession of the bankrupt's property and effects was appointed trustee , 19 . . . The bankrupt was engaged in business as a and had places of business, one at , and another at both in the City of The receiver, pursuant to order of the court, sold all the property of the bankrupt found in the stores mentioned at public auction. The gross amount realized from this sale was $ From this the auctioneer deducted, for his services and disbursements,^ the sum of $ , leaving as the net result of the sale, $ This is all that the estate has as yet recovered, although it appears that the receiver and his attorneys believe that further sums may be recoverable. A summary account of the receiver's cash is as follows : He has received in all the sum of $ and he has disbursed in all the sum of $ , leaving a balance in his hands of I think that the receiver discharged all the duties required of him as such in a satisfactory manner. His attorney also acted with diligence in the discharge of the duties required of him. Much of the services shown by the receiver's attorney consists of examination of the bankrupt and others, for the purpose of discovering assets and obtaining evidence upon, which to base proceedings for the recovery of property believed to have been wrongfully taken from the estate. These services seem to have been rendered with diligence. I therefore respectfully recommend that the said receiver make the follow- ing disposition of the funds in his hands: 1. That he shall retain in full compensation by way of commission for his services as receiver as aforesaid, the sum of $ , and in addition thereto, the sum of $ for disbursements, in all the sum of $ ■1*1 2. That he shall pay to , for his services as attorney for the said receiver, the sum of $ , and in addition thereto the sum of $ for his disbursements, making in all the sum of $ 3. That he pay to each of the appraisers herein, the sum of $ in full compensation for services as such, making in all $ 4. That he shall pay to the undersigned, Special Master, in full com- pensation for his services and disbursements in this proceeding, the sum of No. Tlc.j Notice of Motion to Confirm Kepoet. 1317 $ , and that having made the aforesaid payments, he shall pay over the amoimt then remaining in his hands to , as trustee in bankruptcy herein, and that upon making such payments, the said be discharged as such receiver, and his bond cancelled. All of which is respectfully submitted. Dated , 19... Special Master, (orEeferee), Form No. 71c. Notice of Motion to Confiim Report of Special Master on Receiver's Account. [Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 81.] In the District Court of the United States, for the District of : In Bankruptcy. In the Matter OF Bankrupt. No. Sir: You will please take notice, that upon the receiver's report, account, excep- tions thereto and all the proceedings had herein, and upon the report of , Esq., Special Master (or Eeferee), dated the _. . day of , 19. . ., the undersigned will respectfully move this court at a stated term thereof to be held in the Federal Court House, City of , on the day of '. , 19 ... , at o'clock M., of said day, or as soon thereafter as counsel can be heard, for an order in all respects confirming the report of , Esq., Special Master (or Eeferee), passing and allowing the receiver's accounts herein, overruling the exceptions thereto and fixing the compensation for services of the receiver, his counsel, the counsel for the petitioning creditors and the appraisers, and for such other and further relief as may be just and proper. Dated , 19... Yours, etc.. Attorneys for Receiver, Office and P. O. Address, St., To , Esq., Trustee, 1318 SUPPLEMENTAEY FoEMS. [No. 72. Form No, 72. Order Confirming Report of Special Master on Receiver's Accounts. (Hagar and Alexander's Bankruptcy Forms [2d. Ed.], No. 82.) At a stated term of the District Court of the United States for the District of , held at the Court House, City of ,011 day of , 19 . . . Present : Hon , District Judge. Iw THE Matteb of No. Bankrupt , temporary receiver of the above-named bankrupt, having presented his account and vouchers in support thereof, and having moved to confirm his report and that allowances be made to the said receiver and to his counsel for their services, and to the attorneys for the petitioning creditors, etc., and an application having thereupon been made to confirm and approve the said account and make such allowances, and the said matters having been referred to .• , Esq., as Special Master, and the said Special Master having filed his report thereon, dated day of ,19---, Now after hearing jEsq., of counsel for the receiver, in sup- port of said application, and due deliberation having been had thereon, upon reading and filing the report of the said Special Master, the account and report of , receiver herein, it is Ordered: — That the report of , Esq., Special Master (or Keferee) appointed herein, be, and the same hereby is in all respects con- firmed and approved. And it is further ordered : — That the account of , temporary receiver of the property, assets and effects of , bankrupt above named, be, and the same hereby is in all things allowed, approved and confirmed. And it is further ordered : — That , temporary receiver herein, be, and he hereby is, allowed for his services the sum of $ and that the disbursements expended by him in the safe administration and preservation of the estate and heretofore deducted by him, be and the same hereby are allowed. No. 73.] Petition fob Injunction. 1319 And it is further ordered : — That , temporary receiver herein, pay to the sum of $ as and for an allowance to them as attorneys for the receiver herein and the further sum of $ disbursements incurred and expended on behalf of the receiver in the safe administration and preservation of the estate herein, and amounting in the aggregate to the sum of $ And it is further ordered : — That , temporary receiver herein, pay to , ., and , the sum of $ each for services rendered by them as appraisers herein. And it is further ordered : — That , temporary receiver herein, pay to , Esq., the Special Master herein, the sum of $ for his services and disbursements on this accounting. And it is further ordered : — That , temporary receiver herein, after making the payments as herein directed, pay the balance remaining in his hands to , . . , trustee in bankruptcy herein. And it is further ordered : — That upon making such payments , temporary receiver herein, be discharged as receiver of the property, assets and effects of the above-named bankrupt, and that the bond given by him for the faithful performance of his duties be canceled and discharged, and the sureties thereon released from any and all liability thereunder (and that the bond given by the petitioning creditor upon whose application the receiver was appointed herein under section 3, subdivision e of the bankruptcy act, be canceled and annulled, and the sureties thereon exonerated from any and all liability thereunder.) D. J. Form No. 73. Petition for Injunction Other than Against Suits.^ In the District Court of the United States for the District of . . In the MiTTEE OF Bankrupt y In Bankruptcy No. . . • .J I To , Esq.,^ Eeferee in Bankruptcy: Your petitioner respectfully shows : 33. For the validity of injunctions officers. See also Mueller v. Nugent, 184 granted by referees, see, generally. Sections U. S. 1, 7 Am. B. E. 324. Two, Eleven and Thirty-eight. Read also 24. If before adjudication, address to th« General Order XII, which, however, refers judge. only to injunctions against proceedings or 1320 SUPPLEMENTAEY FoEMS. [No. 74. That lie is the receiver ^' herein. That the above-named bankrupt was duly adjudged herein on the day of , 19. . ., and, thereafter, the following proceedings were had:^ That 27 That, unless the injunction hereinafter asked is granted, your petitioner and the creditors of said bankrupt will suffer irreparable injury. That no previous application has been made to this or any other court for the order hereinafter asked. Wherefore, your petitioner prays for a writ of injunction herein, for- bidding the said , his attorneys, agents, and servants. 28 from and for such other order as shall be just and lawful. Dated, , , , ,19. [Add verification as in Form No. 66.] Petitioner. Form No. 74. Referee's Stay and Show Cause Other .than Against Siiits.2» At a Court of Bankruptcy, held in and for the District of , at , this day of , 19 . . . Present: , Esq., Eeferee. In the Mattee of Bankrupt ^ In Bankruptcy No. . . Application having been made for a writ of injunction directed to , of the of , in said district, 25. Or " the bankrupt;" or " the trustee;" or " a creditor of the bankrupt." 26. Kecite the previous steps in the pro- ceeding briefly. 87. Here give the name and residence of the person sought to be enjoined, and the facts making the injunction necessary, as an imminent sale on a foreclosure where the equity of redemption is substantial; or, the giving of a voidable preference as de- fined in § 60, and proceedings by the creditor preferred which may result in the property getting into the hands of an inno- cent holder for value, in this case specifying whether or not the property is in the pos- session of the bankrupt or an adverse claimant, and, if the latter, by what kind of a transfer and with what notice, if any, of the bankruptcy he holds. See, generally, " Injunctions other than against Suits," in Section Two, ante, and cases cited. 28. Here state briefly the acts or trans- actions which the petitioner seeks to pre- vent. 29. The referee may, it is thought, grant an injunction without a show cause. See No. 74.J Obdee of Stat by Eefe^ee, 1321 restraining him from ' and it appearing that the same should be heard and decided by the judge, and that the said be so restrained meanwhile ; now, on motion of , Esq., attorney for . . . ., , the petitioner, It is ordered : That , his attorneys, agents, and servants, be, and they are and each of them is hereby restrained and enjoined from *^ until the hearing and decision of the show cause hereinafter ordered. That the said show cause, before the Hon , District Judge, at the United States District Court Koom, in the of , in said district, on the day of , 19 . . ., at o'clock, . . M., or as soon thereafter as counsel can be heard, why a writ of injunction should not issue out of said court restraining and enjoining him, the said , from *^ forever.'^ Let service of this order on the said ^ , by delivery to him personally of a copy of the same and of the petition on which it is granted within days previous to the day last hereinbefore mentioned, be sufficient.^* Referee in Bankruptcy, Mueller v. Nugent, 184 TJ. S. 1, 7 Am. B. E. 31. Here state the acta or transactiona 834, and consult generally " Injunctions which are enjoined. other than against Suits " in Section Two, 32. Or until a time certain, specifying it, ante. If a show cause is not thought neces- or " until further order." sary use Form No. 107, or if the local prac- 33. Or "on , Esq., his attorney of tice does not call for the issuance of the record," if any ; or " on either or both the writ of injunction, draw a referee's order said and , his attorney," restraining and enjoining- the person named as the court may direct. as suggested by the words of this form. 34. Service should never be by mail, or on 30. Make this recital fit the prayer of any person other than here specified, the petition. 1322 SUPPLEMENTAKY FoEMS. [No. 75. Form No. 76. Referee's Order that Writ of Injunction Issue.35 At a Court of Bankruptcy, held in and for the . of , at , this day of Present : , Esq., Eeferee. District .. 19... Is THE Mattes of Bankrupt . >.In Bankruptcy Ko. Application having been made for a writ of injunction directed to , of the of , in said district, restrain- ing him from " ; and it appearing that the same should be granted by the referee and not by the judge f^ on motion of , Esq., attorney for ,^^ and , Esq., also appearing for the said and objecting thereto (or consenting). It is ordered: That a writ of injunction issue out of said court, and under its seal, and tested by its clerk,^* restraining and enjoining the said , his attorneys, agents, and servants from *" forever.*^ That, until such writ shall issue, the said , his attorneys, agents, and servants, be and they hereby are restrained and enjoined from the doing of said acts. Referee in Bankruptcy. 85. See foot-note 29, Form No. 74. 36. See foot-note 30, to same form. S7. If brought on before the referee by stipulation (see Form No. 91) strike out this clause and substitute for it, " and the same being now moved by stipulation be- fore the referee instead of before the judge." 38. Strike out to end of paragraph if there is no appearance in opposition. 39. See General Order III. 40. Here state the acts or transactions enjoined. 41. Or until a time certain, specifying it, or " until further order." No. 76.J Oedeb that Wbit Issue. 1323 Form No. 76. Ordci tliat Writ of Injunction Issue, After Referee's Stay and Show Cause.** In the District Court of the United States for the District of . . . In the Mattbb of Bankrupt >■ In Banf ruptoy No. . . . Whereas, application has been previously made for a writ of injunction directed to , of the of , in said district, and a temporary injunction was granted thereon by , Esq., referee in bankruptcy of this court, and the said required to show cause in this court why the same should not be continued forever,** and such show cause being this day moved by , Esq., attorney for the petitioner, and ** after hearing , Esq., attorney for said , opposed : It is ordered :*' that a writ *' of injunction issue out of this court, under its seal and tested by its clerk, restraining and enjoining the said , and his attorneys, agents, and servants, from *'' , . . . forever.** Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19 . . . f Seal of ) I the court | Clerk. 42. To be used only in cases where the referee grants a temporary injunction with show cause. See Form No. 74 and foot-note 29. Compare also Form No. 75. 43. Or recite the duration of the injunc- tion as shown in the referee's order. 44. Strike out to end of paragraph if there is no appearance In opposition. 45. If application is denied, strike out balance of form and add : " That such ap- plication be and the same hereby is denied, and such temporary injunction herein is vacated." 46. For form of writ, see works on Fed- eral Practice. 47. Here state the acts or transactions enjoined. 48. See foot-note 43. 1324 Supplementary Fokms. [No. 77. Form No. 77. Order Determimng Exemptions When no Trustee Appointed.'^s At a Court of Bankruptcy, held in and for the of , at , this day of ..... Present : , Esq., Referee. District ., 19... In the Mattee of Bankrupt >-In Bankruptcy No. An order having been entered herein dispensing with a trustee, as pro- vided in General Order XV; and it appearing, from the affidavit of the bankrupt filed on this application and .Schedule B (5) filed with his petition herein, that he has duly claimed and is entitled to the exemptions hereinafter mentioned; now, on motion of , Esq., his attorney, It is ordered that the said bankrupt's claim to exemptions be determined as follows : That he is entitled, under of the laws of the State of , to the following property :^" and that the same be delivered to him forthwith. Referee in Bankruptcy. 49. Consult, generally, Sections Six and Forty-seven. And see General Order XV and Form No. 27. See also §§ 2(11), 38(4). Forms Nos. 78, 79, 80 should also be noted. 50. Here say " that claimed by him in his said Schedule B (5)," or, if all of same are not set off to him, specify those that are set oS. No. Y8.] Exceptions to Exemptions. 1325 Form No. 78. Exceptions to Trustee's Report Setting ofi Ezemptions.Ei In the District Court of the United States for the District of ..j In the Mattes of Bankrupt In Bankruptcy No. . . . Now comes , of , a creditor of the above- named bankrupt,** and excepts to the trustee's report setting off said bank- rupt's exceptions, filed herein on the day of , 19 . . .,"* in that such report'* sets off to said bankrupt the following :"' for the following reasons:' 56 and prays that a hearing may be had upon such exceptions and that the same may be argued, as provided in General Order XVII. Dated, , , , , 19 . . . Excepting Creditor.'^'' ol. See, generally, Sections Six and 53. Or, if the exceptions are to the Forty-seven, and for trustee's report on ex- referee's order, strike out this clause and emptions. Form No. 47, which, however, it substitute: "and excepts to the order of is thought, should be verified and should , Esq., referee in bankruptcy specify the State ; statute under which the herein, determining said bankrupt's claim exemptions are set apart. The practice on to exemptions, entered on the . day of exceptions will be found in General Order , 19.." XVII. If the bankrupt is the party ag- 54. " Or order," as the case may be. grieved he must ask a review. See Form 55. Here copy in the set-off objected to, or No. 80. phrase it in words so that the exception 52. If the exceptions are made by attor- will be clearly indicated. ney add : "by , of the 56. Here insert words showing the error of , in said district, his attorney, excepted to. duly authorized to that end." For the 57. If by an attorney, add "by authority required if the exceptions are not , his attorney, address No filed by a creditor, see §1(9). , , 1326 SUPPLEMENTAKY FoEMS. [Ko. 79. Form No. 79. Older Detenniniug Exemptions After Trustee's Report.s8 At a Court of Bankruptcy, held in and for the District of , at , this day of , 19 . . . Before , Esq., Keferee,: Inr THE Matteeoe' Bankrupt . In Bankruptcy No. The trustee herein having, more than twenty days since, filed his report of exempted property, in accordance with General Order XVII, and no exceptions having been taken thereto,^* now, on motion of , Esq., attorney for said bankrupt, It is ordered : That said trustee's report of exempted property be, and the same hereby is, in all things confirmed,^ and the bankrupt's claim to exemptions is hereby determined accordingly. That the property specified in such report be delivered to said bankrupt forthwith. Referee in Bankruptcy. 58. See foot-note 51. This form can also easily be changed to fit a ease where ex- ceptions have been taken (Form No. 78) and argued. 59. If exceptions have been taken, change to fit the facts; if the report of the trustee is not to be confirmed in whole or in part, here give the reasons. 60. Or, in case such report is not con- firmed, in whole or in part, stop here and insert words indicating the decision. No. 80. j Ebview of Ordee as to Exemptions. 1327 Form No. 80. Petition by Bankrupt for Review of Referee's Order on Ezemptions.6i In the District Court of the United States for the District of In the Mattee of Bankrupt ^In Bankruptcy No. To , Esq., Eeferee in Bankruptcy: Your petitioner respectfully shows: That he was adjudged a bankrupt herein on the day of , 19 . . . , and that a trustee of his estate was in such proceeding subsequently appointed. That such trustee, on the ...... day of , 19. . ., filed a report oi exempted property herein, and that, on the day of , 19 . . ., -an order was entered determining your petitioner's claim to exempt property, .as stated in such report.*^ «3 That such order was erroneous, for the following reasons :** Wherefore, your petitioner, feeling aggrieved because of said order, prays that said trustee's report and the said order be reviewed, as provided in the bankruptcy law of 1&98 and General Order XXVII. Dated, , , , , 19. . . [^Add verification a^ in Form No. 66.] Bankrupt. 61. If granted, for Referee's Certificate whole or in part here state the substance ■on Review, see Form No. 159. See, gener- of the referee's order. ally, for practice on reviews, Section Thirty- 63. Or, if the referee's order modified the nine, ante. A creditor can, of course, ask trustee's report, strike out " as stated in for a review. If so, see Forms Nos. 158 and such report," and substitute "as follows: 159. " 62. If confirmation was refused either in 64. Here indicate the reasons constitut- ing the error complained of. 1328 SUPPLEMENTAEY FoEMS. [No. 81. Fona B'o, 81. Petition for Oidei Amending Schedules-AS In the District Court of the United States for the District of In the Mattee of Bankrupt In Bankruptcy Ko. To , Esq., Referee in Bankruptcy: Your petitioner respectfully shows : That he was duly adjudicated a bankrupt herein on the day of , 19. . ., and that his schedules, as required by § 7 (8) of the bankruptcy law of 1898, have been duly filed herein. That the first meeting of your petitioner's creditors has been called for** the day of , 19 . . . That, at the time your petitioner's schedule of creditors was prepared, by inadvertence,*^ the names and the statutory facts concerning the claims of certain creditors were omitted therefrom.** That such names and facts are as follows :** That™ the above-mentioned creditors have not been regularly notified of said first meeting of creditors. That/^ at the time your petitioner's schedule of property was prepared, by inadvertence, a certain interest in property vested in your petitioner was omitted therefrom, namely :^^ 65. This petition can be adapted to a case where the petition and not the sched- ules needs amendment. See Section Eigh- teen, write. Compare, generally. General Order XI, and Sections Seven and Eighteen. 66. If the meeting has been held, change to fit the facts. • 67. Or give any other reason bringing the case within General Order XI. 68. Or state what was the act or omission which makes the amendment necessary. 69. If an amendment of Schedule A is desired, give the name of the creditor, his residence, when and where the debt was contracted, and its consideration and amount, and if secured, etc., with the same particularity required by the appropriate page of Schedule A of Form No. 1. 70. Omit this, if notice has been sent them. 71. Use this paragraph only when the amendment of Schedule B is desired. 72. Here give a sufficient description to show all the facts required by the appro- priate page of Schedule B of Form No. 1. No. 82.J Amendment oe 'Schedules. 1329 That no previous application has been made for the order hereinafter asked. Wherefore, your petitioner prays for an order amending said schedules in the particulars above specified/* and that notice be given accordingly. Dated at , , , ,19... •} lAdd verification as in Form No. 66. j Petitioner. Form No. 82. Order to Show Cause on Amendment of Schedules.74 At a Court of Bankruptcy, held in and for the District of .... , at , this day of , 19 . . . Present : , Esq., Eeferee. In the Matter of Bankrupt . ^ In Bankruptcy No. On reading and filing the petition of , the bankrupt herein, wherein he prays for an order amending his schedules in certain particulars, novr, on motion of , Esq., his attorney. It is ordered : That the creditors hereinafter named show cause before the undersigned, at , in the of , in said district, on the day of , 19 ... , at .... o'clock, .... m., or as soon thereafter as counsel can be heard, why the prayer .of said petition should not be granted and why said petitioner's schedules, hereinafter mentioned, should not be amended by adding to Schedule A ''^ the names and facts herein- after set forth :^« and" by adding to Schedule B ''^ the following statement of facts as to property :''* 73. If notice has been given, stop here. 76. See foot-note 68, Form No. 81. 74. This form fits into Form No. 81. See 77. See foot-note 71, Form No. 81. foot-note 65 to same. 78. Here insert (1), (3), (3), (4), (5), 75. Here insert (1), (3), (3), (4), or or (6), dependent on the page of Schedule " ( 5 ) , dependent on the page of Schedule A B sought to be amended. sought to be amended. 79. See foot-note 72, Form No. 81. 84 1330 SUPPLEMENTAEY FoEMS. [No. 83. ■ Let service of this order be made by mail, addressed to said persons at their places of residence as above stated, not later than ten days prior to the return day hereof .*° Referee in Bankruptcy. Form Ho. 83. Order Amending Scliedules.si At a Court of Bankruptcy, held in and for the District of , at , on the day of , 1&. . . Present : , Esq., Eeferee, In thb Mattee of ► In Bankruptcy No. Bankrupt . Application having been heretofore made for an order amending Schedule** , previously filed herein and an order to show cause having been granted thereon on the day of , 19 . . . , and proof of mailing said order, as provided therein, now being made, and** now, on motion of , Esq., attorney for said bankrupt. It is ordered : That Schedule A ( )** herein be amended by adding thereto, in the proper columns, the following facts :** 80. If Schedule B only is to be amended, notice sliould be given the trustee, and this paragraph changed accordingly. 81. This order should be in triplicate, one for the clerk, one for the trustee, and one for the referee. Compare Forms Noa. 81 and 82. See also, generally, , Sections Seven and Eighteen, ante, and General Order XI. 82. Here insert, for instance, "A (3) " or "B (2)," to fit the petition. 83. Recite whether there was appearance in opposition, and if so by what creditor or the trustee, and by what attorney repre- sented. 84. See foot-note 82. 85. Indicate the columns on the appro- priate page of schedule A by numeral as if in Schedule A (3) thus: (1) page 25, (2) John Smith, (3) 650 Broadway, New York, (4) New York, (5\ , Merchandise, (6) $5,203.69." No. 84.] Affidavit to Schedule. 1331 That*' Schedule B ( ) be apieiided by adding thereto the following words :*^ ) Referee in Bankruptcy. Form No. 84. Affidavit to Schedule of Creditors When Biankrupt Cannot be Found.88 In the District Court of the United States for the District of In the Matter of Bankrupt >-In Bankruptcy Ko. State of . . . County of City of . ► ss. : , of . , being severally duly sworn, depose and say that they*® are the petitioning creditors in the above proceeding ; that the said , the bankrupt, is absent from the said district and cannot be found ; that your petitioners have diligently inquired into his affairs for the purpose of ascertaining the names and places of residence of all of his creditors, and, according to the best of their information, such names and places of residence are set out in Schedule A, hereto annexed. Subscribed and sworn to before me, this day of 19. 86. Use only if Schedule B is to be amended. 87. See foot-note 85, and indicate columns of appropiiate pajge of Schedule B, as there indicated. 88. This practice is outlined in General Order IX. See also Sections Seven and Thirty-nine. 89. One petitioner acquainted with the facts can make this affidavit; if so, change the form accordingly. 1332 StrPPLEMENTAET FoEMS. [No. 85. Schedule A.^" Unsecured Creditors. Names. Residences. Amounts. Doils. Cta. Creditors Holding Securities. Names. H^sidences. Securities. Values. Amounts. Dolls. Cts. Dolls. Cts. Form No. 85. Petition that Bankrupt Turn over Concealed Assets. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], CNo. 119.) United States District Court, for the District of . . . . In the Mattee of Bankrupt >■ In Bankruptcy No. To ., Esq., Referee in Bankruptcy: The petition of respectfully shows : 1. That he is the trustee herein duly qualified and acting. 2. Petitioner respectfully alleges that through his attorney, he has ex- amined the bankrupt and other witnesses in this proceeding and thoroughly investigated the books of the bankrupt and the circumstances connected with this bankruptcy. 3. Petitioner alleges, upon information and belief, that , the said bankrupt has in his possession or under his control the following 90. Attach this schedule to the affidavit, filling in names, residences, amounts, etc., with as much accuracy as possible. Ko. 86.] Obdeb to Turn Over Concealed Assets, 1333 property belonging to his said estate in bankruptcy : That the said bankrupt is fraudulently concealing same from your petitioner as trustee. 4'. That said property so concealed amounts in value to at least $ 5. That the sources of petitioner's knowledge and the grounds of his belief as to this property are as follows: [Here specify fully.] 6. No previous application has been made for an order herein. Wherefore, your petitioner prays for an order directing the bankrupt to turn over and deliver forthwith to your petitioner, all of such property or moneys so concealed, and for such other and further relief as may be just and proper. . . ., Petitioner. \Yerification.'\ Form No. 86. Order that Banlcrupt Turn over Concealed Assets. (Hagar and Alexander's Bankruptcy Forma [2d Ed.], No. 203.) United 'States District Court, for the District of . . In the Matter of Bankrupt yln Bankruptcy No. , the trustee herein, having made an application to com- pel , the bankrupt above named, to turn to his said trustee, the sum of $ , proceeds of certain property belonging to his estate, alleged to be in the possession and control of said bankrupt and which the said bankrupt is fraudulently concealing from his said trustee, and the said having filed his verified answer thereto and the matter having been duly heard and testimony taken, and the referee having rendered a decision thereon, ]!^0W; upon reading and filing the petition of , trustee herein, verified the day of , 19 ... , the answer of , 1334 Supplementary Fobms. [Ifo. 87. bankrupt herein, verified the , . . . . ; day of ; . ^ , 19. . ., the testimony and all proceedings had herein, and after hearing , attorney for the said trustee, in support of said petition, and , attorney for , in opposition thereto, it is, upon motion of , attorney for said trustee, Ordered, that the prayer of the trustee's petition herein be, and it hereby is, in all respects granted, and It is further ordered, that the said ; , bankrupt herein, account for and pay over within days to , a« trustee herein, the sum of $ belonging to his said estate in bank- ruptcy and found to be in his possession or under his control. Dated, , , 19... Befetee in Bankruptcy. Form Ho. 87. Petition for Older of ProteGtion.8i In the District Court of the United States for the District of . In the Mattes of BanJcruvt In Bankruptcy Ko. To , Esq., Eeferee in Bankruptcy: Your petitioner respectfully shows : That he was adjudicated bankrupt herein on the day of , 19. . ., and on the same day his proceeding in bankruptcy was duly referred. That your petitioner has not yet made application for his discharge herein. That your petitioner has reason to believe that he is liable to arrest upon civil process, other than in the cases specified in § 9-a of the bankruptcy law of 1898. That no previous application has been made to this or any other court for the order hereinafter asked. 91. See, generally, Section Nine, ante. proceedings in a suit, on the theory that a Consult also General Order XII (1),. The body execution is a step in a suit. See application often takes the form of a pe- Forms Nos. 89; 90, 91, 92, 93. tition for an injunction against further No. 88.] OEi)EE Of PKOxEcfibN. 1885 WJierefore, your petitioner prays for an order of protection from arrest, aB provided in said § 9-a and General Order XII (1). Dated, , , 19 , . . Petiiioner. [Add verification as in Form No. 66.] Porm Ko. 88. Older of PTotectioii.n At a Court of Bankruptcy, held in and for the , District of , at , this day oi , 19 . . . Present : > Esq., Eeferee. In the Mattxb of Bankrupt »In Banlmiptef Va. .... The above-named bankrupt having, on the day of , 19 . . . , applied for an order of protection, and it appearing that one year has not yet elapsed since the date of his adjudication, viz., the day of , 19 ... , and that he has not yet been discharged herein, h.ow, on motion of , Esq., attorney for said bankrupt. It is ordered : That all persons and officers be and they hereby are prohibited from arrest- ing the said bankrupt on civil process, save in the cases specified in sub- divisions (1) and (2) of § 9-a of the bankruptcy law of 1898, until tv^elve months after the date of such adjudication, or, if within that time the bankrupt applies for a discharge, then until the question of such discharge is determined. Referee in Bankruptcy. 92. This fits into Form No. 87. See foot-note 91 to that form. OonBult, generally, Section Nine and General Order XII (3). 1336 SUPPLEMENTAET FoEMS. [No. 89. Form "No. 89. Petition for Stay of Pending Suit.M In the District Court of the United States for the . . . . District of In the Mattee of Bankrupt In Bankruptcy No. To ., Esq., Eeferee in Bankruptcy: Your petitioner respectfully shows : That he was duly adjudicated a bankrupt** herein on the day of , 19. . ., and that he has not yet made application for a discharge. That, among your petitioner's debts scheduled herein, is one for dollars ($ ) , in favor of , and that such debt is of such a nature that a discharge in bankruptcy, as provided in the bankruptcy law of 1898 as amended, would be a release. That, at the time of the filing of the petition on which said adjudication was made, a suit was pending on such debt in the 'Court of , entitled v , in which action , Esq., of , in the of , in said district, is the attorney of record of the plaintiff, and that the same is still pending therein f^ and that, if such** is allowed to proceed, injury will be done your peti- tioner," for the following reasons :** 93. See, generally, Section Eleven, and oompare Section Two and Forms Nos. 73, 74. 75 and 76. and the foot-notes to such forms, especially foot-note 23 to Form No. 73. Application may also be made for a stay of a suit begun after the bankruptcy (see, generally. Section Eleven), though the power to grant it flows rather from I 3(15). If such an application is to be made this form can easily be adapted to iit the facts. The form here given refers only to a stay asked by the bankrupt. It can be varied to fit the very diverse facts on which these stays may be granted. Any other form would, in the nature of things, be a mere skeleton and of little value to the practitioner. 84. This petition can also be made by the petitioning creditors if before adjudication. and, if after, by the trustee, and, if the latter, the allegations should be changed so as to show the trustee's appointment and qualification, and injury to the estate if the stay is not granted. The form given applies only to a case where the bankrupt desires to prevent the entry of a judgment. 95. Or in a proper case add: "that such . suit has resulted in a judgment against your petitioner and that there is now pend- ing before , Esq., as referee, a proceeding supplementary to execution," or as the facts may be. 96. " Suit " or " proceeding." 97. Or " your petitioner's estate in bank- ruptcy." 98. Set out the reasons carefully and clearly. No. 90.J Stay of Pending Suit. 1337 That no previous application has been made to this or any other court for the stay herein asked. Wherefore, your petitioner prays that further proceedings in said suit®* may be stayed for the time prescribed in § 11-a of said law, in particular,^ and for such further order as shall be just and lawful. Dated, , , 19 . . . Petitioner. [Add verification as in Form No. 66.] Form Ko. 90. Referee's Stay and Show Cause on Pending Suite At a Court of Bankruptcy, held in and for the District of , at , this day of , 19 . . . Present : , Esq., Referee. In the Matter of Bankrupt >.In Bankruptcy Ko. Application having been made for an order staying further proceedings in a certain suit in the Court of , entitled v. , and it appearing that the same should be heard and decided by the judge and such proceedings be stayed meanwhile ; now, on motion of , Esq., attorney for the applicant. It is ordered : That , the plaintiff in said action, and his attorneys, agents, and servants, be, and they are, and each of them is, hereby stayed from any further proceedings therein, in particular from* until the hearing and decision of the show cause hereinafter ordered. 99. Or, as the facts may be. and see foot-note 29 to Form No. 74 for 1. Here specify the particular act to cross-references. which the stay is mainly directed. 3. Here specify the particular act to 2. Consult footnote 93 of Form No. 89 which the stay is mainly directed. 1388 SUPPLEMENTAEY FoBMS. [No. 91. That* the said , . , the plaintiff in such action, show cause hef ore the Honorahle , District Judge, at the United States District Court Eoom, in the of , in said district, on the day of , 19 . . . , at o'clock, ... m., or as soon thereafter as counsel can he heard, why this stay should not he continued for the space of twelve months from the date of the adjudication herein, or, if within that time the said bankrupt shall apply for a dis- charge, then until the question of such discharge shall be determined;* and then and there also show cause, if any, why a writ of injunction should not issue out of and under the seal of said court accordingly. Let service of this order on said , the plaintiff,' by delivering to him personally a copy of the same and of the petition on which it is granted, within days previous to the day last hereinbefore mentioned, be sufficient.' Referee in Bankruptcy. Torm No. 91. Stipulation that Show Cause be Heard by Referee.s In the District Court of the United States for the District of In the Mattes of Bankrupt - In Bankruptcy No. It is hereby stipulated that the order to show cause previously granted herein, returnable before the Honorable , District Judge, on the day of , 19 ... , may be brought on before and be determined by , Esq., Eeferee in Bankruptcy, who granted the same, instead of said judge ; and that the same may be moved 4. If a show cause Is not thought neces- both the said and , a&Tj use Form No. 93, or il the local prac- his attorney," as the court may direct, tiee does not call for the issuance of the 7. Service should never he by mail, or on writ of injunction, draw a referee's order any person other than one here specified, restraining and enjoining the person named, 8. This form will be found useful when as suggested by the words of this form. the residence of the judge is in another di- 5. If a writ is not asked for, stop this vision or county from that of the bankrupt, paragraph here. Consult, generally, Section Eleven and 6. Or "on , Esq., his attor- Forms Nos. 89, 90, 92, and 93, and the ney of record," if any; or "on either or foot-notes thereto. 1^0. 92.J Decision on Application for )Stat. 1339 before said referee at . . . , in the of , in said district, on the day of , 19 . . . , at . . . . o'clock, . . . m. Dated, , , , ,19... Attorney for > Attorney for Form JSo. 92. Decision and Report of Kef eiee on Application for Stay Stipulated Before Him.* In the District Court of the United States for the District of . . . . In the Matter of Bankrupt >- In Bankruptcy No. To the Hon , District Judge : Application having b^en made for a stay directed to , plaintiff in an action in the Court of , entitled V , and a temporary stay having been previously granted, and the said ordered to show cause before the district judge why such stay should not be continued, and such show cause having been moved before me, on stipulation of all parties, and the petitioning bankrupt appearing by , Esq., his attorney, and , said plaintiff, appearing by , Esq., his attorney ; It is hereby found and recommended that an order be entered^"- directing a writ of injunction to issue to , restraining and enjoining him from further proceedings in said suit in particular^* until twelve months after the date of the adjudication herein, unless the said bankrupt shall, previous to that time, apply for a discharge, and then until the question of such discharge shall be determined. 9. This form fits into Form No. 91, " denying such application and vacating which, and the foot-notes thereto, see. Com- the temporary stay previously granted pare also Forms Nos. 89, 91, and 93. Con- herein." suit, generally. Section Eleven. 11. Here specify the particular act to 10. If the recommendation is against the which the stay is mainly directed, continuance of the stay, stop here, and add: 1*^40 Supplementary Foejis. [No. 93. Herewith are handed up the petition and other papers used on such application and show cause. EespectfuUy submitted, Referee in Bankruptcy. Dated, , , , ,19... Form No. 93. Order that Writ of Injunction Issue.u In the District Court of the United States for the District of ... . In the Matteb of Bankrupt . > In Bankruptcy Ko. Whereas application has been previously made herein for a stay directed to , plaintiff, in a suit in the Court of , entitled v , and a temporary stay was granted by , Esq., Referee in Bankruptcy, and such application has been argued in the first instance, by stipulation, before such referee, and he having reported in favor ^^ of such stay ; now, on motion of , Esq., attorney for the petitioner, and " after hearing , Esq., attorney for said , opposed ; It is ordered :-^^ That such report and recommendation be approved, and that a writ ^' of injunction^ issue, directed to , restraining and enjoining him from further proceedings in such suit, in particular form," until twelve months after the date of the adjudication herein, unless the said 12. To be used only in cases where the 13. Or " against the continuance." referee grants a temporary injunction with 14. Strike out to end of paragraph if show cause. See Form No. 90, foot note 2. there is no appearance in opposition. It is thought also that the referee can on a jg jf tjjg application is denied, follow stipulation bringing the show cause on be- foot-note 45, Form No. 76. fore him, issue an order directing the clerk jg ^^^ ^^^^ ^f ^j.;t^ ^^ ^^^^^ ^^ pg^. to issue the writ, thus avoiding the circum- , py„„t;„g locution resulting from Form No. 93. If ,- -rr ' •* ii. i- i i i. ■n IT no 1. J i J i ii, 1 17. Here specify the particular act to so, Form No. 93 can be adapted to the usual , . , ., ^ . ,. i / form of a referee's, order; see Form No. 75. ^^"'^ **'« «**y '^ <1''^**<*- Consult, generally, Section Eleven. No. 94.] Opfee of Composition. 1341 bankrupt shall, previous to that time, apply for a discharge,, and then until the question of such discharge shall be determined. Witness the Honorable , Judge of said court and the seal thereof, at the city of , in said district, this day of ,19-.. C Seal of ) » I the court.; Clerk. Form Wo. 94, Ofier of Compoaition.is In the District Court of the United States for the District of In the Matter of Bankrupt ,. In Bankruptcy Ko. To , Esq., Referee in Bankruptcy, and the creditors of , a bankrupt : The undersigned, who was adjudicated a bankrupt herein on the day of , 19 . . . , and whose schedules of creditor^ and property have been previously filed at , , with , Esq., the referee in bankruptcy in charge, and who was examined in open couTt . herein on the day of , 19. . .,^® does hereby offer a composition at per cent. ( . . . . ^) of the claims- of his creditors, allowed or to be allowed, except those entitled to priority, in this proceeding. This^" offer is to be effective only after the examination of the under- signed in open court, as provided in § 12-a of the bankruptcy law of 1898. Dated, , , 19 . . . Bankrupt. 18. This is the first step in composition. of bankruptcy law. For substitute for The practice suggested by Form No. RO ap- Forms Nos. 62 and 63, see Form No. 102. plied under the law of 1867", but does not 19. If the examination has not been held under that of 1898. See, generally. Section but is to be, specify the date and then use Twelve; Form No. 61, together with Forms the paragraph referred to in foot-note 20. Nos. 94, 96,. 97, 98, 99, 100, 101, 102, and 20. Omit this if the bankrupt has al 103, are thought to outlifle a complete prac- ready been examined, tice on this increasingly important branch 1342 SUPPLEMENTAET FoBUS. [Ko. 95. State of . . County of City of >ss. On this day of , 19 ... , the ahove-named appeared before me and acknowledged the execution of the fore- going offer of composition. Form liTo. 95. Notice to Creditors. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 294.) United States District Court, for the District of . . . , In the Mattee of Bankrupt . ► In Bankruptcy No, To the creditors of , bankrupt : ITotice is hereby given that the above-named bankrupt has filed his peti- tion, verified the day of , 19 ... , setting forth among other things that he has offered terms of composition, which terms have been accepted in writing by a majority in number of all creditors whose claims have been allowed, and which number represents a majority in amount of such claims, that the consideration to be paid by the bankrupt to his creditors and the money necessary to pay all debts which have priority and the costs of the proceedings have been duly deposited in a duly designated depository, and asking that said composition may be confirmed by the court. iN^otice is hereby given that all creditors and other persons are ordered to attend at the hearing before the Honorable Judge of the United States District Court in the United States Court House, on , , 19 . . ., at . . . .M., and then and there show cause, if any they have, why the prayer of said petitioner should not be granted, and also to attend the examination of the bankrupt thereon. Dated , ,19... > Referee in Bankruptcy. No Street, City of l^Annex proof of pvhlicaiion as on discharge proceeding.] No. 96.] AccEPTAiTCE OF Composition. 1343 Porm ITo. 96. Acceptance of Compo8ition.3i In the IHstrict Court of the United States for the . District of In the Mattee of Bankrupt >- In Bankruptcy Ifo. To , Esq., Referee in Bankruptcy, and the bankrupt above named : The undersigned creditors, whose signatures, residences, claims, and the amount at which the same have been allowed, are hereafter set out, do hereby accept the offer of composition at '. per cent. ( . . . ,J1^) made herein by , the above-named bankrupt, on the day of , 19. . . ; this^^ acceptance, however, to be effective only after such bankrupt shall be examined in open court. Dated, , , , 19 . . . Signatures of creditors, " Residencea. Debts illowed. DoIIb. Cta. ■ 'J State of County of I City of On this day of , 19 ... , the above-named and and appeared before me and severally acknowledged the execution of the fore- going acceptance of offer of composition. 21. See foot-notes to Form No. 94 and consult, generally, Section Twelve. 28. Strike this clause out if bankrupt lias already been eicamined. 2S. The creditors should sign here, using their business names, and, in case of part- nerships, corporations, and the like, the person who actually signs should add his own name: thus, " Smith. & Co., by John Smith, one of such partnership." 1344 Supplementary . FoEMS. [N^o. 97. Form No. 97. Referee's Certificate in Coinposition.2 In Bankruptcy No. . . . To the Honorable , District Judge : I, , one of the referees in bankruptcy of your court, do hereby certify as follows : First: That , the bankrupt herein, was duly adjudi- cated such on the day of , 19 . . ., and that he filed his schedules of creditors and property herein, as provided by § 7 (8) of the bankruptcy law of 1898, on the day of , 19 . . . Second: That the first meeting of creditors was held herein on the day of , 19. . ., and the bankrupt was then examined in open court; and that such examination was taken by a stenographer, reduced to writing, and forms a part of the record-book handed up herewith. Third: That, at such first meeting of creditors, claims of creditors, aggre- gating dollars ($....) in amount, and (....) in number, were duly allowed, and that the names and residences of such creditors and the amounts at which their claims were allowed, are set forth in Schedule A hereto annexed and made a part of this report. Fourth: That, at such first meeting of creditors, claims of creditors entitled to priority, amounting to dollars ($....) in amount, and (....) in number, were duly allowed, and that the names and residences of such creditors and the amounts at which their claims were allowed as entitled to priority, are set forth in Schedule B hereto annexed and made a part of this report. Fifth: That, at the date of this certificate, the claims of certain creditors duly scheduled have not yet been presented for allowance, and that the names and residences of such creditors and the amounts of their claims as so scheduled are set out in Schedule C hereto annexed and made a part of this report. 24. Since the referee cannot confirm a composition, and practically all the papers are on file with him, this certificate is necessary. See, generally, Section Twelve. No. 97.] Ceetificate in Oompositioit. 1345 Sixth: That the cost of this proceeding, as shown by said record-book, is, to this date, dollars ($....). Seventh: That appraisers were appointed herein and have filed a report, showing the value of the assets of said bankrupt to be dollars ($. . . . ), and that the basis of their valuation in such report is as follows:*" Eighth: That the said bankrupt, after he had been so examined and so filed said schedules, offered terms of composition to his creditors at per cent. ( . . . . ^) , as shown by his offer handed up herewith. Ninth: That a majority in number of all of said creditors whose claims .have been allowed, viz. : (....) creditors, whose claims represent a majority in amount of all such allowed claims, viz. : dollars ■($....), have accepted in writing said bankrupt's offer of composition; all &s is shown by such acceptances, handed up herewith. Tenth: That, so far as appears from the files and records herein, said composition will be for the best interests of the creditors and is made in good faith and not procured by any means, promises, or acts prohibited bj said bankruptcy law, nor has the bankrupt been guilty of any of the acts or failed to perform any of the duties which would be a bar to his discharge.^® I hand up herewith, for the information of the judge : (1) The record-book of this proceeding to the date of this certificate. (2) All claims allowed or refused allowance. (3) The appraisal, above mentioued. (4) The offer of composition. (5) The acceptances of creditors. (6) All other papers filed with me herein. Eespectfully submitted, Dated, Referee in BanJcruptcy. 19... Schedule A. Claims Allowed. Names of creditors. Residenees. Amount allowed. Dolls. eta. 25. For jjistance: „ Sixty per cent, of cost, or cost price, or, as the facts may be. 26. This paragraph may be modified to S.'S fit the facts, and should not be inserted if the referee is in doubt on any of the mat- ters mentioned therein. See § 12-d. 1346 Supplementary Fobms. [No. 98. Schedule B. Priority Claims Allowed. Names of creditora. ReaideDces. Amoimt allowed. DoUb. CtB. Schedule C. Claims Not Yet Allowed. Namea of creditors. Residences. Amount scheduled. Dolls. Ct.. Form JSto. 98. Order to Show Cause in Composition.zT In the District Court of the United States for the District of In the Matter of Bankrupt > In Bankruptcy Ko. Whereas, application has been made for the confirmation of the composition offered by the above-named bankrupt, and it appears that such composition has been accepted in writing by a majority in number of all of his creditors whose claims have been allowed, which majority represents a majority in amount of such claims, and that the consideration for such composition required by § 12-b of the bankruptcy law of 1898 has been duly deposited; now, on motion of ., Esq., attorney for such bankrupt, It is ordered". 27. The application fbr this order may be made by Form No. 61, which, however, should be verified. Consult, generally, Sec- tion Twelve, ante. See also forms just ant» and post. No. 99.] Appeabance OF Cbeditoe in Compositiow. 1347 That all creditors of a bankrupt, as well as all other parties in interest, show cause, at a hearing to be had on such application before the District Court of the United States for the District of , at , in the . , of , in said district,. on the day of , 19 . . . , at .... o'clock, . . m., or aa soon thereafter as such hearing is called, why such applicatiqn should not be granted. i That notice of such heading be given by mailing a copy of this order to each of the creditors, parties in interest and attorneys entitled to notice in this proceeding, and by publishing a copy hereof in the designated newspaper of the county district of such bankrupt's residence, as provided by such law. That such notice be so given by or under the direction of the referee in charge of this proceeding.^* Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said districtj on the day of ,19... C seal of ) > I the court I CZerA;. Form No. 99. Appearance of Objecting Creditor in Composition.38 lu the District Court of the United States for the District of Iw THE Matteb of Bankrupt In Bankruptcy N«. To the District Court of the United States for the District of : The clerk of this court will please enter my appearance as attorney for , of , , a creditor of , the above-named bankrupt, who desires to file a specification of objection to the confirmation of his proposed composition herein. Dated, , , , , 19 . . . Attorney for ., Objecting Creditor. Address 38. Or, if that is the local practice, by See also General Order XXXII, for time the clerk. within which this appearance must be en- 29. Consult, generally, Section Twelve. tered, aind compare Equity Rule XVTI. 1348 SUPPLEMENTAKY FoEMS. [N^O. 100. Form No. 100. Specification of Objection in Coinposition.3o In the District Court of the United States for the District of In 'THE Mattek of > In Bankruptcy No. . . . Bankrupt Now comes , of , , a creditor and person interested in the estate of , the above-named bankrupt, and does hereby oppose and object to the confirmation of the composition offered by said bankrupt, and, for grounds of such opposition and objection, does file the following specification.^^ That ^^ such confirmation is not and will not be for the best interests, of the creditors of said bankrupt because of the following facts, which the tmdersigned charges to be true, viz. :^ Wherefore, objection is made to such confirmation and a hearing and the judgment of the court is asked thereon. Objecting Creditor. [by his attorney. Address, ] State of , "^j County of , yss.: City of , J I, , the objecting creditor mentioned and described in the foregoing specification of objection, do hereby make- solemn oath that 30. Consult for available objections Sec- 32. Or specify any other objection men- tion Twelve, ante. See also General Order tioned in § 12-d. XXXII. 33. Here set out facts as in any other 81, There may, of course, be more than pleading, showing them in sufficient detail on6 objection. to give the bankrupt proper notice of the issue he must meet. ISTo. 101.] Oedeu of Eefeeence in Compositiojst. 1349 the statements of fact contained therein are true, according to the best of my knowledge, information, and belief.** Subscribed and sworn to before me, this day of , 19 . Form No. 101. Older of Reference to Special Master in Composition.ss In the District Court of the United States for the District of In the Mattee of Banhrwpt In Bankruptcy No. Whereas, application has been made for the confirmation of a composition offered. by the above-named bankrupt and a hearing set to consider the same, and , a creditor of said bankrupt, having appeared by , Esq., his attorney, and filed a specification of objection to such confirmation ; now, on motion of , Esq., attorney for , It is ordered : That the issue made by such application and such specification of objection be referred to , Esq., as special master, to ascertain and report the facts, with his conclusions thereon. Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of ,19... f Seal of \ I the court. J Clerk. 34. If the specification is made by the weditor's attorney, the latter's affidavit should show why the creditor does not verify and how the attorney is acquainted irith the facta; also that he is authorized by the creditor to file the specification and verify for him. 35. This form will not be used if the judge determines to hear the matter him- self. See Section Twelve, generally, and the foot-notes to forms just ante and post. 1350 Supplementary Foems. [No. 102. Form No. 102. Repolt of Special Master in Compositibn.36 In the District Court of the United States for the District of In the Matter of Bankrupt ► In Bankruptcy No. To the Honorable , District Judge : I, , special master, appointed herein by an order of your court, dated the day of , 19. . ., do hereby report as follows : On receipt of said order, I set ^'^ the day of , 19 . . . , at o'clock, . . M., at , in the of in said district, as the time and place at which such reference should be proceeded with, and notified the respective attorneys ; that, at such time and place, the bankrupt was represented by , Esq., his attorney, and the objecting creditor by , Esq., his attorney, and ^* that there were the following additional appearances : That, thereafter, the proceedings were as indicated in the record-book ^f such reference, which, with the testimony taken and the depositions used, is handed up herewith. That, in accordance with such proceedings, and after due consideration, I do find the facts to be as follows :** That, on such facts, it is my opinion, and I do, therefore, recommend, that:" S6. See foot-note 35 to Fonn No. 101. This form can also be used for the several reports by a special master referred to in the text and post. 37. For practice on references to special masters, see Equity Rules LXXIII to LXXXIV. S8. If there were no additional appear- •noes strike this out. 39. The referee usually prepares his own findings. They should be stated with suffi- cient particularity to inform the judge as to the issue, and, if possible, refer to the testimony by page number and to deposi- tions by name of deponent and date. 40. Here state the conclusion and recom- mendation in a single sentence. No. 103] Okdee Confibmino Composition. 1351 My fees on such reference are dollars ($ . . . . ), and my diB- bursements are dollars ($....), a total of dollars ($....), which have been paid to me by the petitioning bankrupt" I hand up herewith : (1) The record-book on this reference, including the testimony of wit- nesses therein. (2) The petition. (3) The specification of objection. (4) The depositions used on such reference. (5) The exhibits referred to in such record-book. (6) All other papers filed or used on such reference. Dated, , , , , 19. . . KespectfuUy submitted, Special Master. Form No. 103. Order Confirming (or Refusing to Confirm) Composition.^^ In the District Court of the United States for the ...... District of .... In the Matter of Bankrupt -In Bankruptcy No. Whereas, an application for the confirmation of the composition at per cent. ( . . . .^), offered by the bankrupt to his creditors, has been made herein, and it appearing that such composition has been accepted by a majority in number of all of the creditors whose claims have been allowed, and that such number represents a majority in amount of such claims, and the consideration required by § 12-b of the bankruptcy law of 1898 having been deposited in the place designated by this court ; and an order having been previously granted requiring creditors to show cause why such composition should not be confirmed, and due notice having been given as required by § 58-a (2), and no specification of objections to such confirmation having 41. Or " the objecting creditor,'' as the ally, Section Twelve, and for effect of con- case may be. flrmatlon, see §§ 14-c, 31-f-g, and 70-f. See 42. This form accomplishes the same as also General Orders XII (3), XXIX, and Forms Nos. 62 and 63, and also formally XXXII. dismisses the proceeding. Consult, gener- 1352 SUPPLEMENTAEY FoEMS. [No. 103. been filed,** and the court being satisfied in all of the particulars specified in § 12-d of said law.** It is ordered that*^ said composition be, and the same hereby is, in all things confirmed. It is further ordered that distribution of said consideration shall be made by , the trustee herein,*® and that he, first, pay from said deposit the claims of creditors entitled to priority, as fixed by the files and records of this proceeding or as may hereafter be ordered ■,^'' second, pay the costs of this proceeding *^ in the sums and to the persons as likewise so fixed ; third, pay, according to the terms of said composition, the claims of the general creditors ** allowed herein, as shown by the files and records of this proceeding and as may hereafter be ordered ; and fourth, if any balance shall remain, that the same continue on deposit until twelve months from this date, subject to such subsequent orders as may be granted herein during that period, and then, if any of said consideration shall remain, that the same be distributed by the person above designated pro rata among such creditors as, prior to that time, shall have proven and had their claims allowed herein.^" It is further ordered that said proceeding in bankruptcy against the above- named bankrupt be, and the same hereby is dismissed. Witness, the Honorable , Judge of the said court, and the seal thereof, at *he city of , in said district, on the day of ,19... f Steal of 1 > 1 the court \ Clerk. 43. Or if a specification of objections was " confirmation of such composition be and filed, strike out this clause and substitute the same hereby is refused; and the referee " and a specification of objection having in charge is directed to proceed with the been filed by , and the same administration of said estate," concluding having been duly heard," reciting the refer- with the teste clause at the end of the form, ence to the special master, if any, and the 46. Or by the referee or the clerk, as the filing of his report and its recommendation; court may order. for such recitals, see Form No. 116. 47. See § 64-a-b. 44. If confirmation is denied, change this 48. See §§62 and 64'b(3). recital to fit the facts. 49. See § 57. 45. In that event also stop here and add: 50. See § 66. No. 104. j Petition to Set Aside Composition. 1353 Form No. 104. Petition to Set Aside a Composition. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 271.) In the District Court of the United States for the District of ■ 1 In the Matter of Bankrupt. To the District Court of the United States, for the District of : The petition of respectfully shows to this court and alleges : 1. That he is a creditor and party in interest herein, whose claim has been duly filed and allowed in this proceeding. 2. That on the day of , 19 ... , the bankrupt herein, after he had been examined before the referee, duly offered a composition in said proceeding to his creditors upon the following terms and conditions: That said offer was thereafter duly accepted by petitioner and other creditors •of said bankrupt, upon the terms and conditions as offered and on the day of , 19 . . . , the said composition was duly confirmed by the district judge in the manner and form as offered and accepted. 3. That said composition was offered and accepted and. confirmed upon statements that all the creditors should share equally in said composition and receive the same pro rata amounts upon their said several claims. 4. That since the entry of the order confirming said composition and within a period of six months thereafter your petitioner has discovered that statements upon which the said composition was procured were false and untrue and that fraud was practiced by "the said bankrupt in procuring the said composition in the following particulars: [Here allege specifically the fraudulent acts of bankrupt by which it is claimed the composition is vitiated.'] 5. That all of the above facts and circumstances were not knovni to peti- tioner prior to the confirmation of the composition herein. 6. That your petitioner relied upon the representations of the bankrupt and would not have accepted said composition had he known the exact situa- tion and the fraudulent acts of the bankrupt, as above stated. 7. No previous application for the order asked for herein has been made. Wherefore, your petitioner prays that the said composition be vacated and set aside, the proceeding reinstated and the property returned to the trustee for distribution, according to the bankruptcy law. Petitioner. [Verification.'] 1354 SuppLEME^s'TARY FoEMs. [Nos. 104a, 105. Form No. 104-A. Order Setting Aside a Composition. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 310.) At a State Term of the District Court 6f the United States, held in and for the District of , at the Court House, in the City of , on the day of , 19 . . . Present : Hon , District Judge. In the Matteb of Bankrupt. , a creditor of the ahove named bankrupt, having filed a petition herein, verified the day of . . . , 19 . . , praying that the composition of said bankrupt with his creditors, confirmed by order of this court dated the day of , 19 . . , be vacated and set aside for fraud in procuring same, and the proceeding reinstated, and an order to show cause having been issued thereon on the day of , 19. ., and the said motion having come on for hearing before this court on the day of . , 19 . . , (and a trial had), Nok, upon reading and filing the petition of aforesaid, and upon all the pleadings and proceedings herein, and after hearing , Esq., in support of said motion, and , Esq., in opposition thereto, and due deliberation having been had thereon, it is, on motion of , attorney for said petitioner. Ordered, adjudged and decreed that the composition of the bankrupt with his creditors herein, confirmed by this court by order made and entered on the ay of . . , , 19 . . , be and the same hereby is in all respects vacated and set aside and the bankruptcy proceeding reinstated. And it is further ordered that the property of the said bankrupt be and hereby is restored to the trustee herein and the said trustee directed to pro- ceed with the administration of this estate, as provided in the Bankruptcy Act. , D.J. Form No. 105. Petition for Extension of Time to Apply for Discharge."^ In the District Court of the United States for the District of In the Matter of Bankrupt. To the Honorable , District Judge : Your petitioner respectfully shows: That he is the bankrupt herein. 51. Consult Section Fourteen, generally. iff o. 106.] Cebtificate fob Extension of Time. 1315 That more than twelve and less than eighteen months have elapsed since th^e day of , , . ., 19 . . ., vyhen he was adjudicated bankrupt. That he was unavoidably prevented from filing an application for a dis- charge within twelve monhts after such adjudication for the following reasons :^* , That he desires to file such application and secure a discharge. That no previous application has been made to this or any other court for 'the order hereinafter asked. Wherefore your petitioner prays for an order extending his time to file such petition for discharge until the expiration of eighteen months from the date of such adjudication. Dated, , , , , 19. . . Petitioner. [Add verification as in Form No. 66.] Foiin No. 106. Referee's Certificate on Application for Extension of Time.°> In the District Court of the TJnitpd States for the District of In the Matter of Bankrupt To the Honorable , District Judge : I, , referee in bankruptcy in charge of this proceed- ing,: do hereby certify : That the above-named bankrupt was adjudicated herein on the day of , 19 . . . That, from the files and records of such proceeding and any information possessed by me, there appears no reason why such bankrupt's petition for an extension of time to file application for a discharge should not be granted ;"* and that, in my opinion, such bankrupt has not been guilty of laches in applying for his discharge. I, therefore, recommend that his petition for extension of time be granted. Dated, , , , ....... 19 .. . Referee in Bankruptcy. 52. Here give reasons as, for instance, 54. Or, if reasons against the granting lack of funds to pay expenses, illness, of the petition or any facts which should absence, etc. See § 14-a. be brouqht to the attention of the iudge 53. This certificate is not required, but exist, state them here. Consult Section is often applied for, the referee having all Fourteen. the facts, before him. 1356 Supplementary Toems. [Ko. 107. Fonn No. 107. Older Extending Time to Apply for Discliarge.53 In the District Court of the United States for the District of. In the Matter of Bankrupt . In Bankruptcy No. Whereas, a petition for an extension of time to apply for discharge, as provided in § 14-a of the bankruptcy law of 1898, has been filed by the above-named bankrupt, and an order to that effect is recommended by , Esq., the referee in bankruptcy in charge of this pro- ceeding ; now, on motion of , Esq., attorney for said bankrupt. It is ordered: That the time of , the bankrupt herein, to apply for a discharge be, and the same hereby is, extended until the expiration of eighteen months from the day of , 19 ... , the date of his adjudication herein. Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19 . . . f Seal of 1 I the court. I 55. This order usually follows the peti- tion and certificate. Forms Nos. 105 and 106. Consult Section Fourteen, ante; and for other forms on proceedings for a dis- Clerk. charge, see Forms Nos. 57, 58 and 59, as supplemented by Forms Nos. 108, 109, 110, 111, 113, 114, and 115. See also General Order XXXI. No. 108.] Application fob Discharge. 1357 Pom "So. 108. Order to Show Cause on Application for Discbarge.i>6 In the District Court of the United States for the District of ,, In the Matter of Bankrupt . ^ In Bankruptcy No. . . . Whereas, application has been made by the above-named bankrupt for a discharge, as provided by § 14-a of the bankruptcy law of 1898; now, on motion of , Esq., attorney for such bankrupt, It is ordered : That all creditors of ^^ , a bankrupt, as well as all other parties in interest, show cause, at a hearing to be had on such application before the District Court pf the United States for the District of , at , in the of , in said district, on the day of , 19. . . , at .... o'clock, . . m., or as soon thereafter as such hearing may be had, why such application should not be granted. That notice of such hearing be given by mailing a copy of this order at least ten days prior to the date set for such hearing to each of the creditors, parties in interest and attorneys ^* entitled to notice of proceedings herein, and by publishing a copy hereof in the designated newspaper of the county district of such bankrupt's residence, not later than one week prior to such date."" That suchinotice be so given by, or under the direction of, the referee in bankruptcy in charge of this proceeding.®" Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19 . . . f Seal of 1 ■ > I the court, j cierh. 56. This form is intended as a substi- and , as individuals, members of tute for the " Order of Notice " which is a such copartnership, bankrupts." part of Form No. 57. For criticisms of 58. For instance those designated by cred- same, see Sections Fourteen and Fifty- itors under General Order XXI ( 2 ) . eigW. 59. See § 58-b, and compare § 58-a(2). 57. In partnership cases, substitute ; " of 60. Or by the clerk, as is the practice in a partnership and each district. 1358 Supplementary Forms. [No. 109. Porm No. 109. Referee's Ceitificate of Confonnity on Discharge.si In the District Court of the United States for the District of Ik the Mattee of Bankrupt y In Bankruptcy Xo. To the Honorable , District Judge : I, , referee in bankruptcy in charge of this proceeding, do hereby certify : That I have given the notice of the hearing on the application of the bankrupt for a discharge, as directed by an order dated the day of , 19. . ., herein, as appears by the affidavit of mailing®* , and the affidavit of publication, hereto attached and made a part hereof. That, from the files and record-book of this proceeding, it appears that was adjudicated bankrupt herein on the day of ,19... That the administration of said bankrupt's estate is closed.®^ That from such files and record-book, it satisfactorily appears that such bankrupt has not committed any of the offenses or done any of the acts which would be an objection to his discharge, and that, in my opinion, such appli- cation should be granted.^ Dated, , , , , 19 . . . Referee in Bankruptcy* 61. This form conforms to the practice in 63. Or, if the case is not closed, state the those districts where the referee, and not facts, as : " not closed, but has proceeded the clerk, gives the notice of application to a first meeting and choice of trustee, and for a discharge. It is usually drawn by the bankrupt's examination is completed;" the referee. Consult Section Fourteen, gen- or " to a first dividend." erally, for practice. See also forms just 64. If the contrary is true, or there is ante and post. ^ any reason why the hearing should be post- 62. Or "my certificate of mailing" if poned, state the facts and make the proper the referee mails the notices himself. reconmiendation. Nos. 110, lll.J Discharge ; Objections. 1359 Form No. 110. Appearance by Objecting Creditor on Discharge.ss In the District Court of the United States for the District of In the Mattee of Bankrupt . ■ > In Bankruptcy No. To the District Court of the United States for the District of : The clerk of this court will please enter my appearance as attorney for , of , , a creditor of , the above-named bankrupt, who desires to file a specification of objection to the application of such bankrupt for a discharge. Dated, , , , , 19. . . Attorney for Objecting Creditor. Address, Form No. 111. Specification of Objection to Discharge.se In the District Court of the United States for the District of In the Matter of Bankrupt ^In Bankruptcy Ho. ifTow comes , of , , a creditor and person interested in the estate of , the above-named ibankrupt, and opposes and obiects to the granting of such bankrupt's appli- es. Consult, generally, Section Fourteen, .BJiie. See also General Order XXXII, for time within which this appearance must be entered, and compare Equity Rule XVII. 6G. Consult, generally. Section Fourteen, ante, and General Order XXXII. This form is thought more in accord with § 14-b and such general order than is Form No. 58. See also forms just ante and post. 1360 Supplementary Fokms. [^o- l^^' cation for a discharge, and, for grounds of such opposition and objection, does file the following specification : I. That such application should not be granted, because of the following facts, which the undersigned charges to be true, viz. :*^ II. That such application should not be granted, because of the following facts, constituting an additional ground, which the unaersigned charges to be true, viz. :^ Wherefore, objection is made to the granting of such application for a discharge and a hearing and the judgment of the court is asked thereon. Objecting Creditor. [by his Attorney.''^ I. Address, •> lAdd verification as in Form No. 100.] , ] Form No. 112. Exceptions to Specifications. (Hagar and Alexander's Bankruptcy Forma [2d Ed.], No. 275.) United States District Court, District of ._ .^ In the Matter of Bankrupt . <■ In Bankruptcy No, , the bankrupt herein, by , his attorney, hereby excepts to the specifications filed herein in behalf of , as follows : 67. For instance. " That such applicant 68. If a second ground is alleged insert was granted a discharge in a voluntary it here, for instance : " Such applicant has proceeding within six years prior to this committed one of the offenses punishable application, to wit: In the District Court by imprisonment specified in § 29-b of the of the United States for the .... District bankruptcy law of 1898, in that " speeify- of , on the .... day of ing the offense charged, giving time, place, 19..." and transaction. 70. See foot-note 34 to Form No. 100. No. 113.J Dischaege; Oedeb of Eefeeetstce. 1361 1. He excepts to the first of the said specifications on the ground that the same is indefinite, insufficient, and does not state an offense under the United States bankruptcy act which would be a bar to the discharge of the bankrupt, to wit : 2. He excepts to the specification numbered " "on the ground that the allegations contained in the same do not contain any specific aver- ment of fact; that the said specification is vague, indefinite and general; that the said specification does not raise any issue that can be met by the bankrupt herein, as the said specification fails to state what statements were made by the bankrupt which are stated to have been knowingly false when made. 3. That the said specifications hereinbefore excepted to should be dis- missed and stricken out. Dated ., , 19 . . . Counsel for hanhrupt, Street, Form No. 113. Order of Reference to Special Master on Discharge.Ti In the District Court of the United States for the District of In the Mattee of Bankrupt In Bankruptcy No. Whereas, application has been made by the above-named bankrupt for a discharge herein and a hearing set to consider the same, and , a creditor of said bankrupt, having appeared by , Esq., his attorney, in opposition, and filed a specification of objection thereto ; now, on motion of , Esq., attorney for , It is ordered: That the issue made by such application and such specification of objec- 71. Consult, generally, Section Fourteen, form will not be used if the judge deter- and the fprnjs, just ante and post. This mines to hear the matter himself. 86 " 1362 StrPPLEMENTAEY FoBMS. [No. 114. tion be referred to , Esq., as special master, to ascertain and report the facts, with his conclusions thereon. Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19... C seal of 1 I the court, j '•> Clerk. Form Ko. 114. Notice of Hearing Before Special Master. (Hagar and Alexander's Bankruptcy Forma [2d Ed.], No. 279.) United States District Court, District of In the Mattee of Bankrupt >■ In Bankruptcy Ko. Please take notice that the issues raised by the specifications of objection to the discharge of the above-named bankrupt, filed by , have been duly referred to , Esq., as special master (or referee) for examination, testimony and report and that a hearing will be held upon said specifications at the office of the said special master (or referee) No , city of , on the day of , 19 . . . , at o'clock, ... m., and a motion made to dismiss the said specifications, and for such other and further relief as to the court may seem just and proper. Dated , , , 19 . . . Attorney for banJcrupt, Street, City of To ,Esq., Attorney for creditors. ISoa. 115, 116.J Oedee Dijnying Dischakge. 1363 Form No. 115. Report of Special Master on Discliarge.T2 See Form No. 102, and the foot-notes thereto. Such form is equally available in a proceeding for discharge. Form No. 116. Order Denying Discharge, After Reference to Special Master.TS In the District Court of the United States for the District of In the Matter of Bankrupt ►In Bankruptcy No. Whereas, application has been made by , a bankrupt, for a discharge herein, and a specification of objection having been filed thereto by . , a creditor and party in interest, and such specification having been referred to , Esq., as special master, to ascertain and report the facts with his opinion, and such special master having reported and recommended that such specification be sustained, and exceptions''* to such report having been duly filed by said bankrupt, and the same having been argued ; now, on motion of , Esq., attorney for such objecting creditor, , Esq., attorney for the bankrupt, appearing in opposition. It is ordered : That the specification of objection of , a creditor and party in interest herein, be, and the same hereby is, sustained. That the application of the said , a bankrupt, be, and the same hereby is, denied. That'^ the objecting creditor herein recover and have judgment against 72. For practice, consult Section Four- etc., can, it is thought, be adapted to it. teen, and the forms just ante and post. Consult, generally, Section Fourteen, ante. 73. This order is the converse of Form 74. If no exceptions were filed, leave this Noi 59, and, in cases of hearings before a clause out. For practice on exceptions, •.'special master resulting in a report recom- see Equity Rules LXXXIII and LXXXIV. mending a discharge and awarding costs, 75. If costs are allowed, add this. 1364 Supplementary Foems. [Xo. 117. the bankrupt for''^ dollars ($ ), being dollars ($ ), less fiosts, and dollars ($ ), his disbursements herein. Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19 . . . f Seal of 1 ' I the court J Clerk. Form No. 117. Voluntary Petition of Partnership, All Partners Not Joining.'?? To the Honorable , Judge of the District Court of the United States, for the District of : The petition of , and , of the of , in the county of , in said district, by occupation respectively and , respectfully shows : That your petitioners and are and have been partners under the style of , which partnership has had its prin- cipal place of business at the of , in the county of , in said district,^* for the greater portion of the six months immediately preceding the filing of this petition; and that said partnership is insolvent and owes debts in excess of one thousand dollars ($1,000). That your petitioners as individuals each owes debts which he is unable to pay in full. That such partnership and your petitioners are willing to surrender its and their property for the benefit of its and their creditors, respectively, except such as is exempt by law, and desire to obtain the benefits of the bankruptcy law of 1&98, as amended. That the said , whose place of residence is in the of , in the district of . . , has refused and still refuses to join in this .petition; that he is neither a wage-earner nor a person engaged chiefly in farming or the tillage of the soil, and as an individual, owes debts which he is unable to pay in full. That''® such partnership has been dissolved, but there has as yet been no final settlement thereof. 76. The disbursements should be shown 78. If the petition is filed in the district by affidavit at time application for costs of the domicile or residence of one of the is made. partners, here add an allegation to show 77. This form can be. adapted to a case the fact. where all the partners join, and then used 79. If there has been a dissolution, use as a substitute for Form No. 2, if desired. this clause, modifying slightly the previous Consult, generally, Sections Five and Eigh- allegations to iit; if not, leave it out. See teen, and see General Orders VI, VII, and § 5-a. VIII. • No. 117.] Voluntary Petition of Pabtneeship. 1365 That the schedule hereto annexed marked A, and verified by your petitioners' oaths, contains a full and true statement of all the debts of said partnership, and (so far as it is possible to ascertain) the names and residences of its creditors, and such further statements concerning said debts as are required by said law. That the schedule hereto annexed marked B, and verified by your, peti- tioners' oaths, contains an accurate inventory of all qf the property of said partnership, both real and personal, and such further statements*" con- cerning said property as are required by said law. That the schedule hereto annexed marked C, and verified by the oath of your petitioner , contains; a full and true statement of all of his individual debts, and (so far as it is possible to ascertain) the names and places of residence of his individual creditors, and such further statements concerning said debts as are required by said law. That the schedule hereto annexed marked D, and verified by the oath of your petitioner , contains an accurate inventory of all of his individual property, both real and personal, and such further state- ments concerning said property as is required by said law.** Wherefore, your petitioners pray*^ that such partnership and your peti- tioners as individuals may be adjudged bankrupt within the purview of such bankruptcy law of 1898, as amended, and that service of this petition with a subpoena be made upon , such nonconsenting partner, and that such proceedings be had as are provided in said law and General Order. VIII of the Supreme Court and as the court may order. Petitioners. > Attorney of Petitioners. State of County of City of We, and , the petitioning debtors mentioned and described in the foregoing petition, do severally make solemn 80. If exemption is claimed in the part- 82. Prayer should ask for an adjudication nership assets, insert a reference to such of the individuals as well as of the firm, claim here. See Section Six, cmte. In re Wing Yick Co. (D. C, Hawaii), 13 81. Repeat the last two paragrapljs as to Am. B. R. 767. each partner, numbering the schedules. Schedule E and 7, G and H, etc. 1366 Supplementary Foems. [No. 118. oath that the statements of fact contained therein are true, according to the beat of our knowledge, information, and belief. Subscribed and sworn to before me, this day of , 19 . [Attach schedules^ and summary statements for ^ach the partnership and the petitioning partners, using those suggested by Form No. 1, but changing their lettering to correspond to the allegations of the petition.] Form No. 118. Involuntary Petition by Three Creditors.s* To the Honorable , Judge of the District Court of the United States, for the District of : The petition of , of , , and , of , , and , of , , respectfully shows :*' That of the of , in said district, has, for the greater portion of the six months next preceding the date of the filing of this petition, had his principal place of business^* at the of , in the county of , in said district, and is by occupation a That the said owes debts to the amount of one thousand dollars ($1,000) and over, is insolvent, and is neither a wage-earner nor a person engaged principally in farming or the tillage of the soil. (That®* the said is a corporation, organized under the laws of the State of , and that it is engaged principally in trading and mercantile pursuits.) 83. Schedules should be complete both for set out the firm name and add : " composed the firm and for each partner. In re Gay of and ," etc. (D. C.J N. H.), 3 Am. B. R. 529, 98 Fed. 86. Or "resided" or "had his domicile," 870. as the case may be. 84. This form should be executed in 87. If the bankruptcy of i partnership is duplicate. It is intended as a substitute asked, modify this paragraph and those for Form No. 3, which is clearly demur- preceding so as to show the jurisdictional rable. See Sections Three, Four, Five, Eigh- allegations as to the partnership and the in- teen, and Fifty-nine, and the forms for in- dividuals composing it, suggested by Form voluntary proceedings, immediately post. No. 143. 86. If petitioners are corporations, indi- 88. If the alleged bankrupt is a corpora- cate under what laws; if copartnerships, tion, insert this paragraph, modifying the previous allegations where necessary. "No. 118.] Involuntary Petition by Three Ceeditoes. 1367 (That,^* upon information and belief, the said , has less than twelve creditors.) That your petitioners are creditors of said , having provable claims against him which amount in the aggregate, in excess of the value of securities held by them, to five hundred dollars ($500) ; and thaf neither of your petitioners is entitled to priority of payment on his said claim, within the meaning of § 64-b of the bankruptcy law of 1898, nor has either of your petitioners received a preference within the meaning of § 60-a-b of such law, as amended.*" That the nature and amount of your petitioners' claims and the securities held by them, if any, are as follows :'^ That, within four months preceding the filing of this petition, viz. : on the day of , IS ... ,®^ the said , while insolvent, committed an act of bankruptcy in that he did** (That** your petitioners have made diligent effort to find the said within said district ; that he is not, and has not for days been at his place of business ; nor has he during the same time been at his usual place of abode ; that, according to your petitioners' best information and belief, the said has absconded ; and that personal service of a supboena cannot be made on him in said district.) Wherefore,*^ your petitioners pray that service of this petition, with a subpoena, may be made upon , as provided by said bankruptcy law of 1898 as amended, and that he may be adjudged bankrupt within the purview of such law. ) Petitioners. } Attorney for Petitioners. 89. Use only if petition is by one cred- place, transaction, etc., to show unequivo- itor. cally the commission of an act or acts bring- 90. Or as the case may be. See § S9-b. ing the case within one of the subdivisions 91. Set out sufficient facts to inform the of § 3-a. court as to amount, consideration, and the 94. Use only when order of publication like. is to be asked. Change facts in form to fit 92. If the act of bankruptcy was evi- the facts of each case. denced by an instrument that was required 95. If the bankruptcy of a partnership to be recorded or might be recorded, see is desired, modify this clause so that it I 3-b(l), and modify this allegation to fit will ask adjudication of both the partner- the facts. ship and the individuals. See Form Ko., 93. Here set out the act of bankruptcy 117. clearly, giving sufficient facts us to time. 1368 Supplementary Fokms. [No. 119. State of , ^ County of , yss. City of , J and ,'* the petitioning creditors mentioned and described in the foregoing petition, do hereby severally make" solemn oath that the statement of fact contained in the foregoing petition are true, according to the best of their knowledge, information, and belief.®'' Subscribed and sworn to before me, this day of , 19 . Form No. 119. Involuntary Petition by One Creditor Against a Partnership. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 9.) To the Honorable , Judge of the District Court of the United States, for the , . District of : The petition of , of , respectfully shows : First. That and are and have been copartners, doing business under the firm name and style of , and have had their principal place of business at , State and district aforesaid, for the greater portion of the six months next preced- ing the date of the filing of this petition; that the said partnership is insolvent and owes debts to the amount of one thousand dollars and upwards and is neither a wage-earner nor a person engaged principally in farming or the tillage of the soil. Second. That upon information and belief, the said partnership has less than twelve creditors. Third. That your petitioner is a creditor of said and composing the partnership firm of , having a provable claim against said partnership, amounting in the aggregate in excess of securities held by him to the sum of five hundred dollars; that 96. If verified by members of a, partner- 97. If, for any reason, this veriftcatton eliip or oflScers of a corporation, describe is made by attorney, change to fit the facts, the affiants properly. and bring it within the cases cited on p. 218, ante. "No. 119.J Petitioit Against Paetneeship. 1369 your petitioner is not entitled to priority of payment of his said claim within the meaning of section 64 (b) of the United States bankruptcy act and the amendments thereof, nor has he received a preference within the meaning of section 60 (a-b) of such law as amended. Fourth. That the nature and amount of your petitioner's claim is as ■ follows : No part of said claim has been paid though duly demanded. Fifth. Your petitioner represents that the said and , composing the partnership firm of , while insolvent and within four months next preceding the date of this petition, committed an act of bankruptcy in that they did heretofore, to wit: {Here specify act, giving facts, bringing under section 3-a.J Wherefore your petitioner prays that service of this petition with a sub- poena may be made upon the said and individually and as copartners doing business imder the firm name and style of , as provided in the acts of Congress relating to bankruptcy and that they as individuals and the firm of may be adjudged bankrupt within the purview of said acts. Dated, , , ,19... Petitioner. Attorney for Petitioner, Office and Post Office Address, Street, IVerifieation.'] 1370 Supplement ABT Fokms. [No. 120. Form No. 120. Petition for Service by Publication. (Hagar and Alexander's Bankruptcy Forms [2d Ed.],, No. 44.) United States District Court, District of , In the Matter of xin Bankruptcy Ko. ... Alleged Bankrupt . To the Honorable , Judge of the District Court of the United States for the District of : The petition of Messrs respectfully shows to this court and alleges : 1. That your petitioners are the attorneys for the petitioning creditors herein. That a petition in bankruptcy was duly filed and an application for the appointment of a receiver was made, which application was granted, and the receiver is now in possession of assets of the above-named alleged bank- rupt. 2. A subpoena was issued to the marshal and a return thereto was made, and the marshal returned that he was unable to serve the alleged bankrupt personally as he was without the jurisdiction of this court. 3. That the above-named alleged bankrupt (is a corporation organized under the laws of the State of ) resides, (or has its principal office and place of business) at No , city of 4. Your petitioners further allege that the above-named alleged bankrupt has not designated a person upon whom process might be served in the State of 5. Your pdlitioners further allege that the alleged bankrupt is without the jurisdiction of this coiirt and has absconded. That by reason thereof, personal service of the subpoena herein upon the alleged bankrupt is im- possible. Wherefore, your petitioners- pray that an order may be made herein permitting service by publication upon the above-named alleged bankrupt. And your petitioners will ever pray. Dated, , , , ...'..., 19.. . ) Petitioner. '[^t^atificatiorul No. 121.] Service by Publicatic>n. 1371 Porm No. 121. Order of Pulilication. (Hagar and Alexander's Bankruptcy Forma [2d Ed.], No. 45.) United States District Court, ... District of In Bankruptcy. In the Matter OF Alleged Bankrupt. No. It appearing to my satisfaction from the petition of * , Terified the day of , 19. . ., that a petition was filed in this court on the day of , 19. . ., praying that the above named be adjudged a bankrupt and that a subpoena directed to said alleged bankrupt was 'duly issued out of this court to the marshal of this district and that the said marshal has been unable to serve the same upon the alleged bankrupt, and that said alleged bankrupt is not now within this district so that personal service may be made upon him, and that diligent efforts have since been made to ascertain the whereabouts of the said alleged bankrupt , but that he is not now within the jurisdiction of this court, it is Now, on motion of , , Esq., attorney for the petitioning creditors. Ordered, That the above named alleged bankrupt plead or answer on or tefore the day of , 19. . . to the petition herein, filed in the ofiice of the clerk of this court, on the day of 19 ... ; and in case of his failure to plead or answer thereto, adjudication shall he made against him according to the prayer of said petition. And it is further ordered that this order be published in the once a week for two successive weeks, said publication to commence not later than the day of , 19 . . ., and that a copy of this order be mailed to the said alleged bankrupt at his last known residence, to ■wit : No Street, in the City of , on or before the date of the first publication. Dated ,19... 98. This form is thought to be in accord- ance with the new method of service by pub- lication, provided by the amendatory act of 1903. See Section Eighteen. The subpoena should be made returnable at least ' ' ten days after the last publication." D.J. As to the requisites of an order of publi cation, see Bauman Diamond Co. v. Hart (C C. A., 5th Cir.), 27 Am, B. K. 6.^2, 192 Fed 498; In re McDonald (D. G., Hawaii), 30 Am B. B. 120. 1372 Supplementary j: oems. [No. 122. Form No. 122. General Appearance in Involuntary Ca8e.S9 In the District Court of the United States for the District of In the Matter of Bankrupt ► In Bankruptcy No. To the District Court of the United .States, for the District of : The clerk of this court will please enter my appearance as attorney for , of , , the alleged bankrupt' who desires to plead herein in response to the petition of and and , that the said be adjudicated bankrupt. Dated, , , ,19... Attorney for . . . Address, 99. This appearance must now be filed within five days after the return day. See. § 18-b, as amended. Consult Section Eigh- teen, ante, and see General Order IV aad Equity Eule VII. 1. Or "a creditor of the alleged bank- rupt," if a creditor, and nat the bankrupt, appears. No. 123.J Appeaeance by Intervening Ceeditoe. 1372 Fonn No. 123. Appearance by Intervening Creditor.2 In the District Court of the United States for the District of In the Matter of Bankrupt ► In Bankruptcy No. To the District Court of the United States for the District of : I, , a creditor of , against whom a petition for an adjudication in bankruptcy, filed by , on the day of , 19 ... , is pending, desire to appear in such proceeding; and, to that end, the clerk of this court will please enter my presence, by , Esq., of l-^o St., , , whom I hereby appoint as my attorney for such proceeding, and take note that I join in such petition as provided in § 59-f of the bankruptcy law of 1898. Dated, , , , ,19... Intervening Creditor-. •Address State of . . . County of City of . On this day of , 19 ... , before me appeared , the intervening creditor above mentioned, and acknowledged the execution of the above. 2. Consult, generally, Sections Eighteen also numerous forms for involuntary cases and Fifty-nine, especially the latter. See immediately ante and post. 1374 Supplementary Fobms. [No. 124. Form No. 124. Petition to Intervene. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 13.) United States District Court, or the District of Iw THE Mattee of Alleged Bankrupt >-ln Bankruptcy Ko. To the Honorable , Judge of the District Court of the United States, for the District of : The petition of respectfully alleges and shows on in- formation and belief: 1. That your petitioner, , is a creditor of the above named, , having a provable claim against the same amounting to in excess of securities held by him. That the nature and amount of your petitioner's claim is for : and that no part of said plaim has been paid, although duly demanded. 2. That on or about the day of , 19 ... , filed in the office of the clerk of this court a petition that be adjudged an involuntary bankrupt. That the said petition is still pending and that your petitioner desires to join in the petition of the said , that the said be adjudged an involuntary bankrupt. Wherefore, your petitioner would respectfully pray that he be allowed to join in the said petition of , that the said be adjudged a bankrupt within the purview of the bankruptcy act 'of 1898 and the amendments thereof. PetUioner. ^Verification.^ ^0. 126.J Obdeh Allowing Inteevention. 1375 Form No. 125. Order Allowing Intervention. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 14.) At a stated term of the District Court of the United States, for the District of , held at the United States Court House, City of , on the day of , 19 . . . Present : Hon , District Judge. In the Matter of Alleged Bankrupt ► In Bankniptcj No. Upon reading and filing the annexed petition of verified , 19 . . . , praying that he be joined as a petitioning creditor in the above-entitled proceeding, and upon the petition in bankruptcy and all proceedings heretofore had herein, and upon motion of , attorney for said petitioner, it is Ordered, that be and he hereby is allowed to intervene herein, and is hereby joined and made a petitioning creditor, in the petition praying for the involuntary adjudication bf filed in the office of the clerk of the district court of the United States, for the district of , on the day of ,19 ... D.J. 1376 SUPPLEMENTAEY FoEMS. [ISTos. 126, 127. Form No. 126. Application foi Jury Trial in Involuntaiy Case.s In the District Court of the United States for the District of In the Matter of Bankrupt »In Bankruptcy No. I, , of the of , in said district, the alleged bankrupt, who have this day filed an answer to the petition herein for an adjudication in bankruptcy, do hereby apply for and demand a trial by jury in respect to those questions concerning which I am entitled thereto by the terms of § 19-a of the bankruptcy law of 1898. Dated, , , , , 19 . . . Answering Bankrupt* Form No. 127. General Answer in Involuntary Case.s In the District Court of the United States for the District of In the Matter of Bankrupt ..In Bankruptcy No. ... Now comes , of , , the person against whom a petition for an adjudication in bankruptcy has been filed 3. Consult, generally, Sections Eighteen and Nineteen. See also Form No. 6. This application can be made only by the alleged bankrupt. For the time within which it must be filed, see § 19-a. 4. This application should be made by the alleged bankrupt, and not by his attorney. 5. This form supplements Form No. 6. Consult, generally. Section Eighteen; and for available grounds for an answer see §§ 3-a-b, 4, 5, and 59. For form for adju- dication, see Form No. 13 ; for dismissal, see Form No. 11. See also, generally, the Equity Rules. 'No. 127.] Answee in In^voluntaky Case. 13T7 herein,* and does hereby controvert such petition and file the following answer i'' I. That^ the said did not commit an act of bank- ruptcy as alleged in such petition, but, on the contrary, the undersigned charges the facts to be : that* II. That » and and ......... , the petitioning creditors herein,, have not provable claims against the said which amount in the aggregate, in excess of the value of securities held by them, to five hundred dollars (^00), but, on the contrary, the undersigned charges the facts to be : that^° Wherefore, answer is made to such petition and a hearing'^ and the judg- ment of the court is asked thereon. Answering Bankrupt?* [by > his Attorney?* Address , J [^Add verification as in Form No. 100, changing to fit the facts, as, for instance, substituting " answer " for " specification of objection," therein.] 6. Or " a creditor of , against but samples. Each ansTrer should be #hom," showing clearly the possession of adapted to the facts relied on. a provable debt ( § &3, as interpreted by 9. Here the facts relied on by the answer- f 57 ) . ing bankrupt or creditor should be pleaded. 7. There may, of course, b.e several counts 10. Id. in the answer. Careful pleading seems to H. Or " trial." require one for at least each material fact 12. Or " creditor." at issue. 13. See foot-note 34 to Form Ko. 100. S. The ti^o objections here suggested are 87 1378 Supplementary Foems. [No. 128. Form No. 128. Answer Alleging More Than Twelve Creditors.u In the District Court of the United States for the District of In the Mattes of Bankrupt >- In Bankruptcy No. . . Now comes , of , , the person against whom a petition for an adjudication in bankruptcy has been filed herein,^® and does hereby controvert such petition and file the following answer : That the creditors of the said are twelve and more in number. That annexed hereto is a list of all such creditors, with their addresses,^ under oath, as required by § 59-d of the bankruptcy law of 1898. Wherefore, answer is made to such petition, and a hearing^' and the judgment of the court is asked thereon. Answering Bankrupt." [by his Attorney, Address , •J List of Creditors and Addresses. The following is the list of the creditors and their addresses, referred to in the foregoing answer: Names of creditors. Addresses. 14. Only available where the petition is within § 59-d. Consult, generally, Sections Fifty-nine and Eighteen. See foot-notes just ante and post. Answering Bankrupt." 16. See foot-note 6 to Form No. 127. 18. A jury trial cannot be demanded on the issue raised by this answer. 17. Or " creditor." "No. 129.J Dbmueebb to Petition. 1379 State of . . County of City of I, , the answering bankrupt ^* mentioned and described in the foregoing answer, do hereby make solemn oath that the statements of fact contained in such answer are true, according to the best of my knowledge, information, and belief; and also that the list annexed thereto and therein referred to comprises all of the creditors of the said and gives their addresses, so far as they are known or can be ascertained.^® Subscribed and sworn to before me, this day of , 19 . Form No. 129. Demurrer to Petition. (Hagar and Alexander's Bankruptcy Forms, Ko. 14.)' United States District Court, for the District of In the Mattee of Alleged Bavkrupi >-In Bankruptcy Now Now comes , the above-named alleged bankrupt, (or a creditor of alleged bankrupt,) by , his attorney, by protestation, not confessing or acknowledging all or any of the matters or things in said petition in bankruptcy set forth to be true in such manner and form as the same are therein set forth and alleged, and demurs to the petition of , filed herein , 19 ... , upon the following grounds : First: That it appears on the face of the said petition that the court is without jurisdiction to grant the relief prayed for in said petition. Second: That said petition is wholly without equity. 18. See foot-note 34 to Form No. 100. names and addresses of the creditors sliottld 19. If the a£Sdavit is made by an answer- be given. Ing creditor, his efforts to ascertain the 1380 SUPPLBMSNTABT FoEMS. [No. 130. Third: That aaid petition does not state facts sufficient to warrant the granting of the relief prayed for therein. Fourth: That the petitioners have not hy their said petition shown themselves entitled to the relief therein prayed for, or any part thereof. Attorney for Alleged Bankrupt (or Creditor). State of , ^ County of ., >ss.: City of J , being duly sworn, deposes and says : That he is the herein ; that the foregoing demurrer is not inter- posed for delay. > » Sworn to before me this day of , 19 . . . I hereby certify that the foregoing demurrer is in my opinion well founded in po|nt of law. Dated , ,19... » Attorney for . . ..st;.;.: 3;».» .xs* » Form No. 130. Notice of Argument of Demimer. United States District Court, for the District of . . . .jojm Ik thb Mattee or Alleged Bankrupt >.In Bankruptcy No. ... Please take notice that the demurrer of , alleged bankrupt (or creditor herein) to the petition filed herein on the day of , 19 ... , will be brought on for argument before the Hon. , United States District Judge, for the District of at the United States Court House, in the city of , on the day of , 19. . ., at .... o'clock in the noon of said day ITo. 131.]- Oedee of Eefeeence; Involuntaey Case. 1381' and a motion made to overrule said demurrer with costs and for such other or further relief as to the court may seem just and proper. Dated , , 19... To , Esq., Attorney for Alleged Bankrupt, (or Creditor.) Attorney for PetUionirig Creditor!, No Street, City of Form No. 131. Order of Reference to Special Master in Involuntary Case.zo In the District Court of the United States for the District of In the Matter of Bankrupt . ► In Bankruptcy No. Whereas, a petition has been filed -herein asking an adjudication in bankruptcy of the above-named bankrupt, and , the said bankrupt,^^ having appeared by , Esq., Iiis attorney, and filed an answer to such petition ; now, on motion of , Esq., attorney for , It is ordered: That the issue made by such petition and answer be referred to .......... Esq., as special master, to ascertain and report the facts, with his conclusions thereon. Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19 . . . f Seal of 7 |. tb« court. I 20. See foot-note 36 to Form Xo. 101. Consult, generally, Section Eighteen, and the forms just ante and poat. Clerk. SI. Or " a creditor of lueh bankrupt" 1382 SuPPLEMENTABlf FoKMS. [No. 132. Form No. 132. Notice of Hearing Before Special Master. (Hagar and Alexander's Bankruptcy Forms [2d Ed,], No. 33.) United States District Court, for the District of In the Matter of Alleged Bankrupt In Bankruptcy No. Sib: Please to take notice, that a hearing under the order of reference entered on , in the above entitled proceeding, will be brought on before , Esq., as special master, at his office, No street, city of , on the day of , 19 . . . , at .... o'clock, . . M. of that day, or soon thereafter as counsel can be heard. Dated the day of , 19 . . . Yours, etc., Attorney for To ,Esq., Attorney for Nofl. 133, 134.] Notice of Teial. 1383 iV>rm Ho. 133. Notice of Trial in Involuntary Proceeding. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 24.) United States District Court, for the District of , ,;« IW THE MaTTBB of Alleged Bankrupt. ^In Bankruptcy Ko. ... Please take notice that the issues raised by the petition and answer filed herein will be brought ou for a trial and a motion will be made for judgment as prayed for in the petition or to dismiss the petition herein, at a term of this court, to be held in and for the district , at the court room, in the United States Court House, in the city of , , on the day of , 19 ... , at .... o'clock in the noon of that day, or as soon thereafter as counsel can be heard. Dated, ,, , , 19. . . Yours, etc., > Attorneys for Petitioners, [or Alleged Bankrupt.] Street To Messrs Attorneys for Form No. 134. Report of Special Master in Involuntary Caie.^s See Form No. 102, and the foot-notes thereto. With slight changes in the recitals, such form is equally available on a reference in an involimtary case. M. For practice, consult Section Eighteen, and the forms just ante and pott. 13§4 Supplementary Forms. [No. 136. Form No. 135. Exceptions to Report of Special Master in Involuntary Case.ss In the District Court of the United States for the District of In the Matter of Bankrupt >-In Bankruptcy Ko. Now comes , of , ,^ who previously filed herein an answer to the petition for an adjudication in bankruptcy of the above-named bankrupt,*' and excepts to the report of , Esq., as special master, appointed by an order made herein on the day of , 19 . . . , in that such report *® for the following reasons i"^ And prays that the same may be heard, as provided in Equity Rule LXXXIII. Dated, , , , 19. . . 23. For practice, see Equity Rules LXXXIII and LXXXIV. Consult, gener- ally. Section Eighteen. For form for adju- dication, see Form No. 12 ; for dismissal, see Form No. 11; for costs. See General Order XXXIV and S 2(18). 24. If exceptions are filed by attorney, as is usual, add "by , his attorney bereia." [or Excepting Creditor. Attorney for Excepting Address . . . .] 25. Or if the exceptions are taken by the petitioning creditor, change to fit the facts. 26. Here state the error or errors ex- cepted to. 27. Here give the grounds of the excep- tions, that the court and the opposing at- torney may know fully the issue to be de- termined on the bearing on the exceptions. "No. 136.] Obdee upon Eepoet of Mastek. 1385 Form Ho. 136. Older Upon Seport of Special Master Diaraisiing Petition, Xtc. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 34.) At a stated term of the District Court of the United States for th» District of , held at the United States Court House, City of , on the day of , 19. .. Present : Hon , District Judge. In ths Mattke of Alleged Bankrupt ► In Bankruptcy No. A motion having been made herein by for an order confirming the report of , Esq., special master, appointed herein under an order dated , 19 ... , and dismissing the petition in bankruptcy heretofore filed herein with costs and for an order vacating and discharging the order of , 19 ... , appointing a temporary receiver herein and for other and further relief, and the said motion having duly come on for argument, now on the involuntary petition in bankruptcy filed herein 19 . . . , by , and , creditors, the answers filed thereto by , a creditor, and by , the alleged bankrupt, the order of this court dated , 19 ... , appointing , receiver of the estate of said alleged bankrupt, the order of reference herein dated , 19 ... , and the report of said special master dated , 19 ... , and notice of this motion with proof of due service thereof, and the report and petition of said , verified , 19 ... , for an allowance for his services and disbursements to be paid by the petitioning creditors, and for his discharge as such receiver, and for further relief, and the petition of , attorney for said receiver, verified , 19 . . . , for an allowance for his services and disbursements as attorney for said receiver, and on all the pro- ceedings had herein, after hearing , Esq., of counsel for , alleged bankrupt herein, . . ; , Esq., attorney for the petitioiiing creditors herein, and Esq., attorney for the receiver herein, and due deliberation having been had, it is 1386 SUPPLEMENTAEY FoEMS. [No. 137. Ordered, that the report of said special master herein be and hereby is in all respects confirmed and that the petition in bankruptcy filed herein , 19 ... , praying that said be adjudged an involuntary bankrupt, be and the same hereby is dismissed with $ costs and disbursements, as taxed, which said sum, , and are hereby directed to pay to the said , alleged bankrupt, and it is further Ordered, that the matters of the said report, application and petition of , Esq., temporary receiver herein, and the petition of his said attorneys filed herein , 19 . . . , be and the same hereby are referred to , Esq., as special master for examination, testimony and report thereon with all convenient speed. D.J. Form No. 137. Petition of Petitioning Creditors for Dismissal in Involuntary Case.ss In the District Court of the United States for the ...... District of In the Mattbe of Bankrupt . In Bankruptcy Xo. To the Honorable , District Judge : Your petitioners ^' respectfully show : That, on the day of , 19 . . . , they filed a petition herein for an adjudication in bankruptcy against , of the of , in said district. That, since that time, the following proceedings have been had :*° That your petitioners desire and consent that said petition and proceeding be dismissed. That annexed hereto is a list of all the creditors of the said , with their addresses, so far as your petitioners know or have been able to ascertain. as. Consult, generally, Sections Fifty- tion, and, if so, the allegations should be nine. Fifty-eight, and Eighteen. changed to fit the facts. 29. This petition can, of course, be made 80. Here give a brief summary of the by the bankrupt, with the consent of the pe- steps in the proceeding to date. titioning creditors, or for want of prosecu- 2^0. -137.] Petition foe Dismissal. 1387 That no previous application has been made for the order hereinafter asked. Wherefore, your petitioners pray that such proceeding and petition be dismissed, and that notice be given such creditors as is provided by § 58-a (8) of the bankruptcy law of 1898. Petitioners. List of Creditors and Addresses. The following is the list of the creditors and their addresses referred to in the foregoing petition : Names of onditois. Addreeaes. State of . . County of City of Petitioners.'^ yss. We, , , and , the petitioners mentioned and described in the foregoing petition, do hereby severally make solemn oath that the statements of fact contained in such petition are true, according to the best of our knowledge, information, and belief; and also that the list annexed thereto and therein referred to com- prises all of the creditors of the said and gives their addresses, so far as they are known or can be ascertained. iSubscribed and sworn to before me, this day of , 19. . , 31, This petition cannot be made by the attorney, save when the petition for an ad- judication can be so made. See, generally. Section Eighteen, and Form No. 118. 1388 SUPPLEMENTAEY FOEMS. [No.. 138. Form Ho. 138. Order to Show Cause on Petition for Dismissal in Involuntary Case.sa In the District Court of the United Statee for the District of I» THE Mattbe of Bankrupt . >-In Bankruptcy No. Whereas, application has been made by the petitioning creditors herein ^ for the dismissal of their petition for an adjudication in bankruptcy against , of the of , in said district ; now, on motion of , Esq., attorney for such alleged bankrupt, It is ordered: That all creditors of ** show cause,- before, the district court of the United States for the district of , at , in the of , in said district, on the day of , 19 . . . , at . . M., or as soon thereafter as such hearing may be had, why such application should not be granted. That notice of such hearing be given by mailing a copy of this order at least ten days prior to the date set for such hearing to each of the creditors whose names appear in the list of creditors annexed to the petition on which this application is based, and by publishing a copy hereof in the designated newspaper of such alleged bankrupt's residence, not later than one week prior to such date.** Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19 . . . J Seal ot } > { the court. ) Clerk. S3. Compare Form No. 137 and the foot- 34. See foot-note 57 to Form No. 108. notes thereto. 85. { 58-b. 33. See foot-note 29 to Form No. 137. No. 139.] Obdeb of Dismissal. 1389 Porm No. 139. Older of DiuniHal on Petition of Petitioning Creditots and After Notice in InyoltLaUtj Case.36 In the District Court of the United States for the District of In the Mattee of >-In Bankruptcy No. ... Bankrupt Whereas, a petition was, on the day of , 19. . ., filed herein for an adjudication in bankruptcy against , and application was subsequently made for a dismissal of such proceeding and petition by the petitioners therein,^^ and an order to show cause having been granted thereon, and notice having been given as provided in said order, such matter having been regularly called and no creditor having appeared to oppose,^* and the court being' satisfied that said petition should be granted ;" now, on motion of , Esq., attorney for , It is ordered: That the petition herein to have adjudicated bank- rupt and the proceedings thereon be, and the same hereby are, dismissed.*" Witness, the Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , 19. . . f Senl of I ' I the court J Clerk. 86. See Forms Nos. 137 and 138 and the 39. Or, if the application is to be re- foot-notes thereto. fused, "denied." 37. Or, if by the bankrupt, or for want of 40. Or, if the application for dismissal prosecution, state the facts. is refused, change to conform to the order 38. Or, if a creditor appeared, note ap- made, pearance and the facts. 13S0 SupPiEMENTAEY FoEMS. [No. 140. Form Nx>. 140. Ordet of Adjudication and Refeience. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 27.) In the District Court of the United States, for the District of In the Mattek op Bankrupt . >.Iu Bankruptcy No. ... At , in said district, on the day of , A. D. 19 ... , before the Honorable , Judge of the said court in bankruptcy, the petition of that he be adjudged bankrupt, within the true intent and meaning of the acts of Congress relating to bankruptcy, having been heard and duly con- sidered, the said hereby declared and adjudged bankrupt accordingly. And it is further ordered, that the said matter be referred to one of the referees in bankruptcy of this court, to take all such further pro- ceedings therein as are required by said acts of Congress, and all such acts therein as the court might take or perform, except such as by law or the general orders of the Supreme Court are required to be performed by the judge; and that the said bankrupt shall attend before said referee on the day of 19 . . . , at ... o'clock, . . m.^ and thenceforth shall submit to such orders as may be made by said referee or by the eonrt relatii^ to said bankruptcy. Witoess, Ae Honorable , Judge of the said court, and the seal thereof, at the city of , in said district, on the day of , A. D. 19. . . District Judge. •> Chrh. No. 141.] Oedee Dexying Adjudicatioit. 1391 Form No. 141. Order Denying Adjudication. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], Jso. 30.) United States District Court, for the District of In the Matter of Alleged Bankrupt. ► In Bankruptcy No. At , in said district, on day of , A. D. 19 ... , before the Honorable , Judge of the district of This cause came on to be heard at , in said court, upon the petition of and and , that be adjudged a bankrupt within the true intent and meaning of the acts of Congress relating to bankruptcy, and [here state the proceeding ^ whether there was no opposition, or if opposed, state what proceedings were had^ . And thereupon, and upon consideration of the proofs in said cause (and the arguments of counsel thereon, if any), it was found that the facts set forth in said petition were not proved; and it is therefore adjudjed that said is not a bankrupt, and that said petition be dis- missed, with costs. Witness, the Honorable , Judge of said court, and the seal thereof, at , in said district, on the day of , A. D. 19... f Seal of 1 • • ' I the court ] District Judge. ^^9" SUPPLEMENTAKY FoEMS. [No. 142. Form No. 142. Petition to Vacate Adjudication. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], STo. 43.) United States District Court, for the District of ........ In the Matteb of Bankrupt ,.In Bankruptcy No. To the District Court of the United States, for the District of : The petition of respectfully shows and alleges : First: That he resides in the city of , State of Second: That your petitioner is a creditor of said alleged bankrupt and his claim is based upon the following facts : Third: That heretofore and on or about the day of , 19 ... , your petitioner instituted an action in the court of county against the above-named , alleged bankrupt, as defendant. That said action was brought to recover the sum of $ , and on the day of , 19 . . . , a judgment was rendered in said action in favor of petitioner. Fourth: That an execution upon the said judgment was duly issued to the sheriff of county, the said judgment having been duly docketed in the office of the clerk of county. That said execution was duly levied upon the real property of the said defendant. Fifth: That on , 19. . ., a petition in involuntary bank- ruptcy was filed in this court against the above-named , and a receiver appointed. That thereafter an alleged adjudication was made therein in which the said was declared a bankrupt. The said receiver has made a demand upon the sheriff to deliver over to him all the property of heretofore levied upon under the execution obtained by petitioner upon his said judgment. Sixth: That your petitioner is informed and verily believes that the aforesaid petition in bankruptcy filed herein did not set forth the jurisdic- tional facts required under the bankruptcy act, and is defective and void, and insufficient U) confer jurisdiction upon the court to proceed therein. That No. 143.] Notice of Motion to Vacate Adjudication. 139.3 the said petition and subpoena required to be served upon the alleged bank- rupt by law were never in fact properly served upon the said bankrupt, as required by law to obtain jurisdiction over the said bankrupt, and that the purported service of the same upon the said was illegal and void, in that said petition and subpoena were alleged to have been served outside of this district, and not upon the alleged bankrupt personally. That the alleged bankrupt had absconded and left the jurisdiction That this court never in fact, acquired any jurisdiction whatever in the said bankruptcy proceeding, and the alleged adjudication was for that reason without juris- diction and void. Your petitioner therefore prays that an order be granted herein, vacating and setting aside the alleged adjudication in bankruptcy herein, vacating the appointment of the receiver herein and all proceedings heretofore had, and dismissing the petition heretofore filed herein. That no previous application for this order has been made. Dated , ,19... . . ., Petitioner. ^Verification.'} Form No. 143. Notice of Motion to Vacate Adjudication. (Hagar and Alexander's Bankruptcy Forms, No. 40.) United States Distriet Court, for the , District of . . . In the Mattee of Bankrupt In Bankruptcy No. SiBs: Please take notice that upon the annexed petition oi , duly verified the day of , 19 ... , and upon all the pleadings and proceedings heretofore had herein, the undersigned will move this court at a term thereof, to be held in the United States Court House at , on the day of , 19 . . . , at . . . . o'clock in the .... noon of that day or as soon thereafter as cotmsel can be heard, for an order vacating and setting aside the alleged adjudication in 88 ■ 1394 SUPPLEMENTAKY FoEMS. [No. 144. bankruptcy herein, and all proceedings thereon, and dismissing the petition heretofore filed herein, and for such other and further relief as to the court may seem just and proper in the premises. Dated , ,19... Yours, etc., Attorney for Petitioner, Office and Post Office Address, Street, To »Esq., Attorney for Petitioning Creditors. To ,Esq., Attorney for Creditors. Form No. 144. Demand for Juiy Trial (Hagar and Alexander's Bankruptcy Forma ['2d Ed.], No. 22.) United States District Court, for the District of -s; In the Mattee of Alleged Bankrupt. >.Ia Bankruptcy .Mo. .. I, , of , in said district, the alleged bankrupt, who has this day filed an answer to the petition filed on the day of , 19 . . . , by , and , praying for an adjudication in involuntary bankruptcy, do hereby apply for and demand a trial by jury in respect to those matters concerning which I am entitled thereto- by the pro- visions of section 19-a of the bankruptcy act. Dated ,19... Alleged Bankrupt No. 145.] Cebtificate of Disqualification. 1395 Form Ho. 14S. Referee's Certificate of Disqualification.^! In the District Court of the United States for the District of In the Matteb of BamJerupi . -In Bankrupted No. .. To the Honorable , District Judge : I, , one of the referees in bankruptcy of your court, do hereby certify that I am disqualified to act as such in the above entitled proceeding,*^ for the following reasons :** I do, therefore, return the papers transmitted to me by the clerk. Dated, , , , 19. . . 41. For general disqualification, see § 35; for what referees may not do, § 39-b; for reference of case after adjudication, see § za 42. Or the disqualification ma; exist as Referee in Bankruptcy. to a portion of the proceeding, as in a con- test on a certain claim. 43. Here insert reasons, as relationship, relation of attorney and client with bank- rupt, or any other reason (see $22), 1396 Supplementary Forms. [No. 146. Form No. 146. Petition to Revise in Matter of Law.M In the District Court of the United States for the District of In the Matter of Bankrupt ^Tn Bankruptcy No. To** the Honorable, the Judges of the Circuit Court of Appeals of the Circuit of the United States : Your petitioner respectfully shows : That he resides at , , and is a creditor '''of , a bankrupt, who was so adjudged by the district court of the United States for the district of , on the day of , 19 . . . That, after such adjudication, the following proceedings were had in the case of the said bankrupt :*'' That, on the day of , 19 ... , an order was granted and entered by said district court of the United States,** > a copy of which order is hereto annexed. That said order was erroneous in matter of law in that :*® Wherefore, your petitioner, feeling aggrieved because of such order, asks that the same may be revised in matter of law by your honorable court, as provided in § 24-b of the bankruptcy law of 1898, and the rulea and practice in such case provided."" > [^Add verification as in Form No. 66.] Petitioner. 44. Consult, generally, Sections Twenty- 48. Here state specifically the erroneous four and Twenty-five, and General Order order or ruling of which revision in law is XXXVI, though the latter seems to refer sought, as, " enjoining and restraining your to appeals only. petitioner from disposing of the following 45. If the petition is to the district court described property, viz. : ; " or, in the first instance, this form should be ad- " requiring your petitioner to deliver to the dressed to the district judge. said trustee in bankruptcy certain property, 46. Or specify how he is interested in the viz. : ," or as the facts may be. proposed revision. 49. Here give the equivalent of an as- 47. Here recite steps leading up to the signment of error on an appeal in equity. mling or order complained of. 50. See Section Twenty-five, ante, foot- note 11.- ' "No. 147.J Obdbh Allowing Petition to Revise. 1397 Form Ho. 147. Oidei of District Court Allowing Petition for Revision in ]C«tter of Law.si In the District Court of the United States for the District of .j In the Matteb of Bankrupt In Bankruptcy No. >. Whereas, application has been made for revision in matter of law by the circuit court of appeals of the circuit of the United States of the order entered herein on the day of , 19 ... , and the court being satisfied that the question there determined is one of which revision may be asked, as provided in § 24-b of the bankruptcy law of 1898,"^ and that the application should be granted ; on motion of Esq., attorney for the petitioner. It is ordered : That the order of this court, made and entered herein on the day of , 19. . ., be revised in matter of law by the circuit court of appeals of the circuit of the United States, as provided by § 24-b of the bankruptcy law of 1898, and the rules and practice of that court. That the clerk, within days from this date, prepare, at the expense of the petitioner, a certified copy of such order and of the record of this case pertinent to such order, and file the same with the clerk of such circuit court of appeals. Witness, the Honorable , Judge of the said court and the seal thereof, at the city of , in said district, on the day of ,19... f Seal of 1 ' I the court | GUrK. 51. Use this form only in case applica- clerk gives notice of the pendency of the tion is made to the district court in the petition for revision to the respondent. See first instance. If application is made to the Section Twenty-five, foot-note 11. tirouit court of appeals, a formal order 52. Certain orders cannot be reviewed at allowing the review is often not entered, all, others only by appeal. Consult, gen- but the case is at once docketed and the erally. Section Twenty-five, ante. 1S''6 At a session of the Circuit Court of Appeals for the Circuit, held at the city of , in the District of , on the day of , 19 . . . Present — The Hon , Circuit Judge ; The Hon , Circuit Judge, and The Hon , Judge. In the Matteb of Bankrupt . in Bankruptcy No. A petition having been filed herein by , of , , on the day of , 19 ... , asking for revision in matter of law of the order of the district court of the United States for the district of , in bankruptcy, made and entered in the above entitled cause, and due notice of such petition having been given the respondent and the same having been regularly heard,'^ , Esq., appearing for the petitioner, and , Esq., for the respondent, and this court being satisfied that :^^ It is ordered : That the said petition of for a revision be, and the same hereby is, dismissed,'® veith costs. That the mandate of this court issue to said district court accordingly. Witness, the Honorable, the judges of the circuit court of appeals of the circuit, and the seal of said court, at , in said circuit, this day of , 19 . . . f Seal of 7 ' I the court J Clerk. 66. See, generally, Sectiong Tweniy-four M. Here recite briefly the decision as to and Twenty-five. whether or not error in law was committed 57. Here specify how, as " and submitted by the court below. on briefs without oral argument;" or as 59. Or "granted;'' or, if in part only, the facte may be. " granted in so far as it refers to " 14rOO SUPPLEMENTABY FoBliS. [No. 150. Poim No. 150. Citation on AppeaL (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 359.) United States District Court, for the District of Iw THE MaTTEB of Bankrupt . .In Bankruptcy No. United States of America, ss: The Ptesident of the United States to , Greeting : You and each of you are hereby cited and admonished to appear in the United States circuit court of appeals for the circuit, in the city of , on the day of , 19 ... , pursuant to the appeal duly obtained and filed in the clerk's office of the district court of the United States for the district of , wherein you as objecting creditors are appellees and , bankrupt, is the appellant, to show cause, if any there be, why the order and decree in said appeal mentioned, should not be reversed and corrected, and why speedy justice should not be done to the parties in that behalf, and to do and receive that may appertain to justice to be done in the premises. Witness, the Honorable , United States Judge for the district of , on the day of , in the year of our Lord one thousand nine hundred and > J. Ifos. 151, 152.] Obdibs Stating PaocBEDiNos. 1401 Form Ko. 151. Notice of Motion for Stay Fending Review. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 370.) United States District Court, for the District of In Bankruptcy. In the Matter of Bankrupt. Sir: Upon all the proceedings had herein and on the petition to review the order and decree entered herein on the day of > 19 ■ • » directing that (etc.) , filed in the clerk's office of the United States Circuit Court of Appeals for the Circuit, on or about , 19. . ., I shall move this Court at a session thereof "to be held on the day of , 19 . ., at ... A. M., or as soon thereafter as counsel can be heard, for a stay of all proceedings herein on said final order and decree, pending said petition to reviev?; also for such other and further relief as to the court may seem proper. Dated, , , 19. . . Attorney for . . . To , Esq., (Address.) Attorney for Form Ho. 152. Order Staying Proceedings Pending Petition for Review Under 24-b. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 76.) At a State Term of the District Court of the United States, in and for the district of , at the Court House, in the City of , on the day of , 19 . . . Present : Hon , District Judge. In the Matter of Bankrupt. Upon reading, and filing the petition of duly verified, the petition to review herein, and on motion of attorney for said petitioner, and sufficient reason appearing therefor, it is Ordered, that further proceedings to enforce the order made and entered herein dated to , be stayed, pending the hearing and determination of the petition for review herein, upon the filing in this Court by the petitioner of a supersedeas bond, with good and sufficient sureties to the satisfaction of the Court in the sum of $ U.S.D.J. 1402 SuPPLEMENTABY FOBMS. [No. 153. Form Ho. 153. Petition for Writ of Error from the Supreme Court to a Circuit Court of Appeals. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 383.) United States Circuit Court of Appeals, for the Circuit. Plaintiff in Error, vs. Defendant in Error. Your petitioner, , plaintiff in error in the above entitled cause, respectfully shows that the above entitled cause is now pending in the United States circuit court of appeals for circuit, and that a judgment has therein been rendered on the .... day of , affirming {or reversing) a judgment of the district court of the United States for the district of , and that th ematter in con- troversy in said suit exceeds thousand dollars, besides costs, and that the jurisdiction of none of the courts above mentioned is or was dependent in any wise upon the opposite parties to the suit or controversy being aliens and citizens of the United States, or citizens of the different States, and that this cause does not arise under the patent laws, nor the revenue laws, nor the criminal laws, and that it is not an admiralty case, and that it is a proper case to be reviewed by the Supreme Court of the United States upon writ of error; and therefore your petitioner would respectfully pray that a writ of error be allowed him in the above entitled cause directing the clerk of the United States circuit court of appeals for the circuit to send the record and proceeding in said cause with all things concerning the same, to the Supreme Court of the United States, in order that the errors complained of in the assignment of errors herewith filed by said plaintiff in error may be reviewed, and if error be found, corrected according to the laws and customs of the United States. I Plaintiff in Error, By , His Attorney. The forgoing petition is granted and writ of error allowed as prayed for upon 's giving bond according to law in the sum of $ > Associate Justice of the Supreme Covri of the United States. No. 154.] Wbit of Ebeoe Fbom Supkeme Couet. 1403 Form No. 164. Writ of Error from the Supreme Court of the United States to a Circuit Court of Appeab. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 384.) United States of America, ss. : The President of tbe United States to the Honorable, the Judges of the United States Circuit Court of Appeals for the Circuit, Greeting : Because, in the record and proceedings, as also in the rendition of the judgment of a plea which is in the said circuit court of appeals before you, or some of you, between , plaintiff in error, and , defendant in error, a manifest error hath hapened, to the great damage of the said plaintiff in error as by his complaint appears. We being willing that error, if any hat been, should be duly corrected, and full and speedy justice done to the parties aforesaid in this behalf, do command you, if judgment be therein given, that then under your seal, distinctly and openly, you send the record and proceedings aforesaid, with all things concerning the same, to the Supreme Court of the United States, together with this writ, so that you have the same in the said Supreme Court at Washington, within thirty days from date hereof, that the record and proceedings aforesaid being inspected, the said Supreme Court may cause further to be done therein to correct that error, what of right, and according to the laws and customs of the United States, should be done. 1404 SUPPLEME^TAEY FOBMS. '• ' [No.' 155.* ' Form No. 155. Petition for Meeting of Creditors to onsider Proposed Compromise. (Hagar and Alexander's Bankruptcy Forms (2d Ed.), No. 116.) United States District Court for the District of In the Matter oe Bankrupt. To , Esq., Keferee in Bankruptcy : The petition of respectfully shows : 1. That your petitioner is the trustee herein, duly qualified and acting. 2. That among the assets coming into the hands of your petitioner is a certain claim consisting of : against of That your petitioner has made efforts to collect said claim, has presented same and demanded payment thereof. That payment was refused by the said on the following grounds, to wit : 3. That after considerable negotiation, your petitioner has succeeded in obtaining an offer of $ from said in full settle- ment of your petitioner's claim against him. That your petitioner has fully investigated the claim, and verily believes that it is to the best interests of this estate to accept the amount offered, and petitioner recommends a com- promise of he claim upon the terms offered. Wherefore, your petitioner prays that a meeting of creditors be called upon ten days' notice, to consider a proposed compromise of the controversy of the claim against [ VerificcUion. ] Petitioner. Nob. 156, 157.] Oedee Axjthoeizing Compeomise. 140 f Form No. 156. Notice to Creditors of Special Meeting. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 116.) In the District Court of the United States for the District of In the Mattee of Bankrupt . >-In Bankruptcy No. To the creditors of , of , in the county of , and district aforesaid, a bankrupt : Notice is hereby given that on the day of , 19 ... , at .... o'clock, . . M., there will be a meeting of the creditors of the said bankrupt, at , in the of , in said district, for the following purposes: [Here set forth statement of object of meeting, as for example, " To con- sider a proposed compromise of a controversy between the trustee herein and concerning on the following terms : "] To transact such other business as may properly come before said meeting. Dated, , , , 19... Referee in Bankruptcy. Form No. 157. Order Authorizing Compromise. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 117.) United States District Court for the District of Iw THE Mattee of Bankrupt ► In Bankruptcy No. Upon reading and filing the petition of , trustee herein, duly verified, praying for authority to compromise a controversy with 1406 Supplementary Foems. [No. 158. and all the proceedings heretofore had herein, and a meeting of creditors having been duly held before the referee herein on ten days' notice, to consider the proposed compromise of the controversy with the said , and no objections having been filed and no one having appeared in opposi- tion thereto, Now, on motion of , attorney for the said trustee, it is Ordered, that , , the trustee herein, be and he hereby is authorized to settle and compromise the controversy with of the city of , for the sum of $ , and the said trustee is authorized to execute the necessary papers to carry out said compromise. Dated, , , , 19.. . Referee in Bankruptcy. Form N^o. 158. Petition for Review of Referee's OrdeT.so In the District Court of the United States for the District of ... . In the Matteb of Bankrupt >-In Bankruptcy N«. To , Esq., Referee in Bankruptcy: Your petitioner respectfully shows: That your petitioner is a creditor®* of , the above- named bankrupt, and that his claim has been allowed herein. That, on the day of , 19 . . . , an order, a copy of which is hereto annexed, was made and entered herein. That such order was and is erroneous in that®* 60. See, generally, Section Thirty-nine, 61. Or " the trustee " or otherwise, as the ante. Consult also General Order XXVII. facts may be. See General Order XXVII. Note |§ 2(10) and 38-a. Compare also 62. Here give the equivalent of an as- Form No. 80, and the foot-notes thereto. signment of error in an appeal in equity, or a concise statement of the error relied on. No. 159.J Eefeebe's. Cbbtificate on Eeview. 1407 Wherefore, your petitioner, feeling aggrieved because of such order, prays that the same may be reviewed, as provided in the bankruptcy law of 1898 and General Order XXVII. Dated, , , , , 19. . . Petitioner. [Add verification as in Form No. 66.] Form No. 1S9. Referee's Ceitificate on Review.es In the District Court of the United States for the District of . . . ; . In the Mattee of ^In Bankruptcy No. .. Bankrupt To the Hon , District Judge : I, , the referee in bankruptcy in charge of this pro- ceeding, do hereby certify : That, in the course of such proceeding, an order,®* a copy of which is annexed to the petition hereinafter referred to, was made and entered on the day of ,19 . . . That, on the day of , 19 . . . , , a in such proceeding, feeling aggrieved thereat, filed a petition for a review, which was granted. That a summary of the evidence on which such order was based is as follows :** That the question presented on this review is :* 63. This form is of more general applica- 65. Here recite the facts leading up to tion than Form No. 56, which savors more the order, perhaps calling attention to the of the practice under the law of 1867. Con- pages of the record-book and the documents suit, generally, Section Thirty-nine. See handed up. See General Order XXVII. also General Order XXVII. See Form No. 66. Here phrase the question involved 158 for petition. into an interrogation, if possible limiting 64. If a question is to be certified with- it to a single sentence. See General Order out decision, use Form No. 56. XXVII. 1408 SUPPLEMENTAEY FoKMS. [No. 160, I hand up herewith, for the information of the judge, the following papers s (1) The record-book of this proceeding; (2) The petition on which this certificate is granted ; (3) All other papers filed with me herein which are pertinent to this review. Dated, , ., ,19... Respectfully submitted, Referee in Bankruptcy. Form ITo. 180. Order Approving Appointment of Trustee. Trustee. State of , ^ County of , V-s«.: City of J I, , the trustee herein, do hereby make solemn oath that the statements of fact contained in the above report are true, according to the best of my knowledge, information, and belief. Subscribed and sworn to before me, this day of , 19 . Porm No. 162. Order Declaiing and Ordering First Dividend Paid.TS At a Court of Bankruptcy, held in and for the District of , at , this day of , 19 . . . Present : , Esq., Referee. In the Matter of Bankrupt .In Bankruptcy Xo. Application having been heretofore made for the declaration of a first dividend of not less than per cent. ( . . . . ^) herein, on the report of , the trustee herein, and due notice having been given of the proposed declaration and payment of such dividend, and no objections 76. Stop here, if there is not enough on 78. Consult, generally, Sections Forty- hand for a first dividend. seven and Sixty-five. See also General Or- 77. See I 65-b, as amended by act of der XXIX, and |§ 39-a(l), 58-a(5). IMS. No. 163.J Trustee's Final Eepobt. 1411 liaving been made thereto, and it- appearing from said trustee's report that such dividend will not include more than fifty per cent. (. . . .^) of the money of the estate in excess of the debts which have priority not yet paid and such claims as will probably be allowed ; now, on motion of , Esq., attorney for such trustee. It is ordered : That a dividend of per cent. ( . . . .^) be, and the same hereby is, declared on all claims, not entitled to priority, allowed herein to this date, in accordance with a dividend sheet hereto annexed. That the said dividend be paid by the trustee herein forthwith.''® Referee in Bankruptcy. Dividend Sheet. No. Dr. Sum allowed. Cr. Referee in Bankruptcy. Form No. 163. Tnistee's Final Report and Account.so In the District Court of the United States for the District of .... In the Matter of Bankrupt "In Bankruptcy No. To , Esq., Keferee in Bankruptcy : I, , the trustee in this proceeding, do hereby make my final report and account as follows: 79. If debts entitled to priority have not been paid, add a paragraph directing their payment and specifying ' the names of the priority claimants and the amounts at which their claims have been allowed. 80. This form is merely a suggestion. It is impossible to give more than a skeleton of a report which must vary widely with each case. Consult, generally. Section Forty-seven, also General Order XVIL 1412 SUPPLEMENTAEY FoEMS. [No. 163. That, on the day of , 19. . ., I was appointed trustee herein, immediately qualified by filing the required bond, and have since acted as such. That I have previously filed reports herein under dates of the day of , 19 . . . , and the day of , 19 . . . That the following is a brief detailed statement of the steps in this proceeding since the date of my last report :^^ That the said bankrupt's property is now reduced to money,*^ except*^ , which property, for the following reasons ^* should be sold at public auction at the time of the final meeting herein. That more than three months *^ has elapsed since the first dividend to creditors was declared, and said estate is now ready to be closed. That annexed hereto is my final account, duly verified.** Dated, , , , 19. . . EespectfuUy submitted, > Trustee. Final Account.sT l_8ee and use Form No. 49.] State of County of City of I, , the trustee herein, do hereby make solemn oath that the statements of fact contained in the foregoing report are true, accord- ing to the best of my knowledge, information, and belief; also that the account thereto annexed is true, and contains entries of every sum of money This report must be on file fifteen days be- 84. Give reasons for a sale, specifying fore a meeting can be held. Compare also whether there are any offers and the prob- Form No. 161, and see Form No. 164. For able value, if any, of such assets. the account, see Form No. 49. If there are gS. See § 65-b, as amended by the act of no assets, Form No. 58 should be used. 1903. 81. Here set out briefly the more import- gg" g^^ g ^^.^^g, ^^^ ^^^^ j^^ 49_ ant steps of the proceedmg smce the last g^ ^^ ^.^j^ ^^^^^^ ^^^ ^^^^^^^^ report, among other things, ^^o^'^g t^e ^^^^^^ ^^^. ^o the different dividend cash on hand at that time and the total . / = . i i.i,„ . . . J J- u _, 4.„ „;„„„ periods, so as to permit the making of the of receipts and disbursements since. ^ , . ,, , , ■„ 82. If all in the form of cash, stop here. summary statement at the end of Form 8S. If any property remains unsold, No. 160. specify it here. Tfo. 164.] Final Oedek of Distribution. 1413 received by me as such trustee, and that the payments in such account stated to have been made by me have been so made.** Subscribed and sworn to before me, this day of , 19 . Form No. 164. Final Order ot Distribution.89 At a Court of Bankruptcy, held in and for the District of , at , this day of , 19. . . Present: , Esq., Eeferee. In the Mattee of y In Bankruptcy No. . . . Bankrupt . A final report and account having been filed by , the trustee herein, and due notice having been given of sa.id filing and of a final meeting of creditors to examine and pass on such account ^^ and of the declaration and time of payment of a final dividend herein,^^ and no objection having been made to such account or to the declaration and payment of such dividend f^ nov7, on motion of , Esq., attorney for the trustee herein. It is ordered : That the final account of , the trustee herein, be, and the same hereby is, approved. That»« That the trustee disburse from the money on hand, for expenses of administration, the following :'* 88. This oath is an adaptation of Form 91. If the notice included one for a pro- No. 50. posed sale of assets recite that fact here. 89. Consult, generally, Section Forty- 92. In case of sale, add: "or to such seven, and see §§ 55-f, 58-a(5) (6), 63, 64 proposed sale." and 65, and General Order XXIX. 93. If a sale was also had, insert a clause 90. If for a sale of, remaining assets, re- approving such sale here. cite the fact here, and also any other mat- 94. Here add the items, something as fol- ter included in the notice for the meeting. lows: "To , for , $ " 1414 SUPPLEMENTAEY FoEMS. [No. 164. which sums are hereby allowed, and retain in his hands dollars ($....) for his necessary expenses in making distribution hereunder. That said trustee pay to the following creditors ^ entitled to priority of payment the sums severally set opposite their names, viz. :** That the attorney's fee herein be dollars ($....), which sum is hereby allowed ; and that it be paid by said trustee to , Esq., attorney for the bankrupt, dollars ($....), and^ to , Esq., attorney for the petitioning creditors, dollars ($ ). That ®* said trustee pay to , Esq., his attorney herein, dollars ($....), which sum is hereby allowed to him for the services of such attorney, as a part of the expenses of administration herein. That ®* said trustee pay the previous dividend of per cent. ( . . . .^) to the following creditors, entitled thereto : That, from the balance remaining on hand, said trustee retain his com- missions, which are hereby fixed at the maximum amount specified in § 48 of the bankruptcy law of 1898, as amended, viz. : dollars ($.....), and pay to the undersigned referee his commissions and claim fees as fixed by § 40 of said law, as amended, viz. : dollars ($....). That the balance then remaining, viz. : the sum of dollars ($. . . . ), be disbursed in a final dividend of per cent. ( . . . .^), which is hereby declared'and ordered paid forthwith, to the creditors whose claims are approved herein and on the amount as appears on the dividend sheet hereto annexed. That, on the coming in of vouchers for the payments herein ordered, the trustee and the sureties on his bond be, and they are hereby, discharged. That the annexed summary statement be sent or delivered to each creditor when said dividend is paid to him.^ Referee in Bankruptcy. The items are usually the expenses of giv- 97. Use only in involuntary eases. ing notice of the meeting, stenographer's 98. Use only where the trustee has found fees, or the filing fees and expenses of pe- it necessary to employ and has employed titioning creditors in involuntary cases. an attorney. See § 62, and compare § 64-b(3). 99. Use only when claims have been 95. See § 64-b(4) (5). proven since the first dividend, setting out 96. Here set out the names of priority (1) name, (2) amount of claim proven, creditors whose claims have been allowed and (3) amount of dividend in a schedule and not previously paid, with the amounts in the body of the form, similar to the divi- to which they have been found entitled in dend sheet at the end of this form. • Mhedule in the body of the form, similar 1. This is not required, but is suggested to th»t in Form No. 19. as a safe and courteous practice. 2To. 164. J Final Obdee of Distribution. 1415 Dividend Sheet. [jSee Form No. 162, and copy in same maiier.] Summaiy Statement. Total cash collected by trustee $ Disbursed prior to or at time of first dividend : For $ For priority claims For first dividend of ^ Total Balance on band after first dividend $ . Cash collected since, as per final account Total cash for distribution on final report $ . ■ Disbursed as follows: For $ For expenses of administration • For priority claims For attorney's fee, under § 64-b (3) For legal services to trustee For first dividend of ^ to creditors whose claims had not then been allowed For trustee's commissions For referee's commissions and fees For final dividend 1416 SUPPLEMENTABY FoEMS. [No. 165. Form No. 165. Trustee's Combined Dividend Check and Receipt.2 In the District Court of the United States for the District of In the Matteb of Bankrupt . In Bankruptcy Ko. ) ' • • The National Bank of No 19. Pay to the order of , dollars, being a dividend of per cent. ( ^) on claim allowed in the proceeding of , a bankrupt, by order dated , ,19--- Countersigned, Trustee. > Referee in Bankruptcy. Receipt. (Do not detach. If detached, the check will not be honored.) $ " No , , , ,19-- Eeceived of , the trustee of , a bankrupt, being in full of the dividend of per cent. ( . . . . ^) on claim allowed in the proceeding of such bankrupt, by order dated , 19 . . . {Creditor's Signature.) t. This form is of course merely a sug- tion Forty-seven. See also § 65 and Gen- gestion to trustees who wish to do their eral Order XXIX. work- thoroughly. Compare, generally, Sec- No. 166.1 Ceetipicate of Feesj Payable. 1417 Form No. 166. Refeiee's Ceitificate of Fees Payable.s In the District Court of the United States for the District of In the Mattee of Fees in Pbooeedings IN Bankeuptcy Refeeked to Referee in Bankruptcy. To , Clerk of the United States District Court, for the District of : I, , the referee in bankruptcy to whom the proceedings in bankruptcy hereinafter mentioned were referred do hereby certify that the following cases are closed and the fees now payable as follows : To trustees : No. case. Name of bankrupt. Name of trustee. To bankrupts (no trustee having been appointed) : No. case. Name of bankrupt. To the referee : No. case. Name of bankrupt. Dated, .,19... > Referee in Bankruptcy. %. Consult, generally, Section Fifty-one. See also §{40 and 48, as amended by the' a«t of 1903; also General Orders XXIX and XXXV. 1418 Supplementary Foems. [No. 167. J — -I II Fonn No. 167. Bond of Trustee, with Justification of Sureties.4 In the District Court of the United States for the District of In the Mattee of Bankrupt ^In Bankruptcy No. Know all men hy these presents : That we, , of the . . . . . of , in said district, as principal, and , and , both of the of , in said district, as sureties, are held and firmly bound imto the United States of America in the sum of dollars ($....), in lawful money of the United States, to he paid to the United States, for which payment, well and truly to be made, we bind ourselves and our heirs, executors, and administrators, jointly and severally, by these presents. Signed and sealed this day of , 19 . . . The condition of this obligation is such that : Whereas the above-named was, on the day of , 19 ... , duly adjudicated a bankrupt herein, and on the day of , 19 . . . , the above-named was appointed trustee in said proceeding in bankruptcy, and he, the said , has accepted said trust, with all the duties and obligations per- taining thereunto ; Now, therefore, if the said , trustee as aforesaid, shall obey such orders as said court may make in relation to said trust, and shall faithfully and truly account for all the moneys, assets, and effects of the estate of said bankrupt which shall come into his hands and possession, and shall in all respects faithfully perform all his official duties as such trustee, then this obligation to be void ; otherwise, to remain in full force and virtue. [i-. s.] [l. s.] [l" s.] Signed, sealed, and delivered, in the presence of 4. Consult, generally, Section Fifty. See tion; note § 50-d-f. This bond can be also Form Ho. 25, for which, this is a Bub- adapted to that required of a receiver, •titute, the former containing no justifica- 6. See { 50-e. /;, fi No. 16S.] ArPBOvii of Tbitstbe's Bond. 1419 State op j County of , ^ ss.: City of , On this day of , 19..., the above-named , and , and , appeared before me, and severally acknowledged the execution of the foregoing bond.* State of • . .., County of , ^as.: City of and , respectively, the sureties in the foregoing bond, being each severally duly sworn, deposes and says that he i« a resident of and a holder within the of , in said district, and is worth in property, at its actual value, dollars* ($ ) over all the debts and liabilities which he owes or has incurred, and exclusive of property exempt by law from levy and sale under an execution. Subscribed and sworn to before me, this day of , 19 . . . F«rm No. 168. Order Approving ' Trustee's Bond.s At a Court of Bankruptcy, held in and for the ........ District of , at , this day of , 19 . . . Present : , Eeferee. In the Mattee of Bankrupt . .In Bankniptqr Ko. ..7~ The petition for the adjudication of the above-named bankrupt, .- , having been filed herein on the day of , 10 . . ., fi. This is not essential, but is thought ally, Sections Twenty-one and Fifty. See good practice. also § 47-c, added by the amendatory act 7. See I 50-f. of 1903, and § 70-a. 8. For reasons for this, consult, gener- 1420 SUPPLEMENTAEY ToBMS. [No. 169. and , having been appointed trustee herein on the day of , 19. . ., and he having given a bond for the faithful per- formance of his official duties in the amount of dollars ($ ), as provided by the order appointing him ; nov/, on motion of , Esq., attorney for , It is ordered : That said bond be, and the same is hereby, approved. Referee in Bankruptcy. Form No. 169. Certificate of Refeiee as to Falsity of Pauper Affidavit.s In the District Court of the United States for the District of Its the Mattes of Bankrupt . >-In Bankruptcy "So, I, , referee in bankruptcy in charge of the above- entitled proceeding, do hereby certify : That I have reason to believe that the pauper affidavit filed herein by the above-named bankrupt, as provided in § 51 (2) of the bankruptcy law of 1898, is false ;. and I do, therefore, set the day of , 19 . . . , at . . M., as the time and , in the of , in said district, as the place, vrhen said bankrupt shall be examined as to the truth of such affidavit. Dated, , , , 19. . . Referee in Bankruptcy. To , bankrupt : You' are hereby ordered to appear before the undersigned, for examination, at the time and place specified in the above certificate. Dated, , , , 19... Referee in Bankruptcy. 9. Consult, generally, Section Fifty-one, and compare General Offl^r XXXV(4). No. 170. j Clauses fob Proofs of Debt. 1421 Form No. 170. Special Clauses for Proofs of Debt.io [To conform to General Order XXI,] 1. Insert at the end of all proofs of debt, not resting on a note or judg- ment, the following averment : " That no note has been received for such debt" (except ) nor has any judgment been rendered thereon-'^ (except )." 2. Insert, after the statement of the " consideration " in all proofs of debt resting on open account, the following averment : " That the said debt became due (or will become due) on the day of ,19..." 3. Insert also, in the same place, in all proofs of debt resting on open account, where the items of account mature at different dates, the following averment : " That the average due date of said debt is the day of , 19..." 4. Insert in all proofs of debt by a corporation (Form No. 33) which are not sworn to by the treasurer, after the words " authorized to make this proof," the following averment : " That the same is not made by the treasurer of such corporation, for the reason that^* , and that the affiant is an officer of such corporation and his duties most nearly correspond to those of treasurer." 5. In all proofs of debt where the claim was assigned after the petition in bankruptcy, but before proof, add at the end of the proof, the following averment : " That, at the time these proceedings in bankruptcy were begun, such debt was owned by , of , ; that since then, by an instrument in writing, hereto annexed, such debt has been assigned to the affiant; and that annexed hereto is a deposition by said , as provided by General Order XXI (2)." 10. See, generally, Section Fifty-seven, on the judgment, attaching a transcript, and ante, and General Order XXI. See also specifying how much of the costs, if any. Forms Nos. 31, 32, 33, 34, 35, 36, 37, 38, were earned before the petition in bank- and 39; also Forms Nos. 171 and 172. ruptcy was filed; see § 63-a(2) (3). 11. If so, prove on the note, or surrender 13. Here give the reason why the proof is it and prove on the debt, adding an explana- not made by the treasurer, as absence, ill- tion here. ness, etc. 12. If a judgment has been entered, prove 1422 Supplementary Forms. [No. 171. Form No. 171. Petition for Reconsidexation and Rejection of Claim.u In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy. To , Esq., Eeferee in Bankruptcy: Your petitioner respectfully shows : That he is the trustee herein.^^ That the proof of debt of , of , , claiming to be a creditor of the said , was filed herein on the day of , 19 . . . , and, on the day of , 19 . . . , duly allowed. That the same should not have been allowed for the following reasons:^* That the attorney of said claimant is , Esq., of • That no previous application has been made to this or any other court for the order hereinafter asked. Wherefore, your petitioner prays that the said proof of debt may be reconsidered and rejected." Petitioner. \_Add verification as in Form No. 66.] 14. Consult, generally, Section Fifty- seven and General Order XXI ( 6 ) ; and see Forms Nos. 172, 38, and 39. 15. A creditor may make this petition; if so, he should show the allowance of his claim. 18. As, for instance, because technically imperfect, or not in accordance with the general orders, or secured, or the claimant preferred and his preference not surren- dered or want of consideration, or many other reasons. The reasons should be set forth as in a pleading, so that the claim- ant may have proper notice of the issue he must meet. Neither the bankrupt act nor the gen- eral orders require the petitioner to aver facts which, if proved, would defeat the claim. It is only necessary to aver facts which, if true, are a sufficient cause for the re-examination of the claim. In re Watkin- son & Co. (D. C, Pa.), 12 Am. B. E. 370, 130 Fed. 218. 17. This form can he adapted to a case where the application is to reduce but not reject in toto. Nos. 172, 173.] Peoof of Sbcttebd Debt. l4r2S Foim JSto. 172. Notice of Petition foi Reconsideration and Rejection of Claim.i9 In the District Court of the United States for the District of . • •1 In the Mattes of Bankrupt ► In Bankruptcy No. To , a creditor, and , Esq., his attorney: You will please take notice that , the trustee herein," has filed a petition asking that your claim against , the above-named bankrupt, be reconsidered and rejected,^" and that a hearing will be had on such petition at , in the of , in said district, on the day of , 19 . . . , at . . . . o'clock, . . m. Dated, ...., , ,19... Referee in BwnJcruptey. Form No. 173. Proof of Secured Debt. (Hagar and Alexander's Bankruptcy Forms, No. 130.) In the District Court of the United States for the District of ..>-.. In the Mattbb of Bankrupt In Bankruptcy No. jr; At , in said district of , on the day of .... , A. D. 19 ... , came of , in the county of , State of in said ......... district of and made oath, and says that the said 18. Consult, generally. Section Fifty- 19. If made by a creditor, change to fit seven. See, for practice, General Order the fact. XXI (6). If claim is rejected, the proper 20. Or "reduced to $ " It may be order is suggested by Form No. 39 ; suggested that a copy of the petition should if merely reduced, by Form No. 38. be mailed with this notice. 1424 SuPPLEMENtAEY FoEMS. [No. 174. , the person by {or against) whom a petition for adjudication of bankruptcy has been filed, .... at and before the filing of said petition, and still .... justly and truly indebted to said deponent in the sum of dollars : that the said debt exists upon of which a is hereto annexed; that the consideration of said debt is as follows : that the said debt due on the average due date being 19 ... ; and that no note has been received for the said debt nor any judgment rendered thereon except as aforesaid ; that no part of said debt has been paid except that there are no set-offs or counterclaims to the same except » that the only securities held by this deponent for said debt are the following : Subscribed and sworn to before me, this day of , A. D. 19.. • , Creditor. \_Official character.] Fona No. 174. Order Expunging or Reducing Proof of Debt. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 164.) United States District Court for the District of In the Mattee of ► In Bankruptcy No. Bankrupt The trustee of the estate of the above-named bankrupt having filed in the office of the referee a duly verified petition praying that the proof of debt No. 175.J Okdbe Allowing Claim. 1425 heretofore filed herein by , an alleged creditor for $ , be reconsidered, rejected and expxmged {or reduced), and an order having been made herein that a hearing be had thereon on the day of , 19 ... , and due notice of said hearing having been given to said claimant, and to the said trustee, and the said claimant having appeared by counsel on said day, and the evidence submitted (or testimony having been taken thereon), now on reading and filing the trustee's said petition and after hearing , Esq., attorney for the said trustee, in support of said petition and , Esq., in opposi- tion thereto, it is Ordered, that the prayer of said petition be and the same is hereby granted, and it is further Ordered, that said claim of be and it is hereby rejected, disallowed and expunged from the list of claims upon the record in this case. (or that said claim of be and it hereby is reduced to $ and allowed at said amount upon the list of claims herein.) Dated, , , ,19. Referee in Bankruptcy. Form No. 175. Order Allowing Claim. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 165.) United States District Court for the District of In the Mattee of Bankrupt . In Bankruptcy No. having filed in the ofiice of the referee a proof of claim against the estate of the above-named bankrupt in the sum of $ , and the said claim having been objected to by (the trustee or certain creditors) and the objections having come on for a hearing before me, and testimony having been offered in behalf of in support of the said claim, and by (the trustee or certain objecting creditors) in opposition thereto, and due deliberation having been had, and after hearing f . . Esq., attorney for the said claimant, in support of the said claim, and , Esq., attorney for (trustee or objecting creditors), in opposition thereto, it is 90 1426 Supplementary FoKifs. [No. 176. Ordered, that the said claim be and the same is hereby allowed in the sum of $ and the objections thereto dismissed. Dated, , , , 19. . . Referee in Bankruptcy. Form No. 176. Notice of Final Meeting.21 In the District Court of the United States for the District of In the Mattee of >-In Bankruptcy No. Bankrupt . To the creditors of , of , in the county of , and district aforesaid, a bankrupt : Notice is hereby given that on the day of , A. D. 19 ... , at o'clock, . . M., there will be a meeting of the creditors of the above-named bankrupt at , in the of , in said district, to ^ examine and pass upon the final report and account of , the trustee herein, which was filed in the office of the undersigned at , in said district, on the day of , 19 ... , and shows $ on hand for distribution, '^^ and to transact such other busi- ness as may properly come before such meeting. Dated, , , ,19... Referee in Bankruptcy. Attorney for the Trustee. 21. Consult, generally, Section Fifty- eight. See also §§ 47-a(8), 55-f, and 65. Compare Forms Nos. 18 and 178. See also for notices given by the clerk, Forms Nos. 53, 57, 98, 108, 138. 38. The italics are used only for conven- ience of reference in substituting clauses for other notices. See Form No. 176. 23. When the meeting is also for the dec- laration and payment of a final dividend, see Form No. 179. No. 177.] Clauses foe ^Notices to Ceeditoes. 142 ^ Form No. 177. Special Clauses for Notices to Creditors.^^ 1. Where the notice is for a hearing on an application for a discharge or composition (§ 58-a (2)), or the proposed dismissal of the proceedings (§ 58-a (7)), as previously suggested in Forms Nos. 98, 108, and 138, the order to show cause should be used. 2. Where the notice is for the examination of the bankrupt (§ 58-a (1))^ at a meeting called for that purpose, substitute for the words in italics in Form No. 172, the words : " To attend an examination of the bankrupt." 3. Where the notice is for a proposed sale of property (§ 58-a (4)), substitute in the same place in Form No. 172, the words: " To consider a proposed sale of the following described property. and if objection to said sale is not made, or, if objected to, it is ordered, forthwith to attend the sale of such property at auction to the highest bidder, on the following terms :^* ) subject to confirmation by the undersigned, at a continuance of such meeting, which, on the conclusion of such sale, will be taken to , in the of , in said district, on the day of , 19 . . . , at o'clock, . . M." 4. Where the notice is for the declaration and payment of a dividend (§ 58-a (5)) substitute in the same place in Form No. 172, the words: " For the purpose of declaring and directing the payment of a dividend of not less than per cent, upon all debts allowed prior to or on that date." 5. Where the notice is of the proposed compromise of a controversy (§ 58-a (6)), substitute in the same place in Form No. 172, the words: " To pass upon a proposition to compromise a controversy between the trustee herein and , concerning ^ by^ ,..:." 6. Where the notice is of a meeting of creditors for any purpose not specifically indicated in § 58-a, substitute in the same place in Form No. 172, the words : " For the purpose of '^ 24. Consult, generally, Section Fifty- 27. Here indicate the question at issue, eight. See also Form No. 176 and the foot- 28. Here indicate the proposed compro- notes thereto. mise. 25. Here insert description and give ap- 29. Here describe briefly the purpose of praised value and the incumbrances, if any. the meeting. 26. Here insert terms as to down pay- ment, etc. 1428 SUPPLEMENTAEY FoEMS. [No. 178. Form I7o. 178. Combined Notice to Cieditors.30 In the District Court of the United States for the . . District of Iir THE Mattee of Bankrupt >.In Bankruptcy No. ... To the creditors of , of , in the county of , and district aforesaid, a bankrupt : Notice is hereby given that on the day of , A. D. 19 . . . , at o'clock, . . M., there will be a meeting of the creditors of the said bankrupt, at , in the of , in said district, for the following purposes: I. To consider a proposed sale of the following described property, VIZ, .31 and, if objection to said sale is not made, or, if objected to, it is ordered, forthwith to attend a sale of such property at auction to the highest bidder, on such terms as may then be fixed ; II. To examine and pass upon the final report and account of the trustee, which was filed in the office of the undersigned at , in said district, on the day of , 19 . . . , and shows $ on hand for distribution ; III. For the purpose of declaring and ordering paid, a final dividend herein ; IV. To transact such other business as may properly come before said meeting. Notice ^^ is alsc given that, unless proofs of debt are filed on or before the day set for such meeting, the same cannot share in such dividend. Dated, , , , 19. . . Referee in Bankruptcy, ,Esq., Attorney for Trustee. 30. See, generally, Section Fifty-eight, praised value and the incumbrances, if and the forms just amte, wj.th their foot- any. notes. 32. This clause should also be added to 31. Here insert description and give ap- the notice of the first dividend. No. 179.J Affidavit of Publication. 1429 Form No. 179. Affidavit of Publication of Notice.33 In the District Court of the United States for the District of Ik the Mattee of Bankrupt ► In Bankruptcy No. {^Attach slip here.'] State of County of , yss. City of , of the of , in said district, being duly sworn, deposes and says, that he is the proprietor ** of , the newspaper designated for the publication of notices in bankruptcy in the county of , in said district ; and that the notice to creditors in the above-entitled proceeding, of which the attached printed slip is a copy, was published in said newspaper on the day of , 19 . . . Subscribed and sworn to before me, this day of , 19 . 38. See Section Fifty-eight, ante, and note Form No. 179. 84. Or " foreman," or " clerk," as the case may be. 1430 Stjpplemisntaby Foems. [No. 180. Form No. 180. Affldavit of Mailing Notice.ss In the District Court of the United States for the District of Ih the Matteb of Bankrupt >.In Bankruptcy No. State of ; , "^ County of , yss,: {^Attach notice here."] City of , J , of the of , in said district, being duly sworn, deposes and says that, on the day of , 19 . . . deponent mailed notices to creditors, of which the annexed printed notice is a copy, one each to the persons, copartnerships, and corporations mentioned in the schedule of names and addresses hereto annexed, by depositing such notices in sealed, postpaid envelopes,^* in the general post-oflSce at the of , in the district aforesaid. Subscribed and sworn to before me, this day of , 19 . SS. See Section Fifty-eight, ante and S6. Or, if the notice is mailed hy the lef- S"onn No. 180. The original notice, the eree, add words indicating that an "official affidavit of publication, and this affidavit business " envelope was used, should be bundled together before being filed. No. 181.] Oedee Appointing Attoenet. 1431 Form No. 181. Ordei Appointing Attorney for TruBtee.ST At a Court of Bankruptcy, held in and for the District of , at , this day of , 19. . . Present: , Esq., Eeferee. Ik the Mattee of Bankrupt -In Bankruptcy Ko. ... Application having heen made for the appointment of an attorney for the trustee herein, and it appearing that the services of an attorney are and will be required, and that the appointment hereinafter made is acceptable to such trustee f^ now, on motion of , Esq., It is ordered : That , Esq., of the of , in said dis- trict, be, and he hereby is, appointed attorney for the trustee herein,*® his compensation to be fixed and paid as an expense of administration at the final meeting of creditors. Referee in Bankruptcy. 87. See, generally, Section Sixty-two. 38. If the choice has been submitted to creditors, here recite their action. 88. Or. " that .the trustee. be authorized to employ of the , of , in said district, aa his attorney herein." 14:32 SUPPLEMENTABY FoEMS. [No. 182. Form Ho. 182. Petition for Instruction as to Burdensome Property .40 In the District Court of the United States for the District of In the Mattes of BartJcrupt . ► In Bankruptc7 No. To , Esq., Eef eree in Bankruptcy : Your petitioner respectfully shows : That he is the trustee herein. That a portion of such bankrupt's estate consists of the following property :*^ ., That your petitioner has investigated the value of such property and finds the same to be worthless,*^ for the following reasons :** That it will be for the benefit of said estate that your petitioner be instructed to disclaim title to such property and to refuse to take the same into his possession. That no previous application has been made to this or any other court for the order hereinafter asked. Wherefore, your petitioner prays for an order permitting him to disclaim title to such property and to refuse to take the same into his possession. Trustee. [_Add verification as in Form No, 66.] 40. See Section Seventy, and compare 42. Or, if actually burdensome to the the forms immediately ante. See also bankrupt's estate, state that fact. Forms Nos. 42, 43, 44, 45, and 46. 43. Here give the reasons on which the 41. Here describe the property. order is asked, showing condition, incum- brances, etc. lfo8. 183, 184.J Okdee Allowing Continuance of Business. 1433 Form No. 183. Ordei on Petition as to Burdensome Property .44 At a Court of Bankruptcy, held in and for the District of , at , this day of , 19 . . . Present : , Esq., Eeferee. In the Mattee of Bankrupt J In Bankruptcy No. Application having been made for an order permitting the trustee herein to disclaim title to certain worthless*" property, and to refuse to take the same into his possession, and it appearing that such order should be granted; now, on motion of , Esq., attorney for , It is ordered : That , the trustee herein, be, and he hereby is, directed to disclaim title to the following described property, and to refuse to take the same into his possession, viz. :** Referee in Bankruptcy. Form No. 184. Order Allowing Trustee to Continue Business. (Hagan and Alexander's Bankruptcy Forms, No. 162.) United States District Court for the District of In the Matter of Bankrupt »In Bankruptcy No. ... On reading and filing the annexed petition of , the trustee of the estate of the above-named bankrupt, verified , 19 . . . , and on motion of , attorney for the said trustee, it is 44. See Form No. 182, and its foot-notes. 45. Here describe the property. 46. Or "burdensome." 1434 SUPPLEMENTAEY FoBMS. [N^O. 185. Ordered, that , the said trustee, be and he is hereby authorized, in his discretion, to continue the business of the said bankrupt, for a period of days from the date of this order. Dated, , , , 19. . . Referee in Bankruptcy, Form No. 185. Petition for Leave by Trustee to Sue. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 187.) United States District Court, for the District of Is THE MaTTEB of Bankrupt ► In Bankruptcy No. To the United States District Court, for the District of : The petition of respectfully shows : 1. That your petitioner is the trustee in bankruptcy herein, duly qualified and acting. 2. That among the assets coming into the hands of your petitioner as trustee was a certain contract dated , 19 . . . with That, as your petitioner is informed and verily believes, at the time of the adjudication herein, the bankrupt had entered upon the per- formance of said contract and completed the same. 3. That the said has been examined under section 21-a, in this proceeding, but denies that there is any sum of money coming to the bankrupt herein, on account of said contract. 4. That the creditors herein have requested your petitioner, as trustee, to bring an action against for the recovery of the moneys claimed to be due this estate by reason of said contract, and your petitioner has been advised by his counsel, , that he has a good and valid cause of action against 5. That no previous application has been made for the order prayed for. Wherefore, your petitioner prays for an order authorizing and permitting him to bring an action in the court for the county of . . . . , against Peiitioneif. iyer^ation,\ No. 186.] Oedee Atjthokizing Teustbe to Sub. liBi Form No. 186. Order Aathorizing Trustee to Sue. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 188.) At a stated term of the United States District Court for the District of , held at the United States Court HousOj City of on the day of , 19 . . . Present : Hon , District Judge. In THE Mattes of Bankrupt >-In Bankruptqr Nou Upon reading and filing the annexed petition of , trustee herein, duly verified, and upon motion of , attorney for said trustee, it is Ordered, that , as trustee in bankruptcy of the above- named bankrupt, be and he hereby is authorized and permitted to bring an action as such trustee in bankruptcy, in the court of , county, against , upon the following alleged cause of action : to recover any moneys which may be due this estate from D.J. 1436 SUPPLEMBNTAEY FoKMS. [Nos. 187, 188. Form No. 187. Demand in Reclamation. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 311.) In the District Court of the United States for the District of In the Mattes of Alleged Bankrupt. ^ In Bankruptcy Ko. . . . J Sib:— Please take notice that the undersigned is the owner of and entitled to the immediate possession of the following chattels which were wrongfully and unlawfully obtained from him by the above-named (alleged) bankrupt, and that the undersigned demands the immediate return of said property, to wit : \_Here set forth property claimed in detail] . Dated, Tours, etc., By Attorney. Form No. 188. Petition to Reclaim. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 312.) In the District Court of the United States for the District of .... In the Mattbb of Bankrupt ►In Bankruptcy No. To the District Court of the United States, for the District of '• The petition of respectfully shows and alleges : First: (That your petitioner i^ a corporation duly organized under and No. 188.] Petition to Reclaim. 1437. existing under and by virtue of the laws of the State of , and having an office for the transaction of its business in the city of ) . Second : That at all the times hereinafter mentioned, the said bankrupt was engaged in business in the city of as Third: That your petitioner is the owner and entitled to the immediate possession of the property set forth in schedule " A " hereto annexed, and made a part hereof, and that the value of said property is ($ ) dollars. Fourth : That your petitioner further alleges upon information and belief, that heretofore and on or about the day of , 19 ... , an involuntary petition in bankruptcy was filed in the office of the clerk of this court, by three creditors of above bankrupt, praying that the said be adjudged an involuntary bankrupt, and that thereafter , Esq., was duly appointed as temporary receiver in bankruptcy of the said , and that pursuant to the order of his appointment, he did take possession of and continues to hold the property mentioned and described in the schedule hereto annexed and made a part hereof, marked exhibit " A," and that the said property is in the original piece in which it was delivered by your petitioner to the said (That on the day of , 19 ... , the said was duly adjudicated a bankrupt). Fifth: That heretofore and before the commencement of this proceeding, due demand was made by your petitioner upon the said , Esq., receiver, that he deliver possession of the said goods, wares and merchandise in said schedule " A " mentioned to your petitioner, but that said demand has been refused. Sixth : That heretofore and at various times between the day of and the day of , both dates inclusive, said , upon false and fraudulent representations, induced your petitioner to sell and deliver to him the said goods, wares and merchandise mentioned and described in said schedule " A " hereto annexed, and the said wrongfully, fraudulently and with intent to defraud your petitioner and knowing that your petitioner relied upon the truth of the representations so made, procured the said property to be delivered to his custody. Seventh : That at the time that the said goods were so delivered to the said by your petitioner as aforesaid, and at the time that the said false and fraudulent representations were made as aforesaid, the said was insolvent and unable to pay his' debts in full to his knowledge, and made false and fraudulent representations with intent td cheat and defraud your petitioner, and so knowing his insolvency as afore- 1438 SUPPLEMENTAEY FoHMS. [No. 188. said, induced your petitioner to sell and deliver the said merchandise as aforesaid with the intent and design not to pay therefor when the term of credit upon which the same had been sold should have expired. Eighth: Your petitioner further alleges that the false and fraudulent representations, the truth of which he relied upoh, and which induced him to sell and deliver the said merchandise as aforesaid, are as follows, to wit: That heretofore and on or about the day of , 19 . . . , the said did make, sign and deliver a written statement of his financial condition to in the city of , wherein he did state that he had merchandise on hand on the day of to the value of $ ; outstanding accounts of $ ; fixtures of the value of $ ; and cash on hand and in bank of $ , or a total of assets of $ and did further state that his liabilities amounted to the sum of $ and that he was worth over and above all his debts and liabilities the sum of $ Ninth: That your petitioner obtained the said statement previous to the sale and delivery of the said merchandise in said schedule " A " mentioned; and as your petitioner is informed and does verily believe, the said did deliver the said signed statement as aforesaid to petitioner for the purpose of obtaining credit, and that your petitioner relied upon the truth of the representations therein contained. Tenth: Upon information and belief, that the aforesaid representations were false and untrue, in that the said did not have on the day of , the assets as heretofore alleged and stated by him in said statement, of the total value of $ , and owed in liabilities a sum in excess of the liabilities as hereinabove alleged and by him in said statement specified of $ , and that the said did not have a surplus over and above all of his debts and liabilities of the sum of$ Eleventh : That the said goods had not been taken by virtue of a warrant against your petitioner for the collection of any tax, assessment or fine, issued in pursuance of a statute of the United States, and that they have not been seized by virtue of an execution or warrant of attachment from or through whom your petitioner has derived title to the said chattels. Wherefore, your petitioner does respectfully pray that the said , Esq., as said temporary receiver herein, be directed to deliver to your peti- tioner the said property in said schedule " A " mentioned and described, upon your petitioner filing in the office of the clerk of this court a bond in double the value of said property to be returned to him conditioned that in the event your petitioner fails to establish his right, title and interest in and to the said property, that then, and in that event, your petitioner will repay to the said receiver, or trustee hereinafter to be elected, the value of the said property so No. 189.J Answer im: Eeclamatiost. 1439 to be delivered to him and all costs and expenses, and your petitioners have such other and further relief, as to this honorable court may seem just and proper. Dated, , , , 19. . . Petitioner. Solicitors for Petitioner, Address, [Verification.] (Schedule " A " annexed.) Form No. 189. Answer in Reclamation. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 315.) United States District Court, for the District of . . In THE Mattes of Bankrupt "■In Bankruptcy No. as receiver in bankruptcy of the estate of the above- named bankrupt, answering the petition of the claimant herein, shows and alleges, upon information and belief : 1. Admits the allegations of plaintiff's petition numbered , , , , , and ........ 2. The receiver further answering the said petition denies that he has knowledge or information sufficient to form a belief as to the allegations of paragraph numbered and of said ^jotition, and therefore denies same. 3. The receiver further answering the said petition, denies the allega- tions of paragraph of said petition. 4. The receiver denies the allegations of paragraph , but admits that a letter. dated . . ., from the attorneys for the petitioner herein and written after the filing of the petition of bankruptcy herein and containing an alleged demand was received by the bankrupt herein. 1440 SUPPLEMENTAKY FoEMS, [No. 190. 5. The receiver further answering the said complaint admits that a certain portion of the property claimed by the petitioner has come into the hands of the receiver as a part of the assets belonging to this estate. The receiver further answering said petition and as a further and separate defense (or counterclaim) thereto alleges: [Here set forth specifically defense or counterclaim.] Wherefore, the receiver demands judgment dismissing the petition of the claimant herein, with costs. As Receiver in Bankruptcy of [Address.] Attorney for Receiver. [Verification.] [Trustee after appointment is proper person to answer and defend.] Form No. 190. Petition for Sale under Geneial Order XVIII(2).47 In the District Court of the United States for the District of . In the Matter of 'In Bankruptcy Ko. ... Bankrupt To , Esq., Eeferee in Bankruptcy : Your petitioner respectfully shows : That he is the trustee herein. That a portion of such bankrupt's estate consists of the following property f^ 47. See Section Seventy and General Or- the same general order. See also Forms der XVin(2). Though such sales are of 42, 43, 44, 45, 46, 182, 183, 191, and 192- doubtful validity, they are common. This 48. Here insert description of property, form can be adapted to a sale of personal giving its location, appraised value, the in- property, or one at public auction under cumbrances, if any, etc. m. 191.J Okdeb FOE Sale. :!141 That it forthwith, will be to the advantage for the following reasons of tl .49 le estate that such property be sold That no previous application has been made to this or any other court for the order hereinafter asked. Wherefore, your petitioner prays for an order permitting him to sell said property in the way and on the terms above specified. •) IVerificaiion same as in Form No. 66. J Trustee. Farm No. 191. Order for Sale under General Order XVIII(2).50 At a Court of Bankruptcy, held in and for the District of , at , this day of . . , 19 . . . Present : , Esq., Referee. In the Matter of ► In Bankruptcy No. Bankrupt Application having been made by the trustee herein for an order per- mitting such trustee to sell the following property ®^ on the terms hereinafter mentioned, and it appearing that good cause for such sale has been shown; now, on motion of , Esq., attorney for the trustee, It is ordered : That , the trustee herein, be, and he hereby is, authorized to sell the property above specified to , on receipt from him of dollars ($....) in cash.^^ Referee in Bankruptcy. 49. Here give the reasons, as, for in- 51. Here copy the description of the prop- stance, a cash offer of 75 per cent, of the ap- erty from the petition. praised value, giving name of person mak- 62. Or, as the terms may be, usually ing the offer, etc., or the necessity of va- adding a clause directing the transfer of eating the premises in which the property title by an instrument transferring only is, or any of the numerous reasons which the trustee's right, title, and interest, and require prompt action on sales of a bank- in no way amounting to a warranty. See rupt's assets. Form No. 193. 50. See foot-note 44 to Form No. 190, and the references therein. 1^4:2 SUPPLEMENTAEY FoEMS. [N'o. 192. Form No. 192. Petition to Confinn Sale. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 251.) United States District Court, for the District of In the Mattee of >-In Bankruptcy No. Bankrupt . To the Hon , District Judge : The petition of respectfully shows : That your petitioner is the temporary receiver herein, duly qualified and acting. That on , 19 . . . , by order of this court, the property and effects of the said bankrupt at , st., city of , consisting of , were offered for sale at public auction. That the same was offered in bulk at the beginning of such sale and a bid of $ was made for the same, and that the goods were then offered for sale in separate lots according to catalogue, and realized the sum of $ or more than the bid in bulk. That the said sum of $ realized, is below 75 per cent, of the appraised value of the property, which is $ , and in order to deliver said property to the purchasers, it is necessary for your petitioner to procure an order confirming said sale. Your petitioner is of the opinion and verily believes that a larger sum than as above stated cannot be obtained, as the sale was largely attended and fairly conducted, and advises that the said goods be delivered to the respective bidders, for the reason that said merchandise will rapidly deteriorate in value, and the expense attendant upon storing the goods for a longer time, or of a resale, would be considerable, and unlikely to produce better results, and petitioner verily believes that the sale should be confirmed. Wherefore, your petitioner respectfully prays that an order be made con- firming the said sale, and authorizing him to deliver the said merchandise afl sold in lots to the respective highest bidders therefor and for such other and further relief as to the court may seem just and proper. Petitioner. {Verification.] Iso. 193.] OeDEE CONFIEMING ISaLE. 1443 Form No. 193. Order Confirming Sale, after Notice to Creditors.53 At a Court of Bankruptcy, held in and for the District of , at , this day of , 19 . . . Present : , Esq., Eeferee. In the Mattee of Bankrupt In Bankruptcy Ko.' Application having been made by the trustee herein for the sale of the following property,^ and a notice of proposed sale having been given thereon, as provided by § 58-a (4) of the bankruptcy law of 1898, and no objection having been made to said sale, and the same having then taken place and said property having been sold to , of the of , in said district, for dollars ($ ), and now coming on for confirmation, as provided in such notice ; " now, on motion of , Esq., attorney for the trustee herein, It is ordered : That such sale be, and the same hereby is, confirmed. That the trustee herein, on receipt of the consideration in cash, complete the same by executing the proper instrument transferring to such purchaser all his right, title, and interest in said property, and delivering the same to such purchaser. Referee in Bankruptcy. 53. See Sections Seventy and Fifty-eight. This form can he adapted to any sale, whether public or private, on notice, and should always be entered, for the protec- tion of the purchaser's title. See special clauses for sale on notice in Form No. 177. See also Forms Nos. 190 and 191, and com- pare Forms Nos. 43, 43, 44, 45, and 46. 54. See foot-note 48 to Form No, 190. 1444 SUPPLEMENTAET FoEMS. [No. 194. Porm No. 184. Petition for Private Sale by Trustee. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 240.) United States District Court, for the District of IW THE MaTTEB of Bankrupt In Bankruptcy No. To. , Esq., Eeferee in Bankruptcy: Your petitioner respectfully shows : That he is the trustee herein duly qualified and acting. That a portion of such bankrupt's estate consists of the following property: That it will be to the advantage of the estate that such property be sold forthwith at private sale for the following reasons and upon the following terms : That no previous application has been made to this court for the order hereinafter asked. Wherefore, your petitioner prays for an order permitting him to sell said property in the way and on the terms above specified. • » Petiiioner. IVerification.'l Ko. 1'95.] Oedee fob Private Sale. Form No. 195. Order for Private Sale by Trustee. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], l>o. 241.) United States District Court, for the District of , In the Matter of ► In Bankruptcy No. Bankrupt . , the trustee herein, having filed a duly verified petition praying for an order permitting him to sell at private sale the following property: [Here specify property.] on the terms set forth in said petition (and a meeting of creditors having been duly held upon ten days' notice) and it appearing that good cause for such sale has been shown ; now, on motion of , Esq., attorney for the trustee, it is Ordered : That , the trustee herein, be, and he hereby is authorized to sell the property above specified to for the sum of $ And it is further ordered : That the said trustee keep an accurate account thereof and file same with the referee. Dated, , day of , 19. . . Referee in Bankruptcy. 1440 Supplementary Forms. [No. 196. Form No. 196. Petition for Sale Fiee and Clear of Liens. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], Xo. 248.) United States District Court, District of In the Matter of Bankrupt In Bankruptcy Ko> To the District Court of the United States, for the District of : The petition of respectfully shows and alleges : First : That your petitioner was heretofore and on the day of , 19 ... , duly appointed the trustee in bankruptcy of all of the property of the above bankrupt and has duly qualified as such by filing his bond in this court in the sum of $ conditioned for the faithful per- formance of his duties, and is now acting as such trustee. Second: That your petitioner has taken possession of all the property of the said bankrupt which includes the following described real and personal estate located at the town of ., county, State of : All that certain tract or parcel of land, with the buildings thereon erected and all machinery connected with or attached to said building and property, situate in the town of , county of and State of , bounded as follows : Together with all and singular, the tenements, hereditaments and appur- tenances belonging to the said property ; and the reversion, remainders, tolls, income, rents, issue and profits thereof, including all chattels, fixtures, furnishings, machinery, tools and every other estate, right, title and interest, property and appurtenances of the said Third : That heretofore and on the day of , 19 . . . , an involuntary petition in bankruptcy was filed herein against the above-named bankrupt, and theretofore and within four months prior to the date of the filing of the said petition, to vit, on the day of No. 196.] Sale Feee of Liens; Petition. 144 i 19 ... , the said bankrupt, for and in consideration of the alleged sum of $ , made, executed and delivered a certain bond and mortgage covering all of the above-described property, to [a corporation organized under and existing by virtue of the laws of the State of ] Fourth : That the said alleged bond and mortgage were, as your petitioner is informed and does verily believe, executed and delivered under the fol- lowing circumstances: That on the said day of , 19 . . . , and for a con- siderable period prior thereto, the said bankrupt above named was insolvent and that his property at a fair valuation was insufficient to pay all of his debts in full, which said debts, as your petitioner is informed and does verily believe, did on said day of , 19 . . . , and prior thereto, aggregate the sum of about $ ; and that all of his assets of what- soever kind, character, nature or description, did not exceed in value the sum of about $ Fifth: That on said day of , 19. . ., the said bankrupt was indebted to in the sum of $ , which said indebtedness consisted of two promissory notes in writing, made, executed and delivered by to , each for the sum of $ Sixth : That on said day of , 19 ... , the said notes of $ , due on that day, were not paid by the said bankrupt, and were thereupon duly protested for nonpayment by the said , on which said day, as your petitioner is informed and verily believes, the said knew and had reasonable cause to believe that the said was insolvent and unable to pay his debts ; and that thereafter and on the day of , 19 . . . , well knowing that the said was insolvent and having good and reasonalDle cause to so believe, and without any present fair consideration, and as security for an antecedent indebtedness, he did accept and take the said bond and mortgage for the said sum of $ on said real and peraoiuJ property hereinbefore mentioned and described. Seventh: That heretofore and by order of this court, all of the said property hereinbefore mentioned and described was duly appraised at the sum of $ , and as your petitioner is informed and does verily believe, the said property if sold by your petitioner subject to the said mortgage of $ , above mentioned, will not realize any equity what- soever by reason of the fact that the said property is not worth the amount of the said mortgage and that no one interested in property of this character would purchase said property subject to it. 1448 Supplementary Poems. [No. 196. Eighth: That your petitioner proposes to institute legal proceedings in this court to declare void and of no effect the said mortgage and to have the same annulled and canceled as of record, upon the ground that under and by virtue of the terms and conditions of the acts of Congress relating to bankruptcy, the giving of the said mortgage was preferential as security for an antecedent indebtedness and for no present fair consideration passing at the time of the execution and delivery thereof; and upon the further ground that the said mortgage constituted a preference by reason of the fact that at the time that the said bond and mortgage were executed and delivered, the said receiving the same, knew and had reasonable cause to know and believe that the said bankrupt was insolvent. Ninth: That your petitioner has examined and caused to be examined , , and other witnesses, to all of which testimony your petitioner upon the hearing of the application herein made begs leave to refer and from which said examination the facts as hereinbefore alleged do more particularly and at length appear. Tenth: That your petitioner in the performance of his duties as said trustee is desirous of immediately disposing of all of the property of the bankrupt herein, and in order so to do most advantageously to the interest of the creditors of the said bankrupt, does verily believe that the said property should be sold free of and from the lien of the said mortgage of $ which said mortgage in detail covers the said property as herein- before described, and which was made, executed and delivered on said day of , 19 ... , by the said , bankrupt herein, for the said sum of $ , and which was thereafter and on the day of , 19. . ., duly recorded in Liber .... of Mortgages at page in the office of the clerk of the county of , State of Wherefore, your petitioner does respectfully pray this Honorable Court that an order be made herein, requiring mortgagee to show cause before this court at a time and place to be stated, why an order should not be made and entered herein, directing that all of the property mentioned and described in the petition herein and covered by the said mortgage herein referred to, be sold by your petitioner as trustee of the said bankrupt, at public auction and in the manner prescribed by the acts of Congress relating to bankruptcy, and the Greneral Orders of the Supreme Court of the United States, free of and from the lien of the said mortgage and why the proceeds arising of and from the sale of the said property should not be held by your petitioner subject to the lien of the said mortgage, to all intents and purposes as though the said property had not been sold, subject to the final order, judgment and decree of this court, or the final order, judgment and decree of a court of competent jurisdiction, as to the validity of the said mortgage No. 197. J Sale Free of Liens; IN'otice op Motion. 1449 and wiiy your petitioner should not have such other and further relief as to this Honorable Court may seem just and proper. And your petitioner will ever pray, etc. Dated , , , , 19 . . . •> > Petitioner, Attorney for Trustee, Office and Post-office address, Street, City of [Verificaiiov^] Form No. 197. Notice of Motion for Sale Fiee and Clear of Liens. (Hagar and Alexander's Bankruptcy Forms [2d Ed.], No. 249.) United States District Court for the , District of In the Matter of Bankrupt ► In Bankruptcy No. Please take notice that upon the annexed petition of , trustee in bankruptcy of the above-named bankrupt, verified , 19 ... , the annexed affidavit of , verified , 19 ... , the (mortgage, etc.) a copy whereof is hereto annexed, from to , bearing date , 19. ; ., and upon all the proceedings and testimony taken herein, a motion will be made by the undersigned on behalf of the trustee herein before , Esq., referee in bankruptcy, in charge of this proceeding, at his office, ITo street, in the city of , on the day of , 19 ... , at .... o'clock in the noon, or as soon thereafter as counsel can be heard, for an order authorizing and directing , as trustee in bank- ruptcy of the estate of the above-named bankrupt, to sell the property mentioned in the annexed petition of the trustee herein, and situated at , , and that the said trustee be authorized and directed to sell and dispose of the aforesaid property, now in his possession, and claimed to belong to this estate, free and clear of all liens and demands thereon, in- cluding an alleged mortgage of to , 14:50 .Supplementary Forms. [No. 198. dated , 19. . ., and that the proceeds arising frona the sale of the said property be held by the trustee subject to the claims, liens and demands of the alleged mortgagees, lienors and claimants, and that the said mortgages, liens, claims and demands attach to the proceeds of such sale with the same force and effect as if upon the property itself, subject to the final order, judgment and decree of this court or of a court of competent jurisdiction as to the validity, iona fides and extent of such mortgage, lien, claim and demand ; And for such other and further relief as to this court may seem just and proper. Dated, , , , 19... Attorney for Petitioner. To Address, {Claimant or "1 Alleged Mortgagee. J Porm No. 198. Order Directing Sale Free and Clear of Liens. (Hagar and Alexander's Bankruptcy Forma [2d Ed.], No. 250.) United States District Court for the , District of . . Us THE Matter of Bankrupt ► In Bankruptcy No. An order having been heretofore made herein requiring to show cause before this court, at the office of , Esq., referee, why an order should not be made herein, directing that all the property, now in the possession of said trustee and mentioned and described in the petition annexed to the said order and alleged to be covered by the mortgage therein referred to, be sold by the said trustee at public auction, and in the manner prescribed by the acts of Congress relating to bankruptcy and the General Orders of the Supreme Court of the United States, free of and from the lien of the said mortgage, and why the proceeds arising of and from the sale of the said property should not be held by the said trustee subject to the lien of the said mortgage, to all intents and purposes as though the said property had not been sold : subject to the final order, judgment and No. 198.] Sale Tbee op Liens. 1451 decree of this court, or of the final order, judgment or decree of a court of competent jurisdiction, as to the validity, bona fides and extent of the said mortgage, and for other and further relief, Now, upon reading and filing the said order to show cause, and the petition ©f , trustee thereto annexed, verified the day of ,19---, And upon the petition in bankruptcy herein, the testimony taken at the first meeting of creditors in support of the said application; and the said having duly appeared upon the return of said order to show cause and duly filed his answer, verified the day of , 19 ... , the affidavits of and , duly verified the and days of , 19 . . . , in opposi- tion to the said application, And after hearing respective! counsel for the trustee and the and due deliberation having been had; and it appearing to the satisfaction of this court that the best interests of the creditors of the said bankrupt above named will be subserved by the granting of the application, and for divers other reasons that the said application is proper, it is hereby Ordered, adjudged and decreed, that , Esq., as trustee of , bankrupt, be, and he hereby is authorized, directed and permitted to sell and dispose at public auction, and in the manner and mode as prescribed by the acts of Congress relating to bankruptcy and the General Orders of the Supreme 'Court of the United States, all of the property of the , bankrupt, situated at more particularly mentioned and described in a certain indenture of mortgage heretofore made by , to , for the sum of $ dated the day of , 19 ... , and recorded on the ....'.. day of , 19 ... , at .... o'clock, . . . m., in Liber of Mortgages, at page , in the office of the clerk of the comity of , State of And it is further ordered, adjudged and decreed, that the said as said trustee, be, and he hereby is authorized, directed and permitted to sell and dispose of the said property in said mortgage more particularly mentioned and described, free of and from the lien of the said mortgage hereinbefore described, and that the proceeds of and from the sale of the said property be held by the said trustee, subject to the lien of the said mortgage, to all intents and purposes as though the said property had not been sold: subject to the final order, judgment and decree of this court or the final order, judgment and decree of a court of competent juris- diction, as to the validity, bona fides and extent of the said mortgage. Dated, City of , ...;.., , 19. . . Referee in Bankruptcy. APPENDIX A RULES OF PRACTICE FOB TEE COURTS OF EQUITY OF THE UNITED STATES.* (In effect February 1, 1913.) V RULE I. — District Court always open for certain purposes — Orders at chambeiB.— The district courts, as courts of equity shall be deemed always open for the purpose of filing any pletiding, of issuing and returning mesne and final process, and of making and directing all interlocutory motions, orders, rules and other proceedings preparatory to the hearing, upon their merits, of all causes pending therein. Any district judge may, upon reasonable notice to the parties, make, direct, and award, at chambers or in the clerk's office, and in vacation as well as in term, all such process, commissions, orders, rules and other proceedings, whenever the same are not grantable of course, according to the rules and practice of the court. RXTLE n. — Clerk's office always open, except, etc. — The clerk's office shall be open dur- ing business hours on all days, except Sundays and legal holidays, and the clerk shall be in attendance for the purpose of receiving and disposing of all motions, rules, orders and other proceedings which are grantable of course. ' RULE III. — Books kept by clerk and entries therein. — The clerk shall keep a book known as " Equity Docket," in which he shall enter each suit, with a file number corre- sponding to the folio in the book. All papers and orders filed with the clerk in the suit, all process issued and returns made thereon, and all appearances shall be noted briefly and chronologically in this book on the folio assigned to the suit and shall be marked with its file number. The clerk shall also keep a book entitled " Order Book," in which shall be entered at length, in the order of their making, all orders made or passed by him as of course and also all orders made or passed by the judge in chambers. He shall also keep an "Equity Journal," in which shall be entered all orders, decrees and proceedings of the court in equity causes in term time. Separate and suitable indices of the Equity Docket, Order Book and Equity Journal stall be kept by the- clerk under the direction of the court. RULE IV. — Notice of orders. — Neither the noting of an order in the Equity Docket nor its entry in the Order Book shall of itself be deemed notice to the parties or their solicitors; and when an order is made without prior notice to, and in the absence of, • party, the clerk, unless otherwise directed by the court or judge, shall forthwith send « * " In proceedings In equity Instltated for the purpose of carrying Into effect the provlslone of the [Bankruptcy) Act, or for enforcing the rights and remedies given by It, the rules of equity practice established by the Supreme Court of the United States shall be followed as nearly as may be." . . . See General Order in Bankruptcy, No. ZXXVii, November, 1898. [1453] 1454 United States Equity Rules. [v-xL (!opy thereof, by mail, to such party or Mn Bolicitor and a note of such mailing shall be made in th« Equity Docket, whdch shall be taken as sufficient proof of due notice of the order. fiULE V. — Motions gr^ntable of course by clerk. — All motions and applications in the clerk's office for the issuing of mesne process or final process to enforce and execute decrees; for taking bills pro eonfesso; and for other proceedings in the clerk's office which do not " require any allowance or order of the court or of a judge, shall be deemed inotiong and applications grantable of course by the clerk; but the same may be suspended, or altered, or rescinded by the judge upon special cause shown. RULE VI. — Motion day. — Each district court shall establish regular times and places, not less than once each month, when motions requiring notice and hearing may be maof and disposed of; but the judge may at any time and place, and on such notice, if any. as he may consider reasonable, make and direct all interlocutory orders, rulings and proceedings for the advancement, conduct and hearing of causes. If the public interest permits, the senior circuit judge of the circuit may dispense with the motion day during not to exceed two months in the year In any district. RULE VII, — Process, mesne and final. — The process of subpoena shall constitute the proper mesne process in all suits in equity, in the iirst instance, to require the defendant to appear and answer the bill; and, unless otherwise provided in these rules or specially ordered by the court, a writ of attachment and, if the defendant cannot be found, a writ of sequestration, or a writ of assistance (o enforce a delivery of possession, as the case r.'ay require, shall be the proper process to issue for the purpose of compelling obedience ti) any interlocutory or final order or decree of the court. RULE VIII. — Enforcement of final decrees. — Final process to execute any decree may, if the decree be solely for the payment of money, be by a writ of execution, in the form used in the district court in suits at common law in actions of assumpsit. If the decree be for the performance of any specific act, as, for example, for the execution of a con- veyance of land or the delivering up of deeds or other documents, the decree shall, in all cases, prescribe the time within which the act shall be done, of which the defendant shall be bound, without further service, to take notice; and upon affidavit of the plaintiff, filed in the clerk's office, that the same has not been complied with within the prescribed time, the clerk shall issue a writ of attachment against the delinquent party, from which, if attached thereon, he shall not be discharged, unless upon a. full compliance with the decree and the payment of all costs, or upon a special order of the court, or a judge (hereof, upon motion and affidavit, enlarging the time for the performance thereof. If the delinquent party cannot be found a writ of sequestration shall issue against his estate, upon the return of non est inventus, to compel obedience to the decree. If a man- datory order, injunction or decree for the specific performance of any act or contract be not complied with, the court or a judge, besides, or instead of, proceedings against the disobedient party for a contempt or by sequestration, may by order direct that the act required to be done be done, so far as practicable, by some other person appointed by the court or judge, at the cost of the disobedient party, and the act, when so done, shall have like effpct as if done by him. RULE IX. — Writ of assistance. — When any decree or order is for the delivery of pos- session, upon proof made by affidavit of a demand and refusal to cbey the decree or order, the party prosecuting the same shall be entitled to a. writ of a-isistanoe from the elerk of the court. RULE X. — Decree for deficiency in foreclosures, etc. — In suits for the foreclosure of mortgages, or for the enforcement of other liens, a decree may bs rendered for any balance that may be found due to the plaintiff over and above the proceeds of the sale or sales, and «aecution may issue for the collection of the same, as is provided in rule 8 when the decree is solely for the payment of money. RULE XI. — Process in behalf of and against persons not parties. — Every perwm, no* being a party in any cause, who has obtained an order, or in whose favor an order shall have been made, m»j to such order by the same process as if he yren xii-xx.] United States Equity Euues. 1465 » party; and every person, not being a party, against whom obedience to any order of the court may be enforced, shall be liable to the same process for enforcing obedience to such orders as if he were a party. RULE XII. — Issue «f subpoena — Time for answer. — Whenever a bill is filed, and not before, the clerk shall issue the process of subpoena thereon, as of course, upon the appli- cation of the plaintiff, which shall contain the names of the parties and be returnable into the clerk's office twenty days from the issuing thereof. At the bottom of the sub- poena shall be placed a, memorandum, that the defendant is required to file his answer or other defense in the clerk's office on or before the twentieth day after service, excluding the day thereof; otherwise the bill may be taken pro confesso. Where there are more than one defendant, a writ of subpoena, may, at the election of the plaintiff, be sued out separately for each defendant, or a joint subpoena against all the defendants. RULE XIII. — Manner of serving subpoena. — The service of all subpoenas shall be by delivering a copy thereof to the defendant personally, or by leaving a copy thereof at the dwelling-house or usual place of abode of each defendant, with some adult person who ia a nuember of or resident in the family. RULE XIY. — AJiaa subpoena. — Whenever any subpoena shall be returned not executed as to any defendant, the plaintiff shall be entitled to other aubpoenas against such de- fendant, until due service is made. RULE XV. — Process, by whom served. — The service of all process, mesne and final, shall be by the marshal of the district, or his deputy, or by aomie other person specially appointed by the court or judge for that purpose, and not otherwise. In the latter easa, the person serving the process shall make affidavit thereof. RULE XVI.— Defendant to answer— Default— Decree pro confesso.— It shall be the duty of the defendant, unless the time shall be enlarged, for cause shown, by a judge of the court, to file his answer or other defense jo the bill in the clerk's office within thi' time named in the subpoena as required by rule 12. In default thereof the plaintiff m&/, at his election, take an order as of course that the bill be taken pro confesso; and there- upon the cause shall be proceeded in ex parte, RULE XVn. — Decree pro confesso to be followed by final decree — Setting aside default. —When the bill is taken pro confesso the court may proceed to a final decree at any time after the expiration of thirty days after the entry of the order pro confesso, and such decree shall be deemed absolute, unless the court shall, at the same term, set aside the same, or enlarge the time for filing the answer, upon cause shown upon motion and affidavit. No such motion shall be granted, unless upon the payment of the costs of the plaintiff up to that time, or such part thereof as the court shall deem reasonable, and unless the i defendant shall undertake to file his answer within such time as the court shall direct, J and submit to such other terms as the court shall direct, for the purpose of speeding the cause. RULE XVIII. — Pleadings — Technical forms abrogated. — Unless otherwise prescribed by statute or these rules the technical forms of pleadings in equity are abolished. RULE XIX. — Amendments generally. — The court may at any time, in furtherance of justice, upon such terms as may be just, permit any process, proceeding, pleading or record to be amended, or material supplemental matter to be set forth in an amended or supplemental pleading. The court, at every stage of the proceeding, must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties. RULE XX.— Further and particular statement in ideading may be required.- A further and better statement of the nature of the claim or defense, or further and better par- ticulars of any matter stated in any pleading, may in any case be ordered, upon such terms, as to costs and otherwise, as may be just. ^^^^ United States Equity Bules. [xxi-xxviL RULE XXI.— Scandal and impertinence.— The right to except to bUls, answers, and other proceedings for scandal or impertinence shall not obtain, but the court may, upon motion or its own initiative, order any redundant, impertinent or scandalous matter stricken out, upon such terms as the court shall think fit. RULE XXn. — Action at law erroneously begun as suit in equity — Transfer. — If at any time it appear that a suit commenced in equity should have been brought as an action on the law side of the court, it shall be forthwith transferred to the law side and b* there proceeded with, with only such alteration in the pleadings as shall be essential. RULE XXIII. — Matters ordinarily determinable at law, when arising in suit in equity to be disposed of therein. — if in a suit in equity a matter ordinarily determinable at law arises, such matter shall be determined in that suit according to the principles applicable, without sending the case or question to the law side of the court. Rule XXIV. — Signature of counsel. — Every bill or other pleading shall be signed in- dividually by one or more solicitors of record, and such signatures shall be considered as a certificate by each solicitor that he has read the pleading so signed by him; that upon the instructions laid before him regarding the case there is good ground for the same; that no scandalous matter is inserted in the pleading; and that it is not interposed for delay. RULE XXV.— Bill of complaint— Contents.— Hereafter it shall be sufficient that a bill in equity sliall contain, in addition to the usual caption: First, the full name, when known, of each plainti£f and defendant, and the citizenship and residence of each party. If any party be under any disability that fact shall be stated. Second, a short and plain statement of the grounds upon which the court's jurisdiction depends. Third, a short and simple statement of the ultimate facts upon which the plaintiff asks relief, omitting any mere statement of evidence. Fourth, if there are persons other than those named as defendants who appear to be proper parties, the bill should state why they are not made parties — as that they are not within the jurisdiction of the court, or cannot be made parties without ousting the jurisdiction. Fifth, a statement of any prayer for any special relief pending the suit or on final hear- ing, which may be stated and sought in alternative forms. If special relief pending the suit be desired the bill should be verified by the oath of the plaintiff, or someone having knowl- edge of the facts upon which such relief is asked. RULE XXVI. — Joinder of causes of action. — The plaintiff may join in one bill as many causes of action, cognizable in equity, as he may have against the defendant. But when there is more than one plaintiff, the causes of action joined must be joint, and if there bfc more than one defendant the liability must be one asserted against all of the material defendants, or sufiBcienc ground must appear for uniting the causes of action in order to promote the convenient administration of justice. If it appear that any such causes of actiov cannot be conveniently disposed of together, the court may order separate trials. RULE XXVII. — Stockholder's bill. — Every bill brought by one or more stockholders in a corporation against the corporation and other parties, founded on rights which may properly be asserted by the corporation, must be verified by oath, and must contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law, and that the suit is not a collusive one to confer on a court of the United States jurisdiction of a case of which it would not otherwise have cognizance. It must also set forth with particularity the efforts of the plaintiff to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholders, and the causes of his failnr* to obtain inch action, or the reasons for not making such effort. xxviii-xxxiii.j United States Equity Eules. 1457 RULE XXVIII. — Amendment of bill as of course. — The plaintiff may, as of course, amend his bill before the defendant has responded thereto, but if such amendment be filed after any copy has issued from the clerk's oflSce, the plaintiff at his own cost shall furnish to the solicitor of record of each opposing porty a copy of the bill as amended, unless otherwise ordered by the court or judge. After pleading filed by any defendant, plaintiff may amend only by consent of the de- fendant or leave of the court or judge. RULE XXIX. — Defenses — How presented.— Demurrers and pleas are abolished. Every defense in point of law arising upon th face of the bill, whether for misjoinder, nonjoinder, or insufllciency of fact to constitute a valid cause of action in equity, which might hereto- fore have been made by demurrer or plea, shall be made by motion to dismiss or in the answer; and every such point of law going to the whole or a material part of the cause or causes of action stated in the bill may be called up and disposed of before final hearing at the discretion of the court. Every defense to each claim asserted by the bill, omitting any •mere statement of the answer and may be separately heard and disposed of before the trial of the principal case in the discretion of the court. If the defendant move to dismiss the bill or any part thereof, the motion may be set down for hearing by either party upon five days' notice, and if it be denied, answer shall be filed within five days thereafter or a decree pro confesso entered. RULE XXX. — Answer — Contents — Counter-claim. — The defendant in his answer shall in short and simple terms set out his defense heretofore presentable by plea in bar or abatement shall be made in evidence and avoiding any general denial of the averments of the bill, but specifically admitting or denying or explaining the facts upon which the plain- tiff relies, unless the defendant is without knowledge, in which case he shall so state, such statement operating as a denial. Averments other than of value or amount of damage, if not denied, shall be deemed confessed, except as against an infant, lunatic or other per- son non compos and not under guardianship, but the answer may be amended, by leave .of the court or judge, upon reasonable notice, so as to put any averment in issue, when justice requires it. The answer may state as many defenses, in the alternative, regardless of consistency, as the defendant deems essential to his defense. The answer must state in short and simple form any counter-claim arising out of the transaction which is the subject matter of the suit, and may, without cross-bill, set out any set-off or counter-claim against the plaintiff which might be the subject of an inde- pendent suit in equity against him, and such set-off or counter-claim, so set up, shall have the same effect as a cross-suit, so as to enable the court to pronounce a final judgment in the same suit both on the original and cross-claims. RULE XXXI. — Reply — When required — When cause at issue. — Unless the answer assert a 6et-off or counter-claim, no reply shall be required without special order of the court or judge, but the cause shall be deemed at issue upon the filing of the answer, and any Asw or aiiirmative matter therein shall be deemed to be denied by the plaintiff. If the answer include a set-off or counter-claim, the party against whom it is asserted shall reply within ten days after the filing of the answer, unless a longer time be allowed by the court or judge. If the counter-claim is one which affects the rights of other defendants they or their solicitors shall be served with a copy of the same within ten days from the filing thereof, and ten days shall be accorded to such defendants for filing a reply. In default of a reply, a decree pro confesso on the counter-claim may be entered as in default of an answer to the bill. RULE XXXII. — Answer to amended bill. — In every case where an amendment to the bill shall be made after answer filed, the defendant shall put in a new or supplemental answer within ten days after that on which the amendment or amended bill is filed, unless the time is enlarged or otherwise ordered by a judge of the court; and upon his default, the like proceedings may be had as in case of an omission to put in an answer. RULE XXXIII. — Testing sufiSciency of defense. — Exceptions for insuflSciency of an answer are abolished. But if an answer set up an affirmative defense, set-off or counter- claim, the plaintiff may, upon five days' notice, or such further time as the court may allow, test the sufficiency of the same by motion to strike out. If found insufficient but amendable the court may allow an amendment upon terms, or strike out the matter. f>9. 1458 United States Equity Rules. [xxxiv-xlii. RULE XXXrV.— Supplemental pleading.— Upon application of either party the court or judge, may upon reasonable notice and such terms as are just, permit him to file and serve a supplemental pleading, alleging material facts occurring after his former pleading, or of which he was ignorant when it was made, including the judgment or decree of a com- petent court rendered after the commencement of the suit determining the matters in con- troversy or a part thereof. RULE XXXV. — Bills of revivor and supplemental bills — Forms. — It shall not be neces- sary in any bill of revivor or supplemental bill to set forth any of the statements in the original suit, unless the special circumstances of the case may require it. RULE XXXVI. — OfGcers before whom pleadings verified. — Every pleading which is re- quired to be sworn to by statute, or these rules, may be verified before any justice or judge of any court of the United States, or of any State or Territory, or of the District of Columbia, or any clerk of any court of the United States, or of any Territory, or of the District of Columbia, or any notary public. RULE XXXVII. — Parties generally — Intervention. — Every action shall be prosecuted in the name of the real party in interest, but an executor, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party expressly authorized by statute, may sue in his own • name without joining with him the party for whose benefit the action is brought. All persons having an interest in the subject of the action and in obtaining the relief de- manded may join as pla;intiffs, and any person may be made a defendant who nas or claims an interest adverse to the plaintiff. Any person may at any time be made a party if his presence is necessary or proper to a complete d'etermination of the cause. Persons having a united interest must be joined on the same side as plaintiffs or defendants, but when any one refuses to join, he may for such reason be made a defendant. Anyone claiming an interest in the litigation may at any time be permitted to assert his right by intervention, but the intervention shall be in subordination to, and in recog- nition of, the propriety of the main proceeding. RULE XXXVIII. — Representatives of class. — VSTien the question is one of common or general interest to many persons constituting a class so numerous as to make it im- praoticable to bring them all before the court, one or more may sue or defend for the whole. RULE XXXIX. — Absence of persons who would be proper parties. — In all cases wheie it shall appear to the court that persons, who might otherwise be deemed proper pa,rties to the suit, cannot be made parties by reason of their being out of the jurisdiction of the court, or incapable otherwise of being made parties, or because their joinder would oust the jurisdiction of the court as .to the parties before the court, the court may, in its discretion, proceed in the cause without making such persons parties; and in such cases the decree shall be without prejudice to the rights of the absent parties. RULE XL. — Nominal .parties. — Where no account, payment, conveyance, or other direct relief is sought against a party to a suit, not being an infant, the party, upon service of the subpoena upon him, need noit appear and answer the bill, unless the plaintiff specially requires him to do so by the prayer; but he may appear and answer at his option ; and if he does not appear and answer he shall be bound by all the proceedings in the cause. If the plaintiff shall require him to appear and answer he shall be entitled to the costs of all the proceedings against him, unkss the court shall otherwise direct. RULE XLI. — Suit to execute trusts of will — Heir as party. — In suits to execute the trusts of a will, it shall not be necessary to make the heir at law a party; but the plaintiff shall be at liberty to make the heir at law a party where he desires to have the will established against him. RULE XLII. — Joint and several demands. — In all cases In which the plaintiff has a Joint and several demand against several persons, either as principals or sureties, it shall not bt necessary to bring before the court as parti«« to a suit concerning such demand all the xliii-xlviii.] Ditited States Equity Kules. 1459 pprsCTis liable thereto; but the plaintiff may proceed against one or more of the persons severally liable. KULE XLIII. — Defect of parties — Resisting objection. — Where the defendant shall by bis answer suggest that the bill of complaint is defectiye for want of parties, the plaintifl may, within fourteen days after answer fikd, set down the cause for argument as a motion upon that objection only; and where the plaintiff 8ha,ll not so set down his cause, but shall proceed therewith to a hearing, notwithstanding an objection fof want of parties taken by the answer, he shall not at the hearing of the cause, if the defendant's objection shall then be allowed, be entitled as of course to an order to amend his bill by adding parties; but the court shall be at liberty to dismdss the bill, or to allow an amendment mi such terms as justice may require. RULE XLIV. — Defect of parties — Tardy objection. — If a defendant shall, at the hear- ing of a cause, object that a suit is defective for want of parties, not having by motioi; or aii.swer taken the objection and therein specified by name or description the parties to whom the objection applies, the court shall be at liberty to make a decree saving tlie rights of the absent parties. RULE XLV. — Death of party — Revivor. — In the event of the death of either party thf court may, in a proper case, upon motion, order the suit to be revived by the susbtitutio:, of the proper parties. If the successors or representatives of the deceased party fail t.> make such application within a reasonable time, then any other party may, on motion, apply for such relief, and the court, upon any such motion may make the necessary order.- for notice to the parties to be substituted and for the filing of such pleadings or ameud ments as may be necessary. RULE XL VI. — Trial — Testimony usually taken in open court — Rulings on objections to evidence. — In all trials in equity the testimony of witnesses shall be taken orally in open court, except as otherwise provided by statute or these rules. The court shall pass upon the admissibility of all evidence offered as in actions at law. When evidence is offered and excluded, and the party against whom the ruling is made excepts thereto at the time, the court shall take and report so much thereof, or make such a statement respecting it, as will clearly show the character of the evidence, the form dn which it was offered, the objection made, the ruling, and the exception. If the appellate court shall be of opinion that the evidence should have been admitted, it shall not reverse the decree unless it be clearly of opinion that material prejudice will result from an affirmance, in which event it shall direct such further steps as justice may require. itULE XL VII. — Depositions — To be taken in exceptional instances. — The court, upon application of either party, when allowed by statute, or for good and exceptional cause for departing from the general rule, to be shown by affidavit, may permit the deposition of named witnesses, to be used before the court or upon a reference to a master, to be taken before an examiner or other named officer, upon the notice and terms specified in the order. All depositions taken under a statute, or under any such order of the court, shall be taken and filed as follows, unless otherwise ordered by the court or judge for good cause shown : Those of the plaintiff within sixty days from the time the cause is at issue ; those of the defendant within thirty days from the expiration of the time for the filing of plaintiff's deposdtions; and rebutting depositions by either party within twenyt days after the time for taking original depositions expires. RULE XL VIII. — Testimony of expert witnessee in patent and trademark cases. — In a case involving the validity or scope of a patent or trade-mark, the district court may, upon petition, order that the testimony in chief of expert witnesses, whose testimony is directed to matters of opinion, be set forth in affidavits and filed as follows: Those of the plaintiff within forty days after the cause is at issue; those of the defendant within twenty days after plaintiff's time has expired; and rebutting affidavits within fifteen days after the expiration of the time for filing original affidavits. Should the opposite party desi™ the production of any affiant for cross-examination, the court or judge shall, on motion, direct that said cross-examination and any re-examination take place before the couit u"on the trial, and unless the affiant is produced and submits to cross-examination ii.i compliance with such direction, his affidavit shall not be used as evidence in th« cause. 14G0 United States Equity Eules. [xlix-lvL BULK XIK.— Evidence taken before examiners, etc.— All evidence offered before u examiner or like officer, together with any objections, shall be saved and returned into tbe court. Depositions, whether upon oral examination before an examiner or like officer or otherwise, shall be taken upon questions and answers reduced to writing, or in the form of narrative, and the witness shall be subject to cross and re-examination. HOLE t. — Stenographer— Appointment — Fees. — When deemed necessary by the court or officer taking testimony a stenographer may be appointed who shall take down testi- mony in shorthand and, if required, transcribe the same. His fee shall be fixed by the court and taxed ultimately as costs. The expense of taking a deposition, or the cost of » transcript, shall be advanced by the party calling the witness or ordering the transcript. BULE LL — Evidence taken before examiners, etc. — Objections to the evidence, before an examiner or like officer, shall be in short form, stating the grounds of objection relied upon, but no transcript filed by such officer shall include argument or debate. The testi- mony of each witness, after being reduced to writing, shall be read over to or by him, and shall be signed by him in the presence of the officer; provided, that if the witness shall refuse to sdgn his deposition so taken, the officer shall sign the same, stating upon the record the reasons, if any, assigned by the witness for such refusal. Objection to any question or questions shall be noted by the officer upon the deposition, but he shall not liave power to decide on the competency or materiality or relevancy of the questions. The court shall have power, and it shall be its duty, to deal with the costs of incompetent and immaterial or irrelevant depositions, or parts of them, as may be just. BULE LII. — Attendance of witnesses before commissioner, master or examiner. — Wit- nesses who live within the district, and whose testimony may be taken out of court by these rules, may be summoned to appear before a commissioner appointed to take testi- mony, or before a master or examiner appointed in any cause, by subpoena in the usual form, which may be issued by the clerk in blank and filled up by the party praying the same, or by the commissioner, master, or examiner, requiring the attendance of the wit- nesses at the time and place specified, who shall be allowed for attendance the same com- pensation as for attendance in court; and if any witness shall refuse to appear or give evidence it shall be deemed a contempt of the court, which being certified to the clerk's office by the commissioner, master, or examiner, an attachment may issue thereupon by order of the court or of any judge thereof, in the same manner as if the contempt were for not attending, or for refusing to give testimony in, the court. In case of refusal of witnesses to attend or be sworn or to answer any question put by the commissioner, master or examiner or by counsel or solicitor, tbe same practice shall be adopted as is now practiced with respect to witnesses to be produced on examination before an examiner of said court on written interrogatories. RULE LIIl. — Notice of taking testimony before examiner, etc. — Notice shall be given by the respective counsel or parties to the Ojiposile counsul ur puiLiin ui' the time and place of examination before an examiner or like officer for such reasonable time as tbe court or officer may fix by order in each case. RULE LIV.— Depositions under Rev. Stat. §§ 863, 865, 866, 867— Cross-examination.— After a cause is at issue, depositions may be taken as provided by sections 863, 865, 866 and 867, Revised Statutes. But if in any case no notice has been given the opposite party of the time and place of taking the deposition, he shall, upon application and notice, be entitled to have the witness examined orally before the court, or to a cross-examination before an examiner or like officer, or a new deposition taken with notice, as the court or judge under all the circumstances shall order. RULE LV. — Deposition deemed published when filed. — Upon the filing of any deposi- tion or affidavit taken under these rules or any statute, it shall be deemed published, unless otherwise ordered by the court. RULE LVI. — On expiration of time for depositions, case goes on trial calendar. — ^After the time has elapsed for taking and filing depositions under these rules, the case shall be Ivii-Iiz.] United States Equity Rules. 1461 placed on the trial calendar. Thereafter no further testimony by deposition shall be taken •zcept for some strong reason shown by affidavit. In every such application the reason why the testimony of the witness cannot be had orally on the trial, and why his deposi- tion has not been before taken, shall be set forth, together with the testimony which it ia expected the witness will give. RULE LVII. — Continuances. — After a cause shall be placed on the trial calendar it may be passed over to another day of the same term, by consent of counsel or order of the court, but shall not be continued beyond the term save in exceptional cases by order of the court upon good cause shown by affidavit and upon such terms as the court shall in its discretion impose. Continuances beyond the term by consent of the parties shall be allowed on condition only that a stipulation be signed by counsel for all the parties and that all costs incurred theretofore be paid. Thereupon an order shall be entered dropping the case from the trial calendar, subject to reinstatement within one year upon application to the court by either party, in which event it shall be heard at the earliest convenient dav. If not so reinstated within the year, the suit shall be dismissed without prejudice to a new one. RULE LVIII. — Discovery — Interrogatories — Inspection and production of documents — Admission of execution or genuineness. — The plaintiff at any time after filing the bill and not later than twenty-one days after the joinder of issue, and the defendant at any time after filing his answer and not later than twenty-one days after the joinder of issue, and either party at any time thereafter by leave of the court or judge, may file interroga- tories in writing for the discovery by the opposite party or parties of facts and documents material to the support or defense of the cause, with a note at the foot thereof stating which of the interrogatories each of the parties is required to answer. But no party shall file more than one set of interrogatories to the same party without leave of the court or judge. li any party to the cause is a public or private corporation, any opposite party may apply to the court or judge for an order allowing him to file interrogatories to be answered by any oflScer of tiie corporation, and an order may be made accordingly for the examina- tion of such officer as may appear to be proper upon such interrogatories as the court or judge shall think fit. Ciopies shall be filed for the use of the interrogated party and shall be sent by the clerk to the respective solicitors of record, or to the last known address of the opposite party if there be no record solicitor. Interrogatories shall be answered, and the answers filed in the clerk's office, within fifteen days after they have been served, unless the time be enlarged by the court or judge. Each interrogatory shall be answered separately and fully and the answers shall be in writing, under oath, and signed by the party or corporate officer interrogated. Within ten days after the service of interrogatories, objections to them, or any of them, may be pre sented to the court or judge, with proof of notice of the purpose so to do, and answers shall be deferred until the objections are determined, which shall be at as early a time as is practicable. In so far as the objections are sustained, answers shall not be required. The court or judge, upon motion and reasonable notice, may make all such orders as may be appropriate to enforce answers to interrogatories or to effect the inspection or pro- duction of documents in the possession of either party and containing evidence material to the cause of action or defense of his adversary.' Any party failing or refusing to comply with such an order shall be liable to attachment, and shall also be liable, if a plaintiff, to have his bill dismissed, and, if a defendant, to have his answer stricken out and be placed in the same situation as if he had failed to answer. By a demand served ten days before the trial, either party may call on the other to admit in writing the execution or genuineness of any document, letter or other writing, saving all just exceptions; and if such admission be not made within five days after such service, the costs of proving the document, letter or writing shall be paid by the party refusing or neglecting to make such admission, Unless at the trial the court shall find that tlie refusal or neglect was reasonable. RULE LIX. — Reference to master — Exceptional,' not usual. — Save in matters of account, a reference to a master shall be the exception, not the rule, and shall be made only upon 4 showing that some exceptional condition requires it. When such a reference is made, the l^'^" United States Equity EtfLES. ' [Ix-lxvi. party at whose instance or for whose benefit it is made shall cause the order of reference to be presented to the master for a hearing within twenty days succeeding the time when the reference was made, unless a longer time be specially granted by the court or judge j if he shall omit to do so, the adverse party shall be at liberty forthwith to cause proceed- ings to be had before the master, at the costs of the party procuring the reference. RULE LX.— Proceedings before master.— Upon every such reference, it shall be the duty of the master, as soon as he reasonably can after the same is brought before him, to assign a time and place for proceedings in the same, and to give due notice thereof to each of the parties, or their solicitors; and if either party shall fail to appear at the time and place appointed, the master shall be at liberty to proceed em parte, or, in his discre- tion, to adjourn the examination and proceedings to a future day, giving notice to the absent party or his solicitor of such adjournment; and it shall be the duty of the master to proceed with all reasonable diligence in every such reference, and with the least prac- ticable delay, and either party shall be at liberty to apply to the court, or a judge thereof, for an order to the master to speed the proceedings and to make his report, and to certify to the court or judge the reason for any delay. RULE LXI.— Master's report— Documents identified but not set forth.— In the reports made by the master to the court, no part of any state of facts, account, charge, affidavit, deposition, examination, or answer brought in or used before him shall be stated or re- cited. But such state of facts, account, charge, affidavit, deposition, examination, or answer shall be identified, and referred to, so as to inform the court what state of facts, account, charge, affidavit, deposition, examination, or answer were so brought in or used. RULE LXII. — Power of master. — The master shall regulate all the proceedings In every hearing before him, upon every reference; and he shall have full authority to examine the parties in the cause, upon oath, touching all matters contained in the reference; and also to require the production of all books, papers, writings, vouchers, and other docu- ments applicable thereto; and also to examine on oath, viva pace, all witnesses produced by the parties before him, or by deposition, according to the acts of Congress, or otherwise, as here provided; and also to direct the mode in which the matters requiring evidence shall be proved before him; and generally to do all other acts, and direct all other in- quiries and proceedings in the matters before him, which he may deem necessary and proper to the justice and merits thereof and the rights of the parties. RULE LXIII. — Form of accounts before master. — All parties accounting before a master shall bring in their respective accounts in the form of debtor and creditor ; and any of the other parties who shall not be satisfied with the account so brought in shall be at liberty to examine the accounting party viva voce, or upon interrogatories, as the master shall direct. RULE LXIV. — Former depositions, etc., may be used before master. — All affidavits, depositiona and documents which have been previously made, read, or used in the court upon any proceeding in any cause or matter may be used before the master, RULE LXV. — Claimants before master examinable by him. — The master shall be at liberty to examine any creditor or other person coming in to claim before him, either upon written interrogatories or viva voce, or in both modes, as the natur? of the eas" mav appear to him to require. The evidence upon such examinations shall be taken down by the master, or by some other person by his order and in his presence, if either party re- quires it, in order that the same may be used by the court if necessary. RULE LXVI. — Return of master's report — Exceptions — Hearing. — The master, as soon as his report is ready, shall return the same into the clerk's office and the day of the re- turn shall be entered by the clerk in the Equity Docket. The parties shall have twenty days from the time of the filing of the report to file exceptions thereto, and if no excep- tions are within that period filed by either party, the report shall stand confirmed. M exceptions are filed, they shall stand for hearing before the court, if then in Migion, ar, if not, at the next sitting held thereafter, by adjournment or otherwise. lxvii-bmii.j Ukited States Equity Rules. 1463 RULE LXVII. — Costs on exceptions to master's report. — In order to prevent eXceptioni to reports from being filed for frivolous causes, or for mere delay, the party whose ex- ceptions are overruled shall, for every exception overruled, pay five dollars costs to the other party, and for every exception allovred shall be entitled to the same costs. RULE LXVIII. — Appointment and compensation of masters. — The district courts may appoint standing masters in chancery iii their respective districts (a majority of all the judges theireof concurring in the appointment), and they may also appoint a master pro hao viee in any particular case. The compensation to be allowed to every master shall be fixed by the district court, in its discretion, having regard to all the circumstance* thereof, and the compensation shall be charged upon and borne by such of the parties in the cause as the court shall direct. The master shall not retain his report as security for his compensation; but when the compensation is allowed by the court, he shall be entitled to an attachment for the amount against the party who is ordered to pay the same, if, upon notice thereof, he does not pay it within the time prescribed by the court. RULE LXIX. — Petition for rehearing. — Every petition for a rehearing shall contain the special matter or cause on which such rcfhearing is applied for, shall be signed by counsel, and the facts therein stated, if not apparent on the record, shall be verified by the oath of the party or by some other person. No rehearing shall be granted after the term at which the final decree of the court shall have been entered and recorded, if an appeal lies to the Circuit Court of Appeals or the Supreme Court. But if no appeal lies, the petition may be admitted at any time before the end of the next term of the court, in the discretion of the court. RULE LXX. — Suits by or against incompetents. — Guardians ad litem to defend a suit may he appointed by the court, or by any judge thereof, for infants or other persons who are under guardianship, or otherwise incapable of suing for themselves. All infants and other persons so incapable inay sue by their guardians, if any, or by their proohein ami; subject, however, to such orders as the court or judge may direct for the protection of infants and other persons. RULE LXXI. — Form of decree. — In drawing up decrees and orders, neitlier the bill, nor answers, nor other pleadings, nor any part thereof, nor the report of any master, nor any other prior proceeding, shall be recited or stated in the decree or order; but the decree and order shall begin, in substance, as follows: "This cause came on to be heard (or to be f\:rther heard, as the case may be) at this term, and was argued by counsel ; and there- upon, consideration thereof, it was ordered, adjudged and decreed as follows, viz.: " (Here insert the decree or order.) RULE LXXII. — Correction of clerical mistakes in orders and decrees. — Clerical mistakes in decrees or decretal orders, or' errors arising from any accidental slip or omission, at any time before the close of the term at which final decree is rendered, be corrected by order of the court or a judge thereof, upon petition, without the form or expense of a rehearing. RULE LXXIII. — Preliminary injunctions and temporary restraining orders. — No pre- liminary injunction shall be granted without notice to the opposite party. Nor shall any temporary restraining order be granted without notice to the opposite party, unless it shall elfarly appear from specific facts, shown by affidavit or by the verified bill, that immediate and irreparable loss or damage will result to the a,pplicant before the matter can be heard on notice. In case a temporary restraining order shall be granted without notie?, in the contingency specified, the matter shall be made returnable at the earliest possible time, and in no event later than ten days from the date of the order, and shall take precedence of all matters, except older matters of the same character. When the matter conies up for hearing the party who obtained the temporary restraining order shall pro- ''fed with his application for a preliminary injunction, and if he does not do so the court shall dissolve his temporary restraining order. Upon two days notice to th« party obtain- ing such temporary restraining order, the opposite party may appear and move dissolution I or modification of the order, and in that event the court or yaA^ shall proceed to hear 1464 United States Equity Rules. [Ixxiv-lxxvii. and determine the motion as expeditiously as the ends of justice may require. Every temporary restraining order shall be forthwith filed in the clerk's office. RULE LXXIV. — Injunction pending appeal. — When an appeal from a final decree, in an equity suit, granting or dissolving an injunction, is allowed by a justice or a judge who took part in the decision of the oause, he may, in his discretion, at the time of such allowance, make an order suspending, modifying or restoring the injunction during the pendency of the appeal, upon such terms, as to bond or otherwise, as he may consider proper for the security of the rights of the opposite party. RULE LXXV. — Record on appeal — Reduction and preparation. — In case of appeal: (a) It shall be the duty of the appellant or hia solicitor to file with the clerk of the court from which the appeal is prosecuted, together with proof or acknowledgment of ■ervce of a copy on the appellee or his solicitor, a praecipe which shall indicate tha portions of the record to be incorporated into the transcript on such appeal. Should the appellee or his solicitor desire additional portions of the record incorporated into the transcript, he shall file with the clerk of the court his praecipe also within ten dajys thereafter, unless the time shall be enlarged by the court or a judge thereof, indicating such additional portions of the record desired by him. (6) The evidence to be included in the record shall not be set forth in full, but shall i be stated in simple and condensed form, all parts not essential to the decision of the ' questions presented by the appeal being omitted and the testimony of witnesses being stated only in narrative form, save that if either party desires it, and the court or judge so directs, any part of the testimony shall be reproduced in the exact words of the witness. The duty of so condensing and stating the evidence shall rest primarily on the appellant, who shall prepare his statement thereof and lodge the same at the clerk's office for the examination of the other parties at or before the time of filing his praecipe under para- graph a of this rule. He shall also notify the other parties or their solicitors of such lodgment and shall name a time and place when he will ask the court or judge to approve the statement, the time so named to be at least ten days after such notice. At the expira- tion of the time named or such further time as the court or judge may allow, the state- ment, together with any objections made or amendments proposed by any party, shall be presented to the court or the judge, and if tne statement be true, complete and properly prepared, it shall be approved by the court or judge, and if it be not true, complete or properly prepared, it shall be made so under the direction of the court or judge and shall then be approved. When approved, it shall be filed in the clerk's office and become a part of the record for the purposes of the appeal. (c) If any difference arises between the parties concerning directions as to the general contents of the record to be prepared on the appeal, such difference shall be submitted to the court or judge in conformity with the provisions of paragraph b of this rule and shall ho covered by the directions which the court or judge may give on the subject. RULE LXXVI. Record on appeal — Reduction and preparation — Cos.ts — Correction of omis- sions. — In preparing the transcript on an appeal, especial care shall be taken to avoid the inclusion of more than one copy of the same paper and to exclude the formal and imma- terial parts of all exhibits, documents and other papers included therein; and for any infraction of this or any kindred rule the appellate court may withhold or impose costs as the circumstances of the case and the discouragement of like infractions in the future may require. Costs for such an infraction may be imposed upon offending solicitors as scell as parties. If, in the transcript, anything material to either party be omitted by accident or error, the appellate court, on a proper suggestion or its own motion, may direct that the omission be corrected by a supplemental transcript. RULE LXXVII. — Record on appeal — Agreed statement. — When the questions presented by an appeal can be determined by the appellate court without an examination of all the pleadings and evidence, the parties, with the approval of the district court or the judge thereof, may prepare and sign a statement of the case showing how the questions arose and were decided in the district court and setting forth so much only of the facts alleged and proved, or sought to be proved, as is essential to a decision of such questions by the appellate court. Such statement when filed in the office of the clerk of the district Lxxviii- Ixxxi.] United States Equity Rules. 1465 court, shall be treated as superseding, for the purposes of the appeal, all parts of the record other than the decree from which the appeal is taket,, and, together with such decree, shall be copied and certified to the appellate court as the record on appeal. RTTLE LXXVIIL-^Affirmation in lieu of oath. — Whenever under these rules an oath is or may be required to be taken, the party may, if conscientiously scrupulous of taking an oath, in lieu thereof make solemn affirmation to the truth of the facts stated by him. RULE LXXIX. — Additional rules by district court. — With the concurrence of a ma- jority of the circuit judges for the circuit, the district courts may make any other and further rules and regulations for the practice, proceedings and process, mesne and final, in their respective districts, not inconsistent with the rules hereby prescribed, and from time to time alter and amend the same. RULE LXXX. — Computation of time — Sundays and holidays. — When the time pre- Bcribed by these rules for doing any act expires on a Sunday or legal holiday, such time shall extend to and include the next succeeding day that is not a Sunday or legal holiday. RULE LXXXI.— These rules effective February 1, 1913 — Old rules abrogated. — These rules shall be in force on and after February 1, 1913, and shall govern all proceedings in cases then pending or thereafter brought, save that where in any then pending causp an order has been made or act done which cannot be changed without doing substantial injustice, the court may give effect to such order or act to the extent necessary to avoid any such injustice. All rules theretofore prescribed by the Supreme Court, regulatiing the practice in euitc in equity, shall be alirogated when these rules take effect. INDEX TO EQUITY RULES. Hit flgnrcs relar to the numbers of tlw rulei. Abatement. defenses formerly presentable by, to be made in answer, 2>. Absence. of persons who would be proper parties, 89. Account. matters of, reference to master, 69. to be Identified but not stated in mas- ter's report, 61. forms of, before master, 63. Action at Law. erroneously begun as suit in equily transter, 22. joinder of, causes of, 26. to be prosecuted in name of real party in interest, 37. Additional Rules. by district court, 79. Administrator, as party, 37. Admissibility. of evidence offered to be passed on by court, 46. Admission of Execution, etc. of documents, etc., S8. Advancement of Causes. notice of interlocutory orders, ete., 6. Affidavit plaintiff's, of noncompliance with de- cree, attachment to issue^ 8. to be made of service of process hj per- son appointed therefor, 15. of expert witnesses in patent and trade- mark cases, provisions as to, 48. required on application for continuance^ 67. Affidavit — (Continued), to be identified but not stated In ma.4- ter's report, 61. previously used in court, etc. may b« used before master, 64. on application for preliminary injunc- tion, 73. Affirmation. in lieu of oath, 78. Agreed Statement. record on appeal, 77. Alternative Defenses. may be stated in answer, 30. Amended bill. answer to, 32. Amendments. generally, 19. permitted of any process, pleading, rec- ord, etc., 19. of bill as of course, 28. not after defendant's pleading filed, except, etc., 28. on suggestion of defect of parties, 43. of pleadings on substitution of parties, 46. Answer. subpoena, proper process to compel, 7. timie for, 12. to be filed within time named in sub- poena, 16. enlarging time for filing, 17. when to be filed, on motion set aside decree pro oonfeaao, 17. exceptions to, for scandal and imperti- nence, shall not obtain, 21. defenses to be preseiited in, 29. to be filed if motion to dismiss denied, 29. if not filed, decree pro oonfesto entered, 29. [1467] 1468 Index to Equity Rules. The figures refer to the numbers of the rules. Answer — {Continued) . defenses formerly presentable by plea in bar or abatement, to be made in, 29. what to contain, 30. amendment of, by leave, on reasonable notice, 30. to omit statement of evidence, 30. to avoid general denial of averments of bill, 30. to specifically admit, or deny, or explain facts upon which plaintiff relies, 30. contents, counter-claim, 30. to state counter-claims, 30. may state defenses in al-ternatives, 30. cause at issue on filing of, unless, etc., 81. to amended bill, 32. new or supplemental, to be filed to amended bill, 32. exceptions for insufficiency of, abolished, 33. if insufiicient may be amended or matter stricken out, 33. I when defect of parties suggested, pro- ceedings on, 43. ' may be stricken out for failure to an- swer interrogatories or produce docu- ments, 58. to be identified but not stated in mas- ter's report, 61. Appeal. injunction pending, 74. record on, differences as to, 75. reduction and preparation. 75. costs — correction of omissions, 76. agreed statement, 77. Appearance. filed with clerk to be noted in equity docket, 3. subpoena proper process to compel, 7. Appellant. to notify opposing party or solicitors, etc., 75. to file praecipe indicating portion of record on appeal, 75. to condense evidence, etc., 75. Appellate Court. not to reverse decree unless, 46. court may direct further steps as justice may require, 46. Appellee. to file praecipe indicating additional portion of record on appeal, 76. Appointment. and fees of stenographers, 60. compensation of masters, 68. Assistance. writ of, when to issue, 7. on refusal to obey decree for delivery of possession, 9. provisions as to, 7. Attachment. for noncompliance with decree, 8. not to be d'ischarged unless upon foil compliance with decree, etc., 8. mav issue for failure to answer inter- rogatories or produce documents, 68. Attendance. of witnesses before commissioner, mas- ter, or examiner, 62. Averments of BUI. if not denied, deemed confessed, except, etc., 30. B. Bill. subpoena proper mesne process to compel appearance and answer to, 7. wh(n filed, clerk to issue subpoena, 12. may be taken pro confesso if answer not filed, etc., 12. exceptions to, for scandal and imperti- nence, shall not obtain, 21. to be signed by solicitors, 24. of complaint, contents, 25. stoekholdpr'e^ 27. stockholder's, what to contain, 27. amendment of, as of course, 28. amended, answer to, 32. supplemental, what necessary in, 85. of revivor and supplemental bills, what necessary in, 35. may be dismissed for failure to answer interrogatories or produce documents, 58. verification of, on application for pre- liminary injunction, etc., 73. Bond. on order suspending, etc, injnnetioo pending appeal, 74. Books. clerk to keep equity docket, order book, equify journal, 3. papers, etc., production of, raquired ly master, 82. Index to Equity Eulbs. 1469 The figures refer to the Calendar. trial, case goes on, when, 56. Cause. speeding, provision as to, on motion set aside decree pro oonfesao, 17. Causes. advancement, conduct and hearing of, notice of interlocutory orders for, 6. of action, joinder of, 26. frivolous, imposition of costs on excep- tions to master's report, 67. Certificate. signature of solicitor to pleading to be considered, 24. Chambers. awarding process, commissions, orders, rules, etc., by judge at, 1. Charge. to be identified but not stated in mas- ter's report, 61. Circuit Court of Appeals. if appeal lies to, rehearing not granted after term, 60. Circuit Judge. may dispense with motion day if public interest permits, 6. Stizenship. name and residence of each party to be stated in bill, 25. Claim. further and better statement of nature of, may be ordered, 20. Claimants. before master, examinable by him, 65. Class. represestatives of, may sue or defend, 38. Clerical. mistakes in order* and decrees, correc- tion of, 72. Clerk. duties of, 2. to keep equity docket, 3. order book, 3. equity journal, 3. motions grantable of course by, 6. numbers of the rules. Clerk — ( Continued) . to grant as of course, motions and ap- plications not requring order of court or judge, 5. to issue writ of assistance on refusal to obey decree for delivery of possession, 9. to issue subpoena when bill filed, and not before, 12. of court, verification of pleadings before, 36. to send copies of interrogatories to so- licitors of record, 58. office of, awarding of process, commis- sions, orders, rules, eta., by judge at, 1. when open, 2. master to return report into, 66. temporary restraining orders to bt filed in, 73. statement as to appeal to be filed in, 75. Commissioner. attendance of witnesses before, 62. Commissions. award of, by judge at chambers, etc., 1. Compensation. and appointment of masters, 68. of master to t>e fixed by court, 68. Competency, etc. of questions asked before examiner not to be decided by him, 51. Computation of Time. Sundays and holidays, 80. Conduct of Causes. notice of interlocutory orders for, 6. Contempt. for noncompliance with mandatory or- der, etc., 8. Continuances. provisions as to, 57. Copy. of praecipe indicating portions of record on appeal, 75. service of, indicating, etc, 76. Corporate Officer. to sign interrogatories under oath, 58. 1470 Index to Equity Eules. The figures refer to the numbers of the rulea. Corporation. when interrogatories to be answered by officer of, 58. •tockholder's bill against, 27. Cotrection. of clerical mistakes In orders and de- crees, 72. omissions in transcript on appeal, 76. Coets. payment of, and full compliance with decree before a discharge of attach- ment, 8. of plaintiff to be paid before court will set aside decree pro confeseo, etc., 17. terms as to, when further and partic- ular statement in pleading required, 20. to nominal parties, 40. stenographer's fees to be taxed as, 50. of incompetent, etc., depositions to be dealt with by court, 51. on continuances, provisions as to, 67. proving execution or genuineness of document, etc., 58. reference to master, 59.. exception to master's report, 67. may be imposed upon offending solicit- ors, 76. Imposition of, for infraction of rule as to record on appeal, 76. Counsel. signature of, 24. to give notice of taking testimony before examiner, etc., 53. consent of, to continuances, provisions as to, 67. to sign petition for rehearing, 69. Counter-claim. to be stated in answer, 30. to be replied to, 31. in default of reply to, decree pro eon- feaso entered, 31. Court. OD motion or own initiative, may order redundant, impertinent or scandalous matter stricken out, 21. testimony usually to be taken in, at I trial, 46. to deal with costs of incompetent, etc., depositions, SI. contempt of, by witness refusing to ap- Court — (Ooniinued). pear before commissioner, master or examiner, 62. may appoint standing masters in chan- cery, 68 provisions as to approval by, of appel- lant's statement, etc., on appeal, 76. district, additional rules by, 79. Creditor. making claim before master examinable by him, 65. Cross-bill. counterclaim to be stated in answer, and not by, 30. Cross-examination. of expert witnesses in patent and trade- mark cases, 48. witness where no notice of deposition given, 54. Damage. averments in bill as to, 30. to be shown on application for prelim- inary injunction, 73. Death of Party. revivor, 45. Decrees. of court to be entered in equity jour- nal, 3. process to issue to compel obedience to, 7. compelling obedience to, writ of seques- tration, 8. discharge of attachment upon compli- ance with, 8. for specific performance, provision as to, 8. for performance of specific act, attach- ment when, 8. solely for payment of money, writ of execution on, 8. final, enforcement, 8. for delivery of possession, writ of as- sistance on refusal to obey, 9. for deficiency in foreclosures, etc., 10. pro oonfesso on default in answer, 16. when may be set aside, 17. to be followed by final decree, 17. final, following decree pro oonfetio, 17. pro confesso entered, if answer not filed, etc- 20. JsDja. TO Equity Hules. 1471 The figure! refer to the Deoees — ( Continued ) . in default of reply to counter- claim, 31. not to be reversed unless material prejudice would result, 46. form of, 71. ■hall not recite pleadings, 71. correction of clerical mistakes in, 72. final, appeals from an injunction suit, 74. to be sent up with agreed statement on appeal, 77. Seeds, etc. decree for deliyering up, attachment in, 8. Default. to answer bill taken pro eonfesso, 16. of reply to counter-claim, decree pro eonfesso, 31. in answer to amended bill, proceedings on, 38. Defect court to disregard in proceedings not affecting substantial rights, 19. of parties resisting objection, 43. tardy objection to, 44. Defendant. subpoena proper process to compel ap- pearance and answer of, 7. if not found, writ of sequestration proper process to issue, etc., 7. to take notice of certain decrees, 8. required to file answer on or before 20th* day after service of sub- poena, 12. service of subpoena to be upon, 13. to answer within time named in sub- poena, 16. person refusing to join as plaintiff or defendant may be made defend- ant, 37. time within which to take deposition for, 47. Defense. further and better statement of nature of, may be ordered, 20. how presented, 29. what to be heard separately and dis- posed of before trial, etc, S9. testing sufficiency of, 33. Deficiency in Foreclosures,' etc. decree for, 10. numbers of the mlci. Delay. signature of solicitor to pleadings eer> tificate that pleadings not intcrpoaed for, 24. master to certify reason for any to court, 60. imposition of costs for, on ueeptiona to master's report, 67. Delivery of possession. writ of assistance to mforeo, T. Demands. joint and several, 42. Demurrers. abolished, 20. Depoations. to be taken in exceptional instances, 47. time within which to be taken, 47. taken before examiners, etc., 49. expense of taking to be advanced by party calling witnesses, SO. court to deal with costs of incompet- ent, etc., 61. under R. S. 863, 865, 866, 867— cross- examination, 54. deemed published when filed, 55. on expiration of time for, ease goes on trial calendar, 56. to be identified but not set forth in master's report, 61. may be taken by master, 62. etc., former may be used before mas- ter, 64. previously used in court may be used before master, 64. Differences. concerning directions as to contents of record on appeal, provisions as to, 75. Disability. of any party to be stated in bill, 25. Discovery. interrogatories for, when to be filed, 58. Dismiss. motion to, setting down for hear- ing, 29. Dismissal of Causes Continued, if not reinstated, 67. 1472 Ikdez to Equitt Bules. The figures refer to the District Courts. always open for certain puTposes, 1. to establish time and places when mo- tions may be made and disposed of, 6. additional rules by, 79. District Judge. may make, direct and award process, commissions, orders, rules, etc., 1. Documentis. inspection and production of, 58. court may enforce inspection and pro- duction of, 58. interrogatories for discovery of, when to be filed, 58. Documents. execution or genuineness of, call for admission of, 58. identified but not set forth in master's report, 61. production of, required by master, 62. previously used in court may be used before master, 64. Dwelling-house. service of subpoena by leaving copy at, 13. K Equity Docket. clerk to keep, 3. index of, 3. noting of order in, not notice, 4. ! day of return of master's report to be entered in, 66. Equity Journal. clerk to keep, 3. index of, 3. Equity. suit in, action at law erroneously be- gun as — transfer, 22. matters ordinarily determinable at law when arising in, to be dis- posed of therein, 23. Error. or defect in proceedings, court to dis- regard when not affecting substan- tial rights, 19. Evidence. mere statement of, to be omitted from ill. 25. numbers of tbe rule*. Evidence — ( GontitMed) . admissibility of, to be passed on by court, 46. offered and excluded, proceedings on, 46. affidavits of expert witnesses in patent and trade-mark cases, when not to be used as, 48. taken before examiners to be returned to court, 49. taken before examiners, provisions as to, 51. objections to, taken before examiner, etc., 51. court or judge may enforce answers to interrogatories and production of documents containing, 58. master may direct mode of proving matters before him, 62. before master on examination to be taken down, 65, how to be stated in record, 75 Ex Parte. cause to be proceeded with after de- cree pro confesso, 16. Examination. to be identified but not stated in mas- ter's report, 61. Examiners. evidence taken before, to be returned to court, 49. provisions as to, 51. not to decide on competency, material- ity or relevancy of questions, 51. attendance of witnesses before, 52. notice of taking testimony before, etc., S3. cross-examination of witness before, 54. of answer abol- Ezceptions. for insufficiency ished, 33. to evidence offered and excluded, pro- visions as to, 46. to master's report, 66. costs on, 67. Execution. writ of, provisions as to, 8. admission of, of documents, ete., S8. Ezecntor. as party, ST. Index to Equity Eule3. 1473- The figures refer to the numbers of the rules. Expert Witnesses. ' H. testimony of, in patent and trade- mark cases, 48. F. Facts. ultimate statement of, upon which re- lief asked, to be stated in bill, 25. insufficiency of, as defense, how pre- sented, 29. material, may be alleged in supple- mental pleading, 34. not to be stated in master's report, 61. Fees. of stenographer, 50. File Number. each suit and all papers, process, etc., to be marked with, and noted on equity docket, 3. Filing. of deposition deemed publication, 55. Final Hearing. points of law may be disposed of be- fore, 29. Final Process. issue and return of, 1. to be served by marshal, deputy, etc., IS. Foreclosure of Mortgages, etc. decree for balance due, 10. Form. of accounts before master, 63. decree, 71. Former Depositions, etc. may be used before master, 64. Forms. technical, of pleadings abrogated, 18. alternative — prayer for specific relief may be in, 35. G. Genuineness. of documents, admission of, etc., 68. Guardian. as party, 37. may sue for infants, 70. ad litem, may \:>e appointed by court or judge, etc., 70. 93 Hearing on Merits. making and directing interlocutory mo- tions, orders, rules, etc., preparatory to, 1. of causes, notice of interlocutory or- ders for, 6. final, points of law may be disposed of before, 29. on exceptions to report of master, 66. Heir. as party to suits to execute trust* of will, 41. Holidays legal, clerk's office not open, S. computation of time, 80. Impertinence. scandal, exceptions to bills, answers etc., for, shall not obtain, 21. Incompetents. suits by or against, 70. Indices. of equity docket, order book and equity journal, clerk to keep, 3. Infants. nothing to be taken against as con- fessed, 30. nominal parties in suits not against, 40. may sue by guardian or by prochein ami, 70. guardians ad litem may be appointed to defend suits against, 70. Injunction. for specific performance, provision as to, 8. preliminary, and temporary restraining orders, 73. pending appeal, 74. Insufficiency of Fact. defense of, how presented, 29. Interlocutory. motions, orders, rules, etc., making and directing, 1. Interrogatories. written, practice as to, to be followed in case of refusal of witness before master, examiner, etc., 52. when to be filed, 58. 1474 Index to Equity Rules. The figures refer to the iBterrogatories — {Continued). when to be answered, etc., 58. court may enforce answers to, S8. to be answered separately and fully, in writing, under oath, and signed, 58. objections to, provisions as to, 68. eopies to be sent by clerk to solicitors of record, 58. examination of accounting party be- fore master on, 63. daimants before master examinable on, 6S. Intervention. when allowed, 37. Issue. of subpoena, 13. cause at, upon filing of answer, except, etc., 31. J. Joinder. of causes of action, 2S. parties, provision as to, 37. Joint. and several demands, 42. Judge. district, may make, direct and award process, commissions, orders, rules, etc., 1. in chambers, orders by, to be entered in order book, 3. on notice, if any, may make inter- locutory orders, etc., 6. verification of pleadings before, 36. Jurisdiction. ground on which depends to be stated in bill, 25. Justice. convenient administration of, joinder of causes of action to promote, 86. Land. Law. decree for conveyance of, attachment in, 8. action erroneously begun as suit in equity — ^transfer 82. matters ordinarily determinable at, wlien arising in suit in equity, to be disposed of therein, 83. points of, may be disposed of before final hearing, 29. numbers of the rulea. Letter. call for admission of genuineness of, etc., 58. Loss. immediate and irreparable to be shown on application for temporary re> straining order, 73. Lunatic. nothing to be taken against as eoa- fessed, 30. M. Marshal. deputy, etc., to serve all process, ex- cept, IS. Haster. attendance of witnesses before, 52. reference to, exceptional not usual, 59. proceedings before, 60. duties of, 60. may proceed ex parte when, 60. may adjourn examination, etc., when, 60. to proceeds with reasonable dili- gence, 60. reports of — documents to be identified but not set forth, 61. powers of, 62. to regulate all pr-sceedings before him, 62. may require production of all books, papers, etc., 68. form of accounts before, 63. former depositions, etc., may be used before, 64. claimants before, examinable by him, 65. appointment and compensation of, 68. entitled to attachment for his com- pensation, when, 68. not to retain report as security for compensation, 68. pro hao vice, in particular cases, may be appointed by court, 68. in chancery, standing, may be ap- pointed by the court, 68. Master's Report. return of — exceptions — ^hearing, 68. costs on exception to, 67. not to be recited in decree or order, 71 Material. supplemental matter may be set forth in amended pleadings, 19. Index to Equity Rules. 1475 UateiiaUty. of questions not to be decided by ex- aminer, 51. The figures refer to the numbers of the rulea. Motions — {Continued) . to strike out, to test sufficiency of answer, 33. Hatter. further and better particulars of, in any pleading may be ordered, 20. new or affirmative, in answer, deemed denied by plantifif, 31. Matters. ordinarily determinable at law, when arising in suit in equity, to be dis- posed of therein, 23. Merits. hearing on — making and directing in- terlocutory motions, orders, rules, etc., preparatory to, 1. Mesne Process. issuing and returning, 1. subpoena shall constitute proper, 7. to be served by marshal, deputy, etc., 15. Misjoinder. defense of, how presented, 29. Mistakes. clerical, correction of, in orders and decrees, 72. Money. payment of, final process to execute de- cree for, 8. Mortgages. foreclosure of, decree for balance due, 10. Motions. interlocutory, making and directing, 1. when may be made, 1. etc., grantable of course, received and disposed of by clerk, 2. grantable of course by clerk, 5. for mesne process grantable of course by clerk, 5. and applications not requiring order of court or judge grantable of course by clerk, 5. grantable of course by clerk may be suspended, etc., by judge, 5. requiring notice and hearing, times and places for, 6. to enlarge time for filing answer, 17. will not be granted unless payment of costs, etc., 17. I Motion Day, 6. may be dispensed with by senior circuit judge, a. Motion. to dismiss, defenses to be presented in. 29. N. Names. of plaintiff and defendant to be stated in bill, 25. Nominal. parties, 40. Non Est Inventus. return of, issuance of writ of seques- tration, 8. Nonjoinder. defense of, how presented, 29. Notary Public. verification of pleadings before, 36. Notice. reasonable, to parties, of process, com- missions, orders, rules, etc., 1. of orders, 4. order without prior, to be mailed by clerk to party, etc., 4. of interlocutory orders, etc., 6. defendant to take of certain decress, 8. of motion to dismiss, 29. reasonable, of amendment of answer, by leave, etc., 30. of filing supplemental pleading, 34. to be given to parties to be substituted. 45. reasonable, of motion to enforce an- swers, etc., 58. of taking testimony before examiner, etc., 63. to parties or solicitors of proceedings before master, 60. no preliminAry injunction granted with- out, 73. Oath. may b* made by plaintiff if special re- lief asked, 2S. 1476 Index to Equity Rules. The figures refer to the numbers of the rules. Oath— {Continued). stockholder's bill to be verified by, 27. , interrogatories to be signed under, 68. petition for rehearing to be verified by, 69. affirmation in lieu of, 78. Objections. to defect of parties, 43. tardy, to defect of parties, 44. to evidence taken before examiner, pro- , visions as to, 51. to be noted by examiner, etc., 61. OfScers. before whom pleadings verified, 36. Old Rules. abrogated, 81. Omissions, etc. in orders and decrees may be corrected without rehearing, 72. of portions of record on appeal, 75. correction of, in record on appeal, 76. Oidera. when may be made, 1. award of, by judge at chambers, etc., 1. interI(>cutory, making and directing, 1. grantable of course, received and dis- posed of by clerk, 2. filed with clerk to be noted in equity docket, 3. of court to be entered in equity jour- nal, 3. made or passed by clerk, or judge in chambers, to be entered in order book, 3. made without notice, to be mailed by clerk, 4. noting of. in equity docket or entered in order book, not notice to parties, 4. interlocutory, notice of, 6. process to issue to compel obedience to, 7. mandatory, for specific performance, provision as to, 8. lor delivery of possession, writ of as- sistance on refusal to obey, 9. in favor person not party, how enforced, 11. against person not party, how enforced, 11. that bill be taken pro confesso on de- fault, 16. shall not recite pleadings, 71. Orders — (Continued). correction of clerical mistakes in, 72. temporary restraining, and preliminary injunctions, 73. justice or judge may make order sus- pending, etc., injunction pending ap- peal, 74. Order Book. clerk to keep, 3. to contain all orders made or passed by judge in chambers or by clerk, S. index of, clerk to keep, 3. entry of order in, not notice, 4. P. Papers. and orders filed with clerk, etc., to be noted in equity docket, 3. production of, required by master, 62. Parties. noting or entry of order not notice to, 4. persons not made, 25. generally — intervention, 37. joinder of, 37. proper, absence of persons who would be, 39. nominal, appearance of, 40. in cases of joint and several demands, 42. defect of, resisting objection, 43. defect of, tardy objection, proceedings on, 44. to give notice of taking testimony before examiner, etc., 53. clerk to send copies of interrogatories to if there be no record solicitor, 58. notice to, of proceedings before master, 60. failing to appear before master, 60. may be examined on oath by master, 62. accounting before master, how to br^g in accounts, 63. to examine accounting party viva voce or upon interrogatory, 63. time for filing exceptions to master's report by, 66. to verify petition for rehearing by oath, 69. to be given notice of preliminary injunc- tions, etc., 73. Party. when order made in absenae of, clerk to mail copy, 4. Index to Equity Rules. 1477 The figures refer to the Party — {Continued). | heir aa, to execute trusts of will, 41. death of, revivor, 45. procuring reference to master, payment of costs by, 69. , Patent Cases. testimony of expert witnesses in, 48. Persons Not Parties. process on behalf of and against, 11. Person Appointed. to serve process to make afSdavit there- of, 15. Persons. not made parties to bill, 25. Person. non compos, nothing to be taken against as confessed, 30. Persons. joining as parties, 37. who would be proper parties, absence oi, Person Making Claim. before master examinable by him, 65. Petition. for rehearing, 69. Plaintiff. entitled to subpoena as of course when bill filed, 12. time within which to take deposition for, 4/. Plea. in bar, defenses formerly presentable by to be made in answer, 29. Pleadings. filing of, 1. technical forms abrogated, 18. court may permit any to be amended, 19. further and particular statement in, may be required, 20. further and better particulars of matter stated in any may be ordered, 20. ftlteration in, on transfer of action at law erroneously begun as suit in .,} equity, 22. to be signed by solicitors, 24. when bill may be amended as of course, 28. numbers of the rules. Pleadings — [Continued). demurrers and pleas abolished, 20. supplemental, permitted when, ii. officers before whom verified, 36. filing, or amendment of, on substitution of parties, 45. Pleas. abolished, 29. Possession. delivery of, writ of Msistance to en- force, 7. on refusal to obey decree for, 9. Powers. of master, C2. Practice. additional rules for, bj district ooart, 79. Praecipe. filing indicating portions of record on appeal, 7S. Prayer. for special relief to be stated in bill, 25. Precedence. given to hearing in cases of temporary restraining orders, 73. Prejudice. unless material, will result appellate court not to reverse decree, 46. Preliminary. injunctions and temporary restraining orders, 73. Preparation. and reduction of record on appeal, 76. costs — corrections of omissions, 76. Pro Confesso. taking bills, motion for, grantable of course by clerk, 5. bill may be taken when answer not filed, etc., 12. ■ decree on default in answer, 16. to be followed by final decree, 17. entered if answer not filed, S9. Proceedings. before master, speeding of, M. powers in, 62. 1478 Index to Equity Ruuis. The flgurea refer to the numbers of the rule*. Reduction. and preparation of record on appeal, 75. coats— corrections of omissions, 76. Kefeience to Master. exceptional, not usual, 59. rncesa, mesne and final, issuing and returning, 1. award of, by judge at chambers, ete^ 1. issuing and return of, 1. issued and returns thereon to be noted in equity docket, S. for taking bills pro eonfetio grantable of course by clerk, 6. mesne or final, to enforce and execute decrees grantable of course by clerk, 6. mesne and final, defined, 7. in behalf of and against persons not parties, II. by whom served, 15. mesne and final to be served by marshal, deputy, etc., 15. may be served by person appointed therefor, 15. court may permit any process to be amended, 19. additional rules as to, by district court, 79. Prochein Ami. may sue for infants, 70. Prodnction of Books, etc. may be required by master, 62. Pnbllcations. of deposition, when filed, 55. Q. Questions. competency, materiality, or relevancy of, not to be decided by examiner, 51. Record. court may permit any record to be amended, 19. how evidence to be stated in, 75. appellant's statement as to record on appeal to become part of, 75. •n appeal indicating portions of, 75. additional portions, how indicated, 75. reduction and preparation, 75. difference as to, 75. reduction and preparation— costs — correction of omissions, 76. agreed statement, 77. Rehearing. petition for, provisions as to, 69. correction of clerical mistakes in ord^ri and decrees without, 72. Reinstatement of Causes, continued, 57. Relevancy. of questions not to be decided by exam- iner, etc., 51. Relief. special, prayer for, to be stated in bill, 25. to be verified hy oath of plaintiff, etc., 25. Reply. when required — when cause at issue, 31. none required unless answer asserts set- off or counterclaim, 31. Report. master's, to court, 60. documents to be identified but not set forth, 61. of master, exceptions, hearing, 66. costs on exceptions to, 67. not to be recited in decree or order, 71. Representatives. of class may sue or defend, 38. Residence. and citizenship of each party to be stated in bill, 25. Restraining Orders. temporary, and preliminary injunctions^ 73. Returns. on process to be entered am equity docket, 3. Return. of subpoena not executed, 14. of master's report — exceptions — heat«. ing, C6. Ikdex to Equity Rules. 1479 The figures refer to the numbers of the rules. Revivor. bills of, what necessary in, 35. on death of party, 45. Rights. substantial, court to disregard rrror or defect in proceedings which does not Affect, 19. Rules. when they may be awarded, 1. interlocutory, making and directing, 1. award of by judge at chambers, etc., 1. grantable of course, received and dis- posed of by clerk, 2. additional, by district court, 79. when effective, 81. old, abrogated, 81. Sale. S. amounl due above proceeds of decree for, 10. Scandal and impertinence, 21. Scandalous Matter. signature of solicitor, certificate that none inserted in pleading, 24. Sequestration. writ of, proper process if defendant not found, 7. against estate of delinquent, 8. person other than disobedient party to comply with mandatory order for specific performance, 8. Service. of subpoena by delivery of copy, etc., 13. Set-off. to be stated in answer, 30. replied to, 31. Signatures. pleadings to be signed by solicitors of record, 24. Solicitors. noting or entry of order not notice to, 4. of record to sign every pleading, 24. to be furnished copy of amended bill, 28. Solicitors — ( Continued ) . clerk to send copies of interrogatmrica to, 58. notice to, of proceedings before master, 60. offending, imposition of costs on, 76. to tile praecipe indicating portions of record on appeal, 75. Specific Performance. by some other person than disobedient party, 8. Standing Masters in Chancery, courts may appoint, 68. Statement. further and particular in pleading may be required, 20. agreed as to record on appeal, 77. Stenographer. appointment — fees, SO. Stockholder's, bill, 27. Subpoena. shall constitute proper mesne pro/>ess, etc., 7. issue of, time for answer, 12. to issue when bill filed and not before, 12. to contain names of parties, 12. when returnable, 12. memorandum at bottom thereof, 12. joint, against more than one defendant 12. separately, for each defendant when against more than one, 12. manner of serving, 13. not executed, provision as to, 14. alias, 14. Substitution. of proper parties by revivor, 46. SufSciency. of defense, how tested, 33. Suits. papers filed, process issued, etc., to ht noted on equity docket, 3. to execute trusts of will — heir as partr 41. • by or against incompetents, 70. Supplemental Pleadings, when may be filed, 34. 1480 Index to Equity Kules. The figures refer to the numbers of the rules. Supreme Court. if appeal lies to, rehearing not granted after term, 69. Sundays. clerk's office not open, 2. and holidays — computation of time, 80. T. Temporary. restraining orders and preliminary in- junctions, 73. Tetm. awarding process, commissions, orders, rules, etc., by judge at chambers, etc., in, 1. orders, decrees, etc., of court to be en- tered in equity journal, 3. rehearing not granted after, if appeal lies, 69. Testimony. usually to be taken in open court at trial, 46. of expert witnesses in patent and trade- mark cases, 48. may be taken down by stenographer, 50. to be signed by witness, 51. of witnesses before examiner to be read to him, 51. contempt of court for refusal of witness to give testimony before commis- sioner, examiner, etc., 52. notice of taking before master or exam- iner, 53. no further by deposition to be taken after case goes on trial calendar, ex- cept, etc., 56. how stated in record on appeal, 75. Testing. sufficiency of defense, 33. Time. enlargement of, for full compliance with decree, 8. to file answer, 16. on expiration of, for depositions, case on trial calendar, 66. computation of — Sundays and holidays, 80. Trade-mark Cases. testimony of expert witnesM* in, 48. Transcript. cost of, to be advanced by party ordering, 50. of evidence before examiner not to in- clude argument, 51. on appeal, indicating portions of, 76. supplemental, correction of, omia- sions by, 76. Transfer. of action at law erroneously begun •■ suit in equity, 22. Trial. testimony usually taken in open court, rulings on objections to evidence, 46. calendar, on expiration of time for depositions case goes on, 56. Trials. separate — court may order separate trials of joint actions, 26. Trustee. as party, 37. V. Vacation. awarding process, commissions, orders, rules, etc., by judge at chambers in, 1. Value. averments in bill other than of, if not denied, deemed confessed, 30. Verification. bill to be verified by oath if special relief asked, 25. of pleadings, officers before whom taken, 36. petition for rehearing to be verified by oath, etc., 69. Viva Voce. master may examine persons before him, 65. Vouchers. production of, required by master, 62. Will. execution party, 41, W. of trusts of— heir Index to Equity Rules. 1481 The figures refer to the numbers of the rules. Witnesses. testimony usually to be taken in open court, 46. depositions of, may be taken when, 47. testimony of expert in patent and trade-mark cases, 48. before examiners, etc., cross-examina- tion, of, etc., 49. testimony of, to be read to, 51. to be signed by, 51. refusing to sign testimony, 50. expense of taking deposition of, to be advanced by party calling, 50. attendance of before commissioner, etc., 53. refusing to appear before commis- sioner, master or examiner, 52. compensation of for attendance before commissioner, master or exam- iner, St. Witnesses — {Contirmed), may be examined orally before eouil> or cross-examined before examiner, etc., when no notice of deposition given, 54. testimony of, by deposition, after caw goes on trial calendar, 56. may be examined on oath by nima- ter, 62. testimony of, how stated in record on appeal, 75. Writing. call for admission genuineness of, 5S. of execution Writings. production of required by master, CI. APPENDIX B. THE BANKRUPTCY ACTS OF i898, i867, i84i AND 18OO. I. THE BANKRUPTCY ACT OF 1898. WITH AMENDMENTS OF 1903, 1906, 1910, and 1917 (With Separate Index.) An Act to Establish a Unifokm System of BAWKErpTOT Thboughout THE United States. Appboved Jm.T 1, 1898} AnEimMENTS Appboved Feb. 5, 1903, Jxtne 15, 1906, Jxma 25, 1910, AifD Mabch 2, 1917. Be it enacted iy the Senate and House of Representatives of the United States of America, in Congress assemiled: CHAPTEE I. DEFINITIONS. Section 1. Meaning of Words and Phrases. — a The words and phrases used in this act and in proceedings pursuant hereto shall, unless the same he inconsistent with the con- text, be construed as follows { (1) "A person against whom a petition has been filed" shall include a person who has filed a voluntary petition; (2) "adjudication" shall mean the date of the entry of a decree that the defendant, in a bankruptcy proceeding, is a bankrupt, or if such decree is appealed from, then the date when such decree is finally confirmed ; ( 3 ) " appellate courts " shall include the circuit courts of appeals of the United States, the supreme courts of the Territories, and the Supreme Court of the United States; (4) "bankrupt" shall include a person against whom an involuntary petition or an application to set a composition aside or to revoke a discharge has been filed, or who has filed a voluntary petition, or who has been adjudged a bankrupt; (5) "clerk" shall mean the clerk of a court of bankruptcy; (6) "corporations" shall mean all bodies having any of the powers and privileges of private corporations not possessed by individuals or partnerships, and shall include limited or other partnership associations organized under the laws making the capital subscribed alone responsible for the debts of the association ; ( 7 ) " court " shall mean the court of bankruptcy in which the pro- ceedings are pending, and may include the referee ; ( 8 ) " courts of bankruptcy " shall include the district courts of the United States and of the Territories, the supreme court of the District of Columbia, and the United States court of the Indian Territory, and of Alaska; (9) "creditor" shall include anyone who owns a demand or claim provable in. bankruptcy, and may include his duly authorized agent, attorney, or proxy; (10) "date of bankruptcy," or " time of bankruptcy," or " commencement of proceedings " or " bank- ruptcy," with reference to time, shall mean the date when the petition was filed; (11) "debt" shall include any debt, demand, or claim provable in bankruptcy; (12) "di>- [1483] 1484 CouETs OF Bankeuptct. [§ 2. charge " shall mean the release of a bankrupt from all of his debts which are provable in bankruptcy, except by this act; (13) "document" shall include any book, deed, or in- strument in writing; (14) "holiday" shall include Christmas, the Fourth of July, the Twenty-second of Febmary, and any day appointed by the President of the United States or the Congress of the United States as a holiday or as a day of public fasting or thanks- giving; (15) a person shall be deemed insolvent within the provisions of this act when- ever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, with intent to defraud, hinder or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts; (16) "judge" shall mean a judge of a court of bankruptcy, not including the referee; (17) "oath" shall include affirmation; (18) "officer" shall include clerk, marshal, receiver, referee, and trustee, and the imposing of a duty upon or the forbidding of an act by any officer shall include his successor and any person au- thorized by law to perform the duties of such officer; (19) "persons" shall include cor- porations, except where otherwise specified; and officers, partnerships, and women, and when used with reference to the commission of acts which are herein forbidden' shall include persons who are participants in the forbidden acts, and the agents, officers, and members of the board of directors or trustees, or other similar controlling bodies of cor- porations; (20) "petition" shall mean a paper filed in a court of bankruptcy or with a clerk or deputy clerk by a debtor praying for the benefits of this act, or by creditors alleging the commission of an act of bankruptcy by a debtor therein named; (21) " referee " shall mean the referee who has jurisdiction of the case or to whom the case has been referred, or anyone acting in his stead; (22) "conceal" shall include secrete, falsity, and mutilate; (23) "secured creditor" shall include a creditor who has security for his debt upon the property of the bankrupt of a nature to be assignable under this act, or who owns such a debt for which somie indorser, surety, or other persons secondarily liable for the bankrupt has such security upon the bankrupt's assets ; ( 24 ) " States " shall include the Territories, the Indian Territory, Alaska, and the District of Columbia; (25) "transfer" shall include the sale and every other and different mode of disposing of or parting with property, or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift, or security; (26) "trustee" shall include all of the trustees of an estate ; ( 27 ) " wage-earner " shall mean an individual who works for wages, salary, or hire, at a rate of compensation not exceeding one thousand five hundred dollars per year; (28) words importing the masculine gender may be applied to and in- clude corporations, partnerships, and women; (29) words importing the plural number may be applied to and mean only a, single person or thing; (30) words importing the singular number may be applied to and mean several persons or things. CHAPTEE II. CREATION OF COURTS OF BANKRUPTCY AND THEIR JURISDICTION. § 2. That the courts of bankruptcy as hereinbefore defined, viz., the district courts of the United States in the several States, the supreme court of the District of Columbia, the district courts of the several Territories, and the United States courts in the Indian Territory and the District of Alaska, are hereby made courts of bankruptcy, and are hereby invested, within their respective territorial limits as now established, or as they may be hereafter changed, with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings, in vacation in chambers and during their respective terms, as they are now or may be hereafter held, to (1) adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within their respective territorial jurisdictions for the preceding six months, or the greater portion thereof, or who do not have their principal place of business, reside, or have their domicile within the United States, but have property within their jurisdic- tions, or who have been adjudged bankrupts by courts of competent jurisdiction without the United States and have property within their jurisdiction; (2) allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates; (3) appoint receivers or t><> marshals, upon application of parties in interest, in case the courts shall find it absolutely necessary, for the preservation of estate. § 3.] Bankeuptct Act, 1898. 1486 to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified; (4) arraign, try, and punish bankrupts, officers, and other persons, and the agents, ofiicers, members of the board of directors or trustees, or other similar controlling bodies of corporations for violations of this act, in accordance with the laws of procedure of the United States now in force, or such as may be hereafter enacted, regulating trials for the alleged violation of laws of the United States; (5) authorize the business of bankrupts to be conducted for limited periods by receivers, the marshals, or trustees, if necessary in the best interests of the estates, and allow such- officers additional compensation for such, services, as provided in section forty-eight of this act; (6) bring in and substitute additional persons or parties in proceedings in bank- ruptcy when necessary for the complete determination of a matter in controversy; (7) cause the estates of bankrupts to be collected, reduced to money and distributed, and de- termine controversies in relation thereto, except as herein otherwise provided; (8) close estates, whenever it appears that they have been fully administered, by approving the final accounts and discharging the trustees, and reopen them whenever it appears they were closed before being fully administered; (9) confirm or reject compositions between debtors and their creditors, and set aside compositions and reinstate the cases; (10) consider and confirm, modify or overrule, or return, with instructions for further pro- ceedings, redbrds and findings certified to them by referees; (11) determine all claims of bankrupts to their exemptions; (13) discharge or refuse to discharge bankrupts and set aside discharges and reinstate the cases; (13) enforce obedience by bankrupts, officers and other persons to all lawful orders, by fine or imprisonment or fine and imprisonment; (14) extradite bankrupts from their respective districts to other districts; (15) make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of this act; (16) punish persons for contempts committed before referees; (17) pursuant to the recom- mendation of creditors, or when they neglect to recommend the appointment of trustees, appoint trustees, and upon complaints of creditors, remove trustees for cause upon hearings and after notices to them; (18) tax costs, whenever they are allowed by law, and render judgments therefor against the unsuccessful party,' or the successful party for cause, or in part against each of the parties, and against estates, in proceedings in bankruptcy; (19) transfer cases to other courts of bankruptcy; and (20) exercise auxiliary jurisdiction over persons or property within their respective territorial limits in aid of a receiver or trustee appointed in any bankruptcy proceedings pending in any other court of bank- ruptcy. Nothing in this section contained shall be construed to deprive a court of bankruptcy of any power it would possess were certain specific powers not herein enumerated. (Thus amended by Act of Feh'y 5, 1903, and June 25, 1910.) CHAPTER III. BANKRUPTS. § 3. Acts of bankruptcy. — a Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred, concealed, or removed, or p'ermitted to be concealed or removed any part of his property with intent to hinder, delay, or defraud his creditors, or any of them; or (3) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors ; or ( 3 ) sufl'ered or permitted, while insolvent, any creditor to obtain a preference through legal proceed- ings, and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference; or (4) made a general assignment for the benefit of his creditors, or, being insolvent, applied for a receiver or trustee for his property or hecoMse of insolvency a receiver or trustee has heen put in charge of his property under the laws of a State, of a Territory, or of the United States; or (5) admitted in writing his inability to pay his debts and his willingness to be ad- judged a bankrupt on that ground. 6 A petition may be filed against a person who is insolvent and who has committed an act of bankruptcy within four months after the commission of such act. Such time shall not expire until four months after (1) the date of the recording or registering of the 1486 Eakkeupts; Pabtnees, [§§ 4, 5. transfer or aBsignment when the act consists in having made u transfer of any of his property with intent to hinder, delay, or defraud his creditors or for the purpose of giving a preference as hereinbefore provided, or a general assignment for the benefit of his creditors, if by law such recording or registering is required or permitted, or, if it is not, from the date when the beneficiary take notorious, exclusive, or continuous posses- sion of the property unless the petitioning creditors have received actual notice of such transfer or assignment. c It shall be a complete defense to any proceedlnga in bankruptcy instituted under the first subdivision of this section to allege and prove that the party proceeded against was not insolvent as defined in this act at the time of the filing the petition against him, and If solvency at su'jh date is proved by the alleged bankrupt the proceedings shall be dis- missed, and under said subdivision one the burden of proving solvency shall be on the alleged bankrupt. d Whenever a person against whom a petition has been filed as hereinbefore provided under the second and third subdivisions of this section take issue with and denies the allegation of his insolvency, it shall be his duty to appear in court on the hearing, with his books, papers, and ?iccounts, and submit to an examination, and give testimony as to all matters tending to establish solvency or insolvency, and in case of his failure to so attend and submit to examination the burden of proving his solvency shall rest upon him. 6 Whenever a petition is filed by any person for the purpose of having another ad- judged a bankrupt, and an application is made to take charge of and hold the property of the alleged bankrupt, or any part of the same, prior to the adjudication and pending it hearing on the petition, the petitioner or applicant shall file in the same court a bond ■with at least two good and sufficient sureties who shall reside within the jurisdiction of said court, to be approved by the court or a judge thereof, in such sum as the court shall direct, conditioned for the payment, in case such petition is dismissed, to the respondent, his or her personal representatives, all costs, expenses, and damages occasioned by such seizure, taking, and detention of the property of the alleged bankrupt. If such petition be dismissed by the court or withdrawn by the petitioner, the re- spondent or respondents shall be allowed all costs, counsel fees, expenses, and damages occasioned by such seizure, taking, or detention of such property. Counsel fees, costs, expenses, and damages shall be fixed and allowed by the court, and paid by the obligors in such bond. {Thus amended by Act of FeVy 5, 1903.) § 4. Who May Become Bankrupts. — o Any person except a municipal, railroad, in- surance, or hanking corporation, shall be entitled to the benefits of this act as a voluntary bankrupt. 6 Any natural person, except a wage-earner, or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any moneyed, business or com- fnercial corporation, except a municipal, railroad, insurance, or banking corporation, owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions and entitled to the benefits of this act. The bankruptcy of a corporation shall not release its ofiicers, directors, or stockholders, as such, from any liability under the laws of a State or Territory or of the United States. (Thus amended by Acts of Feb'y 5, 1903, and June 85, 1910.) § 5. Partners. — a A partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt. 6 The creditors of the partnership shall appoint the trustee; in other respects so far as possible the estate shall be administered as herein provided for other estates. c The court of bankruptcy which has jurisdiction of one of the partners may have jurisdiction of all the partners and of the administration of the partnership and in- dividual property. d The trustee shall keep separate accounts of the partnership property and of the property belonging to the individual partners. « The expenses shall be paid from the partnership property and the individual property in such proportions as the court shall determine. / The net proceeds of the partnership property shall be appropriated to the payment of the partnership debts, and the net proceeds of the individual estate of each partner to the payment of his individual debts. Should any surplus remain of the property of any partner after paying his individual debts, such surplus shall be added to the partnership §i§ 6-9.] Bawkeuptcy Act, 1898. 148T assets and be applied to the payment of the partnership debts. Should any surplus of the partnership property remain after paying the partnership debts, such surplus shall be added to the assets of the individual partners in the proportion of their respective in- terests in the partnership. g The court may permit the proof of the claim of the partnership estjite against the individual estates, and vice versa, and may marshal the assets of the partnership estate and individual estates so as to prevent preferences and secure the equitable distribution of the property of the several estates. /i In the event of one or more but not all of the members of a partnership being ad- judged bankrupt, the partnership property shall not be administered in bankruptcy, unless by consent of the partner or partners not adjudged bankrupt; but such partner or partners not adjudged bankrupt shall settle the partnership business as expeditiously as its nature will permit, and account for the interest of the partner or partners adjudged bankrupt. § 6. Exemptions of Bankrupts. — a This act shall not affect the allowance to bankrupts of the exemptions which are prescribed by the State laws in force at the time of the filing of the petition in the State wherein they have had their domicile for the six months or .the greater portion thereof immediately preceding the filing of the petition. § 7. Duties of Bankrupts. — a The bankrupt shall (1) attend the first meeting of his creditors, if directed by the court or a judge thereof to do so, and the hearing upon his application for a discharge, if filed; (2) comply with all lawful orders of the court; (3) examine the correctness of all proofs of claims filed against his estate; (4) execute and deliver such papers as shall be ordered by the court; (5) execute to his trustee transfers of all his property in foreign countries; (6) immediately inform his trustee of any attempt, by his creditors or other persons, to evade the provisions of this act, coming to his knowledge; (7) in case of any person having to his knowledge proved a false claim against his estate, disclose that fact immediately to his trustee ; ( 8 ) prepare, make oath to, and file in court within ten days, unless further time is granted, after the adjudica- tion, if an involuntary bankrupt, and with the petition of a voluntary bankrupt, a schedule of his property, showing the amount and kind of property, the location thereof, its money value in detail, and a list of his creditors, showing their residences, if known, if unknown, that fact to be stated, the amounts due each of them, the consideration thereof, the security held by them, if any, and a claim for such exemptions as he may be entitled to, all in triplicate, one copy of each for the clerk, one for the referee, and one for the trustee; and (9) when present at the first meeting of his creditors, and at such other times as the court shall order, submit to an examination concerning the conducting of his business, the cause of his bankruptcy, his dealings with his creditors and other per- sons, the amount, kind, and whereabouts of his property, and, in addition, all matters which may affect the administration and settlement of his estate; but no testimony given by him shall be offered in evidence against him in any criminal proceeding. Provided, however. That he shall not be required to attend a meeting of his creditors, or at or for an examination at a place more than one hundred and fifty miles distant from his home or principal place of business, or to examine claims except when presented to him, unless ordered by the court, or a judge thereof, for cause shown, and the bankrupt shall be paid his actual expenses from the estate when examined or required to attend at any place other than the city, town, or village of his -residence. § 8. Death or Insanity of Bankrupts. — a The death or insanity of a bankrupt shall not abate the proceedings, but the same shall be conducted and conclude in the same manner, so far as possible, as though he had not died or become insane: Pbovided, That in case of death the widow and children shall be entitled to all rights of dower and allowance fixed by the laws of the State of the bankrupt's residence. § 9. Protection and Detention of Bankrupts. — a A bankrupt shall be exempt from arrest upon civil process except in the following cases: (1) When issued from u court of bank- ruptcy for contempt or disobedience of its lawful orders; (2) when issued from a State court having jurisdiction, and served within such State, upon a debt or claim from which his discharge in bankruptcy would not be a release, and in such case he shall be exempt from such arrest when in attendance upon a court of bankruptcy or engaged in the per- formance of a duty imposed by this act. 1488 Suits by and Against Bankeupts ; Composition. [§§ 10-12. 6 The judge may, at any time after the filing of a petition by or against a person, and before the expiration of one month after the qualification of the trustee, upon satisfactory proof by the affidavits of at least two persons that such bankrupt is about to leave the district in which he resides or has his principal place of business to avoid examination, and that his departure will defeat the proceedings in bankruptcy, issue a warrant to the marshal, directing him to bring such bankrupt forthwith before the court for examination. If upon hearing the evidence of the parties it shall appear to the court or a judge thereof that the allegations are true and tlTat it is necessary, he shall order such marshal to keep such bankrupt in custody not exceeding ten days, but not imprison him, until he shall be examined and released or give bail conditioned for his appearance for examination, from time to time, not exceeding in all ten days, as required by the court, and for his obedience to all lawful orders made in reference thereto. § 10. Extradition of Bankrupts. — a Whenever a warrant for. the apprehension of a bankrupt shall have been issued, and he shall have been found within the jurisdiction of a court other than the one issuing the warrant, he may be extradited in the same manner in which persons under indictment are now extradited from one district within which a district court has jurisdiction to another. § 11. Suits by and against Bankrupts. — a A suit which is founded upon a claim from which a discharge would be a release, and which is pending against a person at the time of the filing of a petition against him, shall be stayed until after an adjudication or the dismissal of the petition; if such person is adjudged a bankrupt, such action may be further stayed until twelve months after the date of such adjudication, or, if within that time such person applies for a discharge, then until the question of such discharge is de- termined. 6 The court may order the trustee to enter his appearance and defend any pending suit against the bankrupt. c A trustee may, with the approval of the court, be permitted to prosecute as trustee any suit commenced by the bankrupt prior to the adjudication, with like force and effect as though it had been commenced by him. d Suits shall not be brought by or against a trustee of a bankrupt estate subsequent to two years after the estate has been closed. § 12. Compositions, when Confirmed. — a A bankrupt may offer, either before or after adjudication; terms of composition to his creditors after, but not before, he has been ex- amined in open court or at a meeting of his creditors, and has filed in court the schedule of his property and list of his creditors, required to be filed by bankrupts, compositions before adjudication the bankrupt shall file the required schedules, and thereupon the court shall call a meeting of creditors for the allowance of claims, examination of the bank- rupt, and preservation or conduct of estates, at which meeting the judge or referee shall preside; and action upon the petition for adjudication, shall be delayed until it shall be determined whether such composition shall be confirmed. 6 An application for the confirmation of a composition may be filed in the court of bank- ruptcy after, but not before, it has been accepted in writing by a majority in number of all creditors whose claims have been allowed, which number must represent a majority in amount of such claims, and the consideration to be paid by the bankrupt to his creditors, and the money necessary to pay all debts which have priority and the cost of the pro- ceedings, have been deposited in such place as shall be designated by and subject to the order of the judge. c A date and place, with reference to the convenience of the parties in interest, shall be fixed for the hearing upon such application for the confirmation of a, composition, and such objections as may be made to its confirmation. d The judge shall confirm a composition if satisfied that ( 1 ) it is for the best interests of the creditors; (2) the bankrupt lias not been guilty of any of the acts or failed to perform any of the duties which would be a, bar to his discharge; and (3) the ofTer and its acceptance are in good faith and have not been made or procured except as herein provided, or by any means, promises, or acts herein forbidden. e Upon the confirmation of a composition, the consideration shall be distributed as the judge shall direct, and the case dismissed. Whenever a composition is not confirmed, the estate shall be administered in bankruptcy as herein provided. (Thus amended 6j Act of June 35, 1910.) §§ 13-17.] • Bankbuptcy Act, 1898. 14:89 § 13. Compositions, when Set Aside. — a The judge may, upon the application of parties in interest filed at any time within six months after a composition has been confirmed, set the same aside and reinstate the case if it shall be made to appear upon a trial that fraud was practiced in the procuring of such composition, and that the knowledge thereof has come to the petitioners since the confirmation of such composition. § 14. Discharges, when Granted. — o Any person may, after the expiration of one month and within the next twelve months subsequent to being adjudged a bankrupt, file an application for a discharge in the court of bankruptcy in which the proceedings are pend- ing; if it shall be made to appear to the judge that the bankrupt was unavoidably pre- vented from filing it within such time, it may be filed within but not after the expira- tion of the next six months. 6 The judge shall hear the application for a discharge and such proofs and pleas as may be made in opposition thereto by the trustee or other parties in interest, at such time as will give the trustee or parties in interest a reasonable opportunity to be fully heard, and investigate the merits of the application and discharge the applicant unless he has (1) committed an offense punishable by imprisonment as herein provided; or (2) with intent to conceal his financial condition, destroyed, concealed, or failed to keep books of account or records from which such condition might be ascertained; or (3) obtained money or property on credit upon a materially false statement in writing, made by him to any person or representative for the purpose of obtaining credit from such person; or (4) at any time subsequent to the first day of the four months immediately preceding the filing of the petition transferred, removed, destroyed, or concealed, or per- mitted to be removed, destroyed, or concealed any of his property with intent to hinder, delay, or defraud his creditors ; or ( 5 ) in voluntary proceedings been granted a dis- charge in bankruptcy within six years ; or ( 6 ) in the course of the proceedings in bank- ruptcy refused to obey any lawful order of or to answer any material question approved by the court; Provided, that a trustee shall not interpose objections to a bankrupt's dis- charge until he shall be authorized so to do at a meeting of creditors called for that purpose. c The confirmation of a composition shall discharge the bankrupt from his debts, other than those agreed to be paid by the terms of the composition and those not aii'ected by a discharge. {Thus amended hy Acts of Feh'y 5, 1903, and June 25, 1910.) § 15. Discharges, when Revoked. — a The judge may, upon the application of parties in interest who have not been guilty of undue laches, filed at any time within one year after a discharge shall have been granted, revoke it upon a trial if it shall be made to appear that it was obtained through the fraud of the bankrupt, and that the knowledge of the fraud has come to the petitioners since the granting of the discharge, and that the actual facts did not warrant the discharge. § 16. Co-Debtors of Bankrupts. — a The liability of a person who is a co-debtor with, or guarantor or in any manner a surety for, a bankrupt shall not be altered by the dis- charge of such bankrupt. § 17. Debts not Affected ty a Discharge. — a A discharge in bankruptcy shall release a bankrupt from all of his probable debts, except such as (1) are due as a tax levied by the United States, the State, county, district or municipality in which he resides; (2) are liabilities for obtaining property by false pretenses or false representations, or for wilful and malicious injuries to the person or property of another, or for alimony due or to become due, or for maintenance or support of wife or child, or for seduction of an un- married female, or for trench of promise of marriage accompanied "by seduction, or for eriminal conversation; ( 3 ) have not been duly scheduled in time for proof and allowance, with the name of the cred)itor if known to the bankrupt, unless such ■creditor bad notice or actual knowledge of the proceedings in bankruptcy; or (4) were created by his fraud, lembezzlement, misappropriaition, or defalcatiom while acting as an officer or in amy flducilaxy capacity. (Thus amended ly Act of Feb'y 5, 1903, and Act of March 2, 1917.) 94 1490 CouETS ANB Peoceduke Theeein. [§§ 18-21, CHAPTER IV. COUETS AND PROCEDURE THEREIN. I 18. Process, Pleadings, and Adjudications. — a Upon the filing of a petition for in- Toluntary bankruptcy, service thereof, with a writ of subposna, shall be made upon the person therein named as defendant in the same manner that service of such process is now had upon the commencement of a suit in equity in the courts of the United States, except that it shall be returnable within fifteen days, unless the judge shall for cause fix a longer time; but in case personal service cannot be made, then notice shall be given by publication in the same manner and for the same time as provided by law for notice by publication in suits to enforce a legal or equitable lien in courts of the United States, except that, unless the judge shall otherwise direct, the order shall be published not more than once a week for two consecutive weeks, and the return day shall be ten days after the last publication unless the judge shall for cause fix a longer time. b The bankrupt, or any creditor, may appear and plead to the petition within five days after the return day, or within such further time as the court now may allow. c All pleadings setting up matters of fact shall be verified under oath. d If the bankrupt, or any of his creditors, shall appear, within the time limited, and controvert the facts alleged in the petition, the judge shall determine, as soon as may be, the issues presented by the pleadings, without the intervention of a jury, except in cases where a jury trial is given by this act, and make the adjudication or dismiss the petition. e If on the last day within which pleadings may be filed none are filed by the bankrupt or any of his creditors, the judge shall on the next day, if present, or as soon thereafter as practicable, make the adjudication or dismiss the petition. / If the judge is absent from the district, or the division of the district in which the petition is pending, on the next day after the last day on which pleadings may be filed, and none have been filed by the bankrupt or any of his creditors, the clerk shall forthwith refer the case to the referee. g Upon the filing of a voluntary petition the judge shall hear the petition and make the adjudication or dismiss the petition. If the judge is absent from the district, or the division of the district in which the petition is filed at the time of the filing, the clerk shall forthwith refer the case to the referee. {Thus amended by Act of Feb'y 5, 1903.) § 19. Jury Trials. — o A person against whom an involuntary petition has been filed shall be entitled to have a trial by jury, in respect to the question of hia insolvency, ex- cept as herein otherwise provided, and any act of bankruptcy alleged in such petition to have been committed, upon filing a. written application therefor at or before the time within which an answer may be filed. If such application is not filed within such time, a trial by jury shall be deemed to have been waived. 6 If a Jury is not in attendance upon the court, one may be specially summoned for the trial, or the case may be postponed, or, if the case is pending in one of the district courts within the jurisdiction of a circuit court of Qie United States, it may be certified for trial to the circuit court sitting at the same place, or by consent of parties when sitting at any other place in the same district, if such circuit court has or is to have a jury first in attendance. c The right to submit matters in controversy, or an alleged offense under this act, to a. jury shall be determined and enjoyed, except as provided by this act, according to the United States laws now in force or such as may be hereafter enacted in relation to trials by jury. § 20. Oaths, AflSrmations. — a Oaths required by this act, except upon hearings in court, may be administered by (1) referees; (2) ofBcers authorized to administer oaths in proceedings before the courts of the United States, or under the laws of the State where the same are to be taken; and (3) diplomatic or consular officers of the United States in any foreign country. b Any person conscientiously opposed to taking an oath may, in lieu thereof, affirm. Any person who shall affirm falsely shall be punished as for the making of a false oath. { 21. Evidence. — a A cotut of bankruptcy may, upon application of any officer, bank- rupt, or creditor, by order require any designated person, including the bankrupt and §'§ 22-24.] Bankbuptcy Act, 1898. 1401 his wife, to appear in court or before a referee or the judge of any State court, to be examined concerning the acts, conduct, or property of a bankrupt whose estate is in process of administration under this act: Provided, That the wife may he examined only touching business transacted by her or to which she is a party, and to determine the fact whether she has transacted or been a party to any business of the bankrupt. b The right to take depositions in proceedings under this act shall be determined and enjoyed according to the United States laws now in force, or such as may be hereafter enacted relating to the taking of depositions, except as herein provided. c Notice of the taking of depositions shall be filed with the "referee in every case. When depositions are to be taken in opposition to the allowance of a cliiim notice shall also be served upon the claimant, and when in opposition to a. discharge notice shall also be served upon the bankrupt. d Certified copies of proceedings before a referee, or of papers, when issued by the clerk or referee, shall be admitted as evidence with like force and effect as certified copies of the records of district courts of the United States are now or may hereafter be admitted as evidence. e A certified copy of the order approving the bond of a trustee shall constitute con- clusive evidence of the vesting in him of the title to the property of the bankrupt, and if recorded shall impart the same notice that a deed from the bankrupt to the trustee if recorded would have imparted had not bankruptcy proceedings intervened. . / A certified copy of an order confirming or setting aside a composition, or granting or setting aside a discharge, not revoked, shall be evidence of the jurisdiction of the court, the regularity of the proceedings, and of the fact that the order was made. g A certified copy of an order confirming a composition shall constitute evidence of the revesting of the title of his property in the bankrupt, and if recorded shall impart the same notice that a deed from the trustee to the bankrupt if recorded would impart. {Thus amended by Act of July 5, 1903.) § 22. References of Cases after Adjudication.— a After a person has been adjudged a bankrupt the judge may cause the trustee to proceed with the administration of the estate, or refer it (1) generally to the referee or specially with only limited authority to act in the premises or to consider and report upon specified issues; or (2) to any referee within the territorial jurisdiction of the court, if the convenience of parties in interest will be served thereby, or for cause, or if the bankrupt does not do business, reside, or have his domicile in the district. b The judge may, at any time, for the convenience of parties or for cause, transfer a case from one referee to another. § 23. Jurisdiction of United States and State Courts. — The United States circuit courts shall have jurisdiction of all controversies at law and in equity, as distinguished from proceedings in bankruptcy, between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees, in the same manner and to the same extent only as though bankruptcy proceedings had not been instituted and such controversies had been between the bankrupts and such adverse claimants. Suits by the trustee shall only be brought or prosecuted in the courts where the bank- rupt, whose estate is being administered by such trustee, might have brought or prose- cuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits for the recovery of property under section sixty, sub- division b; section sixty-seven e; and section seventy, subdivision e. c The United States circuit courts shall have concurrent jurisdiction with the courts of bankruptcy, within their respective territorial limits, of the offenses enumerated in this act. (Thus amended by Acts of Feb'y 5, 1903, and June Z5, 1910.) § 24. Jurisdiction of Appellate Courts. — ^a The Supreme Court of the United States,* the circuit courts of appeals of the United States, and the supreme counts of the Terri- toTies, in vacation in ■diambers and during theiT respective terms, as now or as' they may be hereafter held, are heireby invested with appellate jurisdiction of coutroversies arising in banliruptcy proceedings from the courts of bankriiptcy from which they have appellate • jurisdiction in other cases. The Supreme Court of the United States shall exercise a like jurisdiction from courts of bankructcv not within anv organized circuit of the United States and from the supreme court of the District of Columbia. *ADpeals in bankruptcy cases from decisions of circuit courts of appeal reetricted by Act of Jan. 28, 19tKaB amended by Act of September 6, 1916. See p. 606, ante. 14^2 COTJETS AND Pboceduee Theeein. [§§ 25-29. 6 The several circuit courts of appeal shall have jurisdiction in equity, either inter- locutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. Such power shall be exercised on due notice and petition by any party aggrieved. § 25. Appeals and Writs of Error.^ a That appeals, as in equity cases may be taken in bankruptcy proceedings from the courts of bankruptcy to the circuit court of appeals of the United States, and to the supreme court of the Territories, in the following cases, to- wit: (1) from a judgment adjudging or refusing to adjudge the defendant a bankrupt; (2) from a judgment granting or denying a discharge; and (3) from a judgment allowing or rejecting a debt or claim of five hundred dollars or over. Such appeal shall be taken within ten days after the judgment appealed from has been rendered, and may be heard and determined by the appellate court in term or vacation, as the case may be. 6 From any final decision of a court of appeals, allowing or rejecting a claim under this act, an appeal may be had under such rules and within such time as may be prescribed by the Supreme Court of the United States, in the following cases and no other: 1. Where the amount in controversy exceeds the sum of two thousand dollars, and the question involved is one which might have been taken on appeal or writ of error from the highest court of a State to the Supreme Court of the United States ; or 2. Where some Justice of the Supreme Court of the United States shall certify that in his opinion the determination of the question or questions involved in the allowance or rejection of such claim is essential to a uniform construction of this act throughout the United States. c Trustees shall not be required to give bond when they take appeals or sue out writs of error. d Controversies may be certified to the Supreme Court of the United States from other courts of the United States, and the former court may exercise jurisdiction thereof and issue writs of certiorari pursuant to the provisions of the United States laws now in force or such as may be hereafter enacted. § 26. Arbitration of Controversies. — a The trustee may, pursuant to the direction of the court, submit to arbitration any controversy arising in the settlement of the estate. 6 Three arbitrators shall be chosen by mutual consent, or one by the trustee, one by the other party to the controversy, and the third by the two so chosen, or if they fail to agree in five days after their appointment the court shall appoint the third arbitrator. c The written finding of the arbitrators, or a majority of them, as to the issues pre- sented, may be filed in the court and shall have like force and efi'eet as the verdict of a jury. § 27. Compromises. — a The trustee may, with the approval of the court, compromise any controversy arising in the administration of the estate upon such terms as he may deem for the best interests of the estate. § 28. Designation of Newspapers.^ — a Courts of bankruptcy shall by order designate a newspaper published within their respective territorial districts, and in the county in which the bankrupt resides or the major part of his property is situated, in which notices required to be published by this act and orders which the court may direct to be pub- lished shall be inserted. Any court may in a particular case, for the convenience of parties in interest, designate some additional newspaper in which notices and orders in such case shall be published. § 29. Offenses. — o A person shall be punished, by imprisonment for a period not to exceed five years, upon conviction of the offense of having knowingly and fraudulently appropriated to his own use, embezzled, spent, or unlawfully transferred any property or secreted or destroyed' any document belonging, to a bankrupt estate which came into his charge as trustee. & A person shall be punished, by imprisonment for a period not to exceed two years, upon conviction of the ofi'ense of having knowingly and fraudulently (1) concealed while a bankrupt, or after his discharge, from his trustee any of the property belunging to his estate in bankruptcy; or (2) made a false oath or account in, or ju relation to, any pro- ceeding in bankruptcy ; ( 3 ) presented under oath any false claim for proof against the estate of a bankrupt, or used any such claim in composition personally or by agent, proxy, or attorney, or as agent, proxy, or attorney; or (4) received any material amount §i§ 30-37.] Bankruptcy Act, 1898. 1493 of property from a bankrupt after the filing of the petition, with intent to defeat this act; or (5) extorted or attempted to extort any money or property from any person as a consideration for acting or forbearing to act in bankruptcy proceedings. c A person shall be punished by fine, not to exceed five hundred dollars, and forfeit his ofiice, and the same shall thereupon become vacant, upon conviction of the offense of having knowingly ( 1 ) acted as a referee in a case in which he is directly or indirectly interested; or (2) purchased, while a referee, directly or indirectly, any property of the estate in bankruptcy of which he is referee; or (3) refused, while a referee or trustee, to permit a reasonable opportunity for the inspection of the accounts relating to the affairs of, and the papers and records of, estates in his charge by parties in interest when directed by the court so to do. d A person shall not be prosecuted for any offense arising under this act unless the indictment is found or the information is filed in court within one year after the com- mission of the offense. § 30. Rules, Forms, and Orders. — a All necessary rules, forms, and orders as to pro- cedure and for carrying this act into force and effect shall be prescribed, and may be amended from time to time, by the Supreme Court of the United States. § 31. Computation of Time. — a Whenever time is enumerated by days in this act, or in any proceeding in bankruptcy, the number of days shall be computed by excluding the first and including the last, unless the last fall on a Sunday or holiday, in which event the day last included shall be the next day thereafter which is not a Sunday or a legal holiday. § 32. Transfer of Cases. — a In the event petitions are filed against the same person, or against different members of a partnership, in different courts of bankruptcy each of which has jurisdiction, the cases shall be transferred, by order of the courts relinquishing jurisdiction, to and be consolidated by the one of such courts which can proceed with iha same for the greatest convenience of parties in interest. CHAPTER V. OFFICERS, THEIR DUTIES AND COMPENSATION. § 33. Creation of Two OfScers. — a The offices of referee and trustee are hereby created. § 34. Appointment, Removal, and Districts of Referees. — o Courts of bankruptcy shall, within the territorial limits of which they respectively have jurisdiction, (1) appoint referees, each for a term of two years, and may, in their discretion, remove them because their services are not needed or for other cause ; and ( 3 ) designate, and from time to time change, the limits of the districts of referees, so that each county, where the services of a referee are needed, may constitute at least one district. § 35. Qualifications of Referees. — a Individuals shall not be eligible to appointment as referees unless they are respectively (1) competent to perform the duties of that ofiBce; (3) not holding any office of profit or emolument under the laws of the United States or of any State other than commissioners of deeds, justices of the peace, masters in chancery, or notaries public; (3) not related ; by consanguinity or affinity, within the third degree as determined by the common law, to any of the judges of the courts of bank- ruptcy or circuit courts of the United States, or of the justices or judges of the appellate courts of the districts wherein they may be appointed; and (4) residents of, or have their ofSces in, the territorial districts for which they are to be appointed. § 36. Oaths of OfSce of Referees. — a Referees shall take the same oath of office as that prescribed for judges of United States courts. § 37. Number of Referees. — a Such number of referees shall be appointed as may be necessary to assist in expeditiously transacting the bankruptcy business pending in the various courts of bankruptcy. 1494 Refeeees; Duties and Compensation. [§§ 38^1. § . 38. Juiisdiction of Referees. — a Referees respectively are hereby invested, subject always to a review by the judge, within the limits of their districts as established from time to time, with jurisdiction to (1) consider all petitions referred to them by the clerks and make the adjudications or dismiss the petitions; (3) exercise the powers vested in courts of bankruptcy for the administering of oaths to and the examination of persons as witnesses and for requiring the production of documents in proceedings before them, except the power of commitment; (3) exercise the powers of the judge for the taking possession and releasing of the property of the bankrupt in the event of the issuance by the clerk of a certificate showing the absence of a judge from the judicial district, or the division of the district, or his sickness, or inability to act; (4) perform such part of the duties, except as to questions arising out of the applications of bankrupts for composition or discharges, as are by this act conferred on courts of bankruptcy and as shall be prescribed by rules or orders of the courts of bankruptcy of their respective districts, except as herein otherwise provided; and (5) upon the application of the trustee during the examination of the bankrupts, or other proceedings, authorize the employment of stenographers at the expense of the estates at a compensation not to exceed ten cents per folio for reporting and transcribing the proceedings. § 39. Duties of Referees. — a Referees shall (1) declare dividends and prepare and deliver to trustees dividend sheets showing the dividends declared and to whom payable; (2) examine all schedules of property and lists of creditors filed by bankrupts and cause such as .ire incomplete or defective to be amended; (3) furnish such information con- cerning the estates in process of administration before them as may be requested by the parties in interest; (4) give notices to creditors as herein provided; (5) make up records embodying the evidence, or the substance thereof, as agreed upon by the parties in all contested matters arising before them, whenever requested to do so by either of the parties thereto, together with their findings therein, and transmit them to the judges; (6) prepare and file the schedules of property and lists of creditors required to be filed by the bankrupts, or cause the same to be done, when the bankrupts fail, refuse, or neglect to do so; (7) safely keep, perfect, and transmit to the clerks the records, herein required to be kept by them, when the cases are concluded; (8) transmit to the clerks such papers as may be on file before them whenever the same are needed in any pro- ceedings in courts, and in lilce manner secure the return of such papers after they have been used, or, if it be impracticable to transmit the original papers, transmit certified copies thereof by mail; (9) upon application of Sunf party in interest, preserve the evi- dence taken or the substance thereof as agreed upon by the parties before them when a stenographer is not in attendance; and (10) whenever their respective offices are in the same cities or towns where the courts of bankruptcy convene, call upon and receive from the clerks all papers filed in courts of bankruptcy which have been referred to them. b Referees shall not ( 1 ) act in cases in which they are directly or indirectly inter- ested; (2) practice as attorneys and counselors at law in any bankruptcy proceedings; or (3) purchase, directly or indirectly, any property of an estate in bankruptcy. § 40. Compensation of Referees. — a Referees shall receive as full compensation for their services, payable after they are rendered, a, fee of fifteen dollars deposited with the clerk at the time the petition is filed in each case, except when a fee is not required from a voluntary bankrupt, and twenty-five cents for every proof of claim filed for allowance, to be paid from the estate, if any, as a part of the cost of adnUnistratiun, and from estates which have been administered before them one per centum commissions on all moneys disbursed to creditors by the trustee, or one-half of one per centum on the amount to be paid to creditors upon the confirmation of a composition. 6 Whenever a case is transferred from one referee to another the judge shall determine the proportion in which the fee and commissions therefor shall be divided between the referees. c In the event of the reference of a case being revoked before it is concluded, and when the case is specially referred, the judge shall determine what part of the fee and com- missions shall be paid to the referee. {Thus amended by Act of February 5, 1903.) § 41. Contempts before Referees. — o A person shall not, in proceedings before a referee (1) disobey or resist any lawful order, process or writ; (2) misbehave during a hearing or so near the place thereof as to obstruct the same ; ( 3 ) neglect to produce, after having been ordered to do so, any pertinent document; or (4) refuse to appear after having been §§ 42-47.] Bankruptcy Act, 1898. 1495 subpoenaed, or, upon appearing, refuse to take the oath as a witness, or, after having taken the oath, refuse to be examined according to law: Provided, That no person shall be required to attend as a witness before a referee at a place outside of the State of his residence, and more than one hundred miles from such place of residence, and only in case his lawful mileage and fee for one day's attendance shall be first paid or tendered to him. b The referee shall certify the facts to the judge, if any person shall do any of the things forbidden in this section. The judge shall thereupon, in a summary manner, hear tlie evidence as to the acts complained of, and, if it is such as to warrant him in so doing, punish such person in the same manner and to the same extent as for a contempt committed before the court of bankruptcy, or commit such person upon the same con- ditions as if the doing of the forbidden act had occurred with reference to the process of, or in the presence of, the court. § 42. Records of Referees. — a The records of all proceedings in each case before a referee shall be kept as nearly as may be in the same manner as records are now kept in equity cases in circuit courts of the United States. h A record of the proceedings in each case shall be kept in a separate book or books, and shall, together with the papers on file, constitute the records of the case. c The book or books containing a record of the proceedings shall, when the case is concluded before the referee, be certified to by him, and, together with such papers as are on file before him, be transmitted to the court of bankruptcy and shall there remain as a part of the records of the court. § 43. Referee's Absence or Disability. — a Whenever the ofBce of a referee is vacant, or its occupant is absent or disqualified to act, the judge may act, or may appoint another referee, or another referee holding an appointment under the same court may, by order of the fudge, temporarily fill the vacancy. § 44. Appointment of Trustees. — a The creditors of a bankrupt estate shall, at their first meeting after the adjudication or after a vacancy has occurred in the office of trustee, or after an estate has been reopened, or after a composition has been set aside or a dis- charge revoked, or if there ia a vacancy in the office of trustee, appoint one trustee or three trustees of such estate. If the creditors do not appoint a trustee or trustees as herein provided, the court shall do so. § 45. Qualifications of Trustees. — a Trustees may be (1) individuals who are respec- tively competent to perform the duties of that office, and reside or have an office in the judicial district within which they are appointed, or (3) corporations authorized by their charters or by law to act in such capacity and having an office in the judicial district within which they are appointed. § 46. Death or Removal of Trustees. — a The death or removal of a trustee shall not abate any suit or proceeding which he is prosecuting or defending at the time of his death or removal, but the same may be proceeded with or defended ty his joint trustee or successor in the same manner as though the same had been commenced or was being defended by such joint trustee alone or by such successor. § 47. Duties of Trustee. — a Trustees shall respectively (1)' account for and pay over to the estates under their control all interest received by them upon property of such estate; (2) collect and reduce to money the property of the estates for which they are trustees; under the direction of the court, and close up the estate as expeditiously as is compatible with the best interests of the parties in interest;, and such trustees, as to all property in the custody or coming into the custody of the bamkruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien, by legal or equitable proceedings thereon; t to act as referees 1493 Orders approving bond of trustee, as eviden'ce, etc 1492 of court, bankrupt to comply with 1487 as to procedure. Supreme Court to prescribe 1493 tranisferring cases in bamkruptcy 1493 Partners, when to be adjudged bankrupt 1486 Payment in contemplation of insolvency, validity of 1500 of dividens on claims 1502 notice to creditor's of 1500 of taxes, priority of 1502 of unclaimed dividends 1503 Pendency of peibition, notice to creditors of 1500 Persons, definition, of j 1485 Petition, definitiou of 1485 to be filed in duplicate . . . .* ■ 1500 who may file, etc 1500 against insolvent persons, filing of 1486 Plaice of creditors' meetings 1498 Pleadings in bamkruptcy proceedings 1490 Plural number, construction of 1485 Possession of bankrupt's property 1504 Preference, permission of 1485 what deemed 1501 Preferred claims, allowance of 1499 creditors giving further credit 1502 provisions as to 1501 PTesentati'on of claims, time for 1500 false claims, punishment for 1492 Procedure in courts of bankruptcy 1490 Process in bankruptcy proceedings 1490 Production of documents before referees 1494 Proof of claim, in insolvent partnerships 1486 of whaA to consist 1499 solvency, burden of 1486 Property of bankrupt 1485 Prosecution of actions by trustees 1488 wiant of, not to cause dismissal, etc 1500 Protection of bankrupts 1487 Publication of notices, to creditors 1500 provisions as to 1490 designiatiom of newspapers for 1432 Punishment of bankrupts 1485 for contempt, manner of 1494 for cffemaes, period and enumeration 1493 Q Qualification of referees 1493 trustees 1495 Questicm of insolvency, when tried by jury 1490 1514 Index to Bankkuptcy Act of 189'8. B PAGE Seal estlaite, adjudication to be filed where situated 1496 Receiver, appli<»iti execution issued out of any court of any State, district or Territory within which suci,- debtor resides or has property, founded upon a demand in its nature provable against a bankrupt's estate under tliis Act, and for a sum exceeding one hundred dollars, and such process is remaining in force and not discharged by payment, or in any other manner provided by the law of such State, district, or Territory applicable thereto, for a period of seven days-, Or has been actually imprisoned for more than* (seven) days in a civil action, founded on contract, for the sum of one hundred dollars or upwards. Or who, being bankrupt or insolvent, or in contemplation of bankruptcy or insolvency s'lail make any payment, gift, grant, sale, conveyance,t (or transfer of money, cr other property, estate, rights, or credits, or give any warrant to confess judgment, or procure or suffer his property to be taken on legal process), with intent to give a preference to one or more of his creditors, or to any person or persons who are or may be liable for him as indorsers, bail, sureties, or otherwise, or with the intent, by such disposition of his property, to defeat or delay the operation of this Act; t (Or who, being a banker, merchant, or trader, has stopped or suspended and not resumed payment of his commercial paper, within a period of fourteen days) ; Shall be deemed to have committed an act of bankruptcy, and, subject to the conditions hereinafter pi-escribed, shall be adjudged a bankrupt, on the petition of one or more of his creditors,* (the aggregate of whose debts provable under this Act amount to at least ♦(Amended to " twenty." R. S., sec 5021 ; Act of June 22, 1874.) t Amended so as to read, " Or transfer of money or other property, estate rights, or credits, or confess judgment, or give any warrant to confess judgment, or procure his property to, be taken on legal process." t Words in parentheses amended so as to read, " or who, being a bank, banker, broker, merchant, trader, (j) manufacturer, or miner, has fraudulently stopped payment, cr who, being a bank, banker, broker, merchant, trader, manufacturer, or miner, has stopped, or suspended and not resumed payment, within a period of forty days of his commercial paper, (made or passed in the course of his business as such), or who, being a bank or banker, shall fail for forty day.s, to pay any depositor upon demand of payment lawfully made. R. S., sec. 5021, Act of June 22, 1874.) S Words in parentheses amended so as to road, "who shall constitute one-fourth thereof, at •east, in number, and the aggregate of whose debts (1) provable under this act amounts to at l»«iflt one-third of the debts bo provable. R. S. sec. 5021, Act of June 22 1874. Bankruptcy Act of 1867. 1537 two hundred and fifty dollars, provided sucli petition is brought within six months after the act of bankruptcy shall have been committed.) * And if such person shall be adjudged a bankrupt, the assignee may recover back the money or other property so paid, conveyed, sold, assigned, or transferred contrar)' to this Act: Provided, the person receiving such payment or conveyance had reasonable cause to believe that a fraud on this Act was intended, or that the debtor was insolvent; And such creditor shall not be allowed to prove his debt in bankruptcy. § 40. And 6e it further enacted, That upon the filing of the petition authorized by the next preceding section, if it shall appear that suflicient grounds exist therefor, the court snail direct the entry of an order requiring the debtor to appear and show cause, at a court of bankruptcy to be holden at a time to be specified in the order, not less than five days from the service thereof, why the prayer of the petition should not be granted; And may also, by its injunction, restrain the debtor, and any other person, in the meantime, from making any transfer or disposition of any of the debtor's property not excepted by this Act from the operation thereof, and from any interference therewith; And if it shall appear that there is probable cause for believing that the debtor is about to leave the district, or to remove or conceal his goods and chattels or his evidence of property, or make any fraudulent conveyance, or disposition thereof, the court may issue a warrant to the marshal of the district, commanding him to arrest the alleged bankrupt and him safely keep, unless he shall give bail, to the satisfaction of the court for his appearance from time to time, as required by the court, until the decision of the court upon the petition or the further order of the court, and forthwith to take possession provisionally of all the property and effects of the debtor, and safely keep the same until the further order of the court. * In the Revised Statutes, section 5021, the following was Inserted before and instead of this paragraph : Provided, also, That no voluntary assignment by a debtor or debtors of all his or their property, heretofore or hereafter made in good faith for the benefit of all his or their creditors, ratably and without creating any preference, and valid, according to the law of the State where made, shall of itself, in the event of his .or their being subsequently adjudicated bankrupts in a proceeding of involuntary bankruptcy, be a bar to the discharge of such debtor or debtors. And the provisions of this section shall apply to all cases of compulsory or involun- tary bankruptcy commenced since the first day of December, eighteen hundred and seventy-three, as well as to those commenced hereafter. And in all cases commenced since the first day of December, eighteen hundred and seventy-three, and prior to the passage of this Act, as well as those commenced hereafter, the court shall, if such allegation as to the number or amount of petitioning creditors be denied by the debtor by a statement in writing to that effect, require him to file in court forthwith a full list of his creditors, with their places of residence and the sums due them respectively, and shall ascertain, upon reasonable notice to the creditors, whether •one-fourth in number and one-third in amount thereof, as aforesaid, have petitioned that the debtor be adjudged a bankrupt. B.ut if such debtor shall, on the filing of the petition, admit in writing that the requisite number and amount of creditors have petitioned, the court (if satis- fled that the admission was made in good faith), shall so adjudge, which judgment shall be final, and the matter proceed without further steps on that subject. And if it shall appear that such number and amount have not so petitioned, the court shall grant reasonable time, not exceeding in cases heretofore commenced, twenty days, and in cases hereafter commenced ten days, within which other creditors may join in such petition. And if, at the expiration of such time so limited, the number and amount shall comply with the requirements of this section, the matter of bankruptcy may proceed ; but if, at the expiration of such limited time, such number and amount shall not answer the requirements of this section, the proceedings shall be dismissed, and in cases hereafter commenced, with costs. And if such person shall be adjudged a bankrupt, the assignee may recover back the money (m) or property so paid, conveyed, sold, assigned, or transferred contrary to this act : Provided, That the person receiving such payment or convey- ance had reasonable cause to believe that the debtor was insolvent, and knew that a fraud on this act was Intended ; and such person, if a creditor, shall not, in cases of actual fraud on his part, be allowed to prove for more than a moiety of his debt ; and this limitation on the proof of debts shall apply to cases of voluntary as well as involuntary bankruptcy. And the petition of creditors under this section may be sufficiently verified by the oaths of the first five signer.^ thereof, if so many there be. And if any of said first five signers shall not reside in the district in which such petition is to be filed, the same may be signed and verified by the oath or oaths of the attorney or attorneys, agent or agents, of such signers. And in computing the number of creditors, as a^ciccald, who shall join in such petition, creditors whose respective debts do not exceed two hundred and fifty dollars shall not be reckoned. But if there be no creditors whose debts exceed said sum of two hundred and fifty dollars, or if the requisite number of creditors holding debts exceeding two hundred and fifty dollars fail to sign the petition, the creditors Jiaving debts of a less amount shall be reckoned for the purpose aforesaid. So amended by act of July 26, ISTG, ch. 234, sec. 1, 19 Stat. 102. 97 1538 Bankkuptcy Act of 1867. A copy of the petition and of such order to show cause shall be served on such debtor by delivering the same to him personally, or leaving the same at his last or usual place of abode; Or, if such debtor cannot be found, or his place of residence ascertained, service shall be made by publication, in such manner as the judge may direct. No further proceedings, unless the debtor appear and consent thereto, shall be had until proof shall have been given, to the satisfaction of the court, of such service or publication ; * And if such p.roof be not given on the return day of such order, the proceedings shall be adjourned and an order made that the notice be forthwith so served or published. § 41. And be it further enacted, That on such return day, or adjourned day, if the notice has been duly served or published, or shall be waived by the appearance and con- sent of the debtor, the court shall proceed summarily to hear the allegations of the petitioner and debtor, and may adjourn the proceedings from time to time, on good cause shown, and shall, if the debtor on the same day so demand in writing, order a trial by jury at the first term of the court at which a jury shall be in attendance, to ascertain the fact of such alleged bankruptcy; t (Or, at the election of the debtor, the court may, in its discretion, award a venire facias to the marshal of the district returnable within ten days before him, for the trial of the facts set forth in the petition, at which time the trial shall be had, unless ad- journed for cause.) And if, upon siich hearing or trial, the debtor proves to the satisfaction of the court or of the jury, as the case may be, that the facts set forth in the petition are not true, or that the debtor has paid and satisfied all liens upon his property, in case the existence of such liens were the sole ground of the proceeding, the proceedings shall be dismissed .and the respondent shall recover his costs. § 42. And be it further enacted. That if the facts set forth in the petition are found to be true, or if default be made by the debtor to appear pursuant to the order, upon due proof of service thereof being made, .the court shall adjudge the debtor to be a bankrupt, and, as such, subject to the provisions of this act, and shall forthwith issue a warrant to take possession of the estate of the debtor. The warrant shall be directed, and the property of the debtor shall be taken thereon, and shall be assigned and distributed in the same manner and with similar proceedings to those hereinbefore (See amendment, Act June 22, 1874), providing for the taking possession, assignment, and distribution of the property of the debtor upon his own petition. The order of adjudication of bankruptcy shall require the bankrupt forthwith, or within such number of days, not exceeding five after the date of the order, or notice thereof, as shall by the order be prescribed, to make and deliver, or transmit by mail, post- paid, to the messenger, a schedulej of the creditors and an inventory of his estate in the form, and verified in tht manner required of a petitioning debtor by section thirteen. If the debtor has failed to appear in person, or by attorney, a certified copy of the adjudication shall be forthwith served on him by delivery or publication in the manner hereinbefore provided for the service of the order to show cause; And if the bankrupt is absent or cannot be found, such schedule and inventory shall be prepared by the messenger and the assignee from the best information they can obtain. If the petitioning creditor shall not appear and proceed on the return day, or ad- journed day, the court may, upon the petition of any other creditor to the required amount, proceed to adjudicate on such petition, without requiring a new service or pub- lication of notice to the debtor. •Amended by act of 22 June, 1874, ch. 390, sec. 13, 18 Stat. 1S2, to read: " And If, on return day of the order to shcv,' cause as afo'resaid the court shall be satlsfled that the requirement of section flvi! thousand and twenty-one (thirty-nine) of said act, as to the number and amount of petitioning creditors, has been complied with, or if within the time pro- vided for in section five thousand and twenty-one (thirty-nine) of this act, creditors sufficient in number and amount shall sign such petition so as to make a total of one-fourth in number of the creditors, and one-third in the amount of the provable debts against the bankrupt, as provided in said section, the court shall so adjudge, which judgment shall be final ; otherwise it shall dismiss the proceedings, and, in cases hereafter commenced, i.ith costs." t So amended by act of 22 June. 1874, ch. mO, see. 14, 18 Stat. 182. t Words " and valuation " added. Act of June 22, 1874. Bankeuptct Act of 1867. 1539 5 43. And be it further enacted, That if, at the first meeting of creditors, or at any meeting of creditors to he specially called for that purpose, and of which previous notice shall have heen given for such length of time and in such manner as the court may direct, three-fourths in value of the creditors whose claims have heen proved shall determine and resolve that it is for the interest of the general body of the creditors that the estate of the bankrupt should be wound up and settled, and distribution made among the creditors by trustees, under the inspection and direction of a committee of the creditors, it shall be lawful for the creditors to certify and report such resolution to the court, and to nomi- nate one or more trustees to take, and hold, and distribiite the estate, unSer the direction of such committee. If it shall appear to the court, after hearing the bankrupt and such creditors as may desire to be heard, that the resolution was duly passed and that the interests of the creditors will be promoted thereby, it shall confirm the same; And upon the execution and filing, by or on behalf of three-fourths in value of all the creditors whose claims have, been proved, of a consent that the estate of the bankrupt be wound up and settled by said trustees, according to the terms of such resolution, the bankrupt, or his assignee in bankruptcy, if appointed, as the case may be, shall, under the direction of the court, and under oath, convey, transfer, and deliver all the property and estate of the bankrupt to the said trustee or trustees, who shall, upon such con- veyance and transfer, have and hold the same in the same manner, and with the same powers and rights, in all respects, as the bankrupt would have had or held the same if no proceedings in bankruptcy had Been taken, or as the assignee in bankruptcy would have done had such resolution hot been passed; And such consent and the proceedings thereunder shall be as binding in all respects on any creditor, whose debt is provable, who has not signed the same, as if he had signed it, and on any creditor whose debt, if provable, is not proved, as if he had proved it; And the court, by order, shall direct all acts and things needful to be done to carry into effect such resolution of ^ihe creditors; and the said trustees shall proceed to wind up and settle the estate, under the direction and inspection of such committee of the creditors, for the equal benefit of all such creditors; And the winding up and settlement of any estate under the provisions of this section shall be deemed to be proceedings in bankruptcy under this Act; and the said trustees shall have all the rights and powers of assignees in bankruptcy. The court, on the application of such trustees, shall have power to summon and examine, on oath or otherwise, the bankrupt and any creditor, and any person indebted to the estate, or known or suspected of having any of the estate in his possession, or any other person whose examination may be material or necessary to aid the trustees in the ex- ecution of their trust, and to compel the attendance of such persons and the production of books and .papers, in the same manner as in other proceedings in bankruptcy under this act; And the bankrupt shall have the like right to apply for and obtain a discharge after the passage of such resolution and the appointment of such trustees as if such resolution had not been passed, and as if all the proceedings had continued in the manner provided in the preceding sections of this Act. If the resolution shall not be duly reported, or the consent of the creditors shall not be duly filed, or if, upon its filing, the court shall not think fit to approve thereof, the bankruptcy shall proceed as though no resolution had been passed, and the court may make all necessary orders for resuming the proceedings; And the period of time which shall have elapsed between the date of the resolution and the date of the order for resuming proceedings shall not bo reckoned in calculating periods of time prescribed by this Act. (R. S., sec. 5103 o (22 June, 1874, ch. 390, sec. 17, 18 Stat. 182). — That in all cases of bankruptcy now pending, or to be hereafter pending, by or against any person, whether an adjudication in bankruptcy shall have been had or not, the creditors of such alleged bankrupt may, at a meeting called under the direction of the court, and upon not less than ten days' notice to each known creditor, of the time, place, and purpose of such meeting, such notice to be personal or otherwise, as the court may direct, resolve that a com- position proposed by the debtor shall be accepted in satisfaction of the debts due to them from the debtor. And such resolution shall, to be operative, have been passed by a majority in number and three-fourths in value of the creditors of the debtor assembled at such meeting either in person or by proxy, and shall be confirmed by the signatures thereto of the debtor and two-thirds in number and one-half in value of all the creditors 1540 Bankeuptcy Act of 1867. of the debtor. And in calculating a majority for the purpose of a composition under this section, creditors whose debts amount to sums not exceeding fifty dollars shall be reckoned in the majority in value, but not in the majority in number; and the value of the debts of secured creditors above the amount of such security, to be determined by the court, shall, as nearly as circumstances admit, be estimated in the same way. And creditors whose debts are fully secured shall not be entitled to vote upon or assign such resolution without first relinquishing such security for the benefit of the estate. Tlie debtor, unless prevented by sickness or other cause satisfactory to such meeting, shall be preselit at the same, and shall answer any inquiries made of him; and he, or, if he is so prevented from being at such meeting, some one in his behalf, shall produce to the meeting a statement showing the whole value of his assets and debts, and the names and addresses of the creditors to whom such dcibts respectively are due. Such resolution, together with the statement of the debtor as to his assets and debts, shall be presented to the court ; and the court shall, upon notice to all the creditors of the debtor of not less than five days, arid upon hearing, inquire whether such resolution has been passed in the manner directed by this section; and if satisfied that it has been so passed, it shall, subject to the provisions hereinafter contained, and upon being satisfied that the same is for the best interest of all concerned, cause such resolution to be recorded and statement of assets and debts to be filed ; and until such record and filing shall have taken place, such resolution shall be of no validity. And any creditor of the debtor may inspect such record and statement at all reasonable times. The creditors may, by a resolution passed in the matter and under the circumstances aforesaid, add to or vary the provisions of, any composition previously accepted by them, without prejudice to any person taking interest under such provisions who do not assent to such addition or variation. And any such additional resolution shall be presented to the court in the same manner and proceeded with in the same way and with the same consequences as the resolution by which the composition was accepted in the first in- stance. The provisions of a composition accepted by such resolution in pursuance of this section shall be binding on all the creditors whose names and addresses and the amounts of the debts due to whom are shown in the statement of the debtor produced at the meet- ing at which the resolution shall have been passed, but shall not affect or prejudice the rights of any other creditors. Where a debt arises on a bill of exchange or promissory note, if the debtor shall be ignorant of the holder of any such bill of exchange or promissory note he shall be re- quired to state the amount of such bill or note, the date on which it falls due, the name of the acceptor and of the person to whom it is payable, and any other particulars within his knowledge respecting the same; and the insertion of such particulars shall be deemed a sufiicient description by the debtor in respect to such debt. Any mistake made inadvertently by a debtor in the statement of his dej)ts may be cor- rected upon reasonable notice and with the consent of a general meeting of his creditors. Every such composition shall, subject to priorities declared in said act, provide for a pro rata payment or satisfaction in money, to tlie creditors of such debtor in proportion to the amount of their unsecured debts, or their debts in respect to which any such security shall have been duly surrendered and given up. The provisions of any composition made in pursuance of this section may be enforced by the court, on motion made in a summary manner by any person interested, and on reasonable notice ; and any disobedience of the order of the court made on such motion shall be deemed to be a contempt of court. Rules and regulations of court may be made in relation to proceedings of composition herein provided for in the same manner and to the same extent as now provided by law in relation to proceedings in bankruptcy. If it shall at any time appear to the court, on notice, satisfactory evidence, and hearing, that a composition under this section cannot, in consequence of legal difficulties, or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, the court may refuse to accept and confirm such composition, or may set the same aside ; and, in either case, the debtor shall be proceeded with as a bankrupt in conformity with the provisions of law, and proceedings may be had accordingly; and the time during which such composition shall have been in force shall not, in such case be computed in calculating periods of time prescribed by said act.) PENALTIES AGAINST BANKRUPTS. § 44. And be it further enacted, That from and after the passage of this act, if any debtor or bankrupt shall, after the commencement of proceedings in bankruptcy,^- Secrete or conceal any property belonging to his estate; Bankeuptcy Act of 3867. 1541 Or part with, conceal, or destroy, alter, mutilate, or falsify, or cause to be concealed, destroyed, altered, mutilated, or falsified, any book, de'ed, document, or writing relating thereto, or remove, or cause to be removed, the same, or any part thereof, out of the dis- trict, or otherwise dispose of any part thereof, with intent to prevent it from coming into the possession of the assignee in bankruptcy, or to hinder, impede, or delay either of them in recovering or receiving the same; Or make any payment, gift, sale, assignment, transfer, or conveyance of any property belonging to his estate witli the like intent; Or spend any part thereof in gaming; Or shall, with intent to defraud, wilfully and fraudulently conceal from his assignee, or omit from his schedule, any property or effects wliatsoever; Or if, in case of any person having, to his knowledge or belief, proved a false or fictitious debt against his estate, he shall fail to disclose the same to his assignees within one month after coming to the knowledge or belief ti'.ereof ; Or shall attempt to account for any of his property by fictitious losses or expen>jes; Or shall, within three months before the commencement of proceedings in bankruptcy, under the false color and pretense of carrying on business and dealing in the ordinary course of trade, obtain on credit from any person any goods or chattels with intent to defraud ; Or shall with intent to defraud his creditors, within three months next before the com- mencement of proceedings in bankruptcy, pawn, pledge, or dispose of, otherwise than by bona fide transactions in the ordinary way of his trade, any of his goods or chattels which liave been obtained on credit and remain unpaid for; He shall be deemed guilty of a misdemeanor, and, upon conviction thereof in any court of the United States, shall be punished by imprisonment, with or without hard labor, for a term not exceeding three years. § 45. And be it further enacted, That if any judge, register, clerk, mar&hal, messenger, assignee, or any other officer of the several courts of bankruptcy shall, for anything done or pretended to be done under this Act, or under color of doing anything thereunder, wilfully demand or take, or appoint or allow any person whatever to take for him or on his account, or for or on account of any other person, or in trust for him or for any other person, any fee, emolument, gratuity, sum of money, or anything of value whatever, other than is allowed by this act, or which shall be allowed under the authority thereof, such person, when convicted thereof, shall forfeit and pay the sum of not less than three hundred dollars, and not exceeding five hundred dollars, and be imprisoned not exceeding three years. § 46, And be it further enacted, That if any person shall forge the signature of a judge, register, or other officer of the court, or knowingly concur in using any such forged or counterfeit signature or seal for the purpose of authenticating any proceeding or document. Or shall tender in evidence any such proceeding or document with a false or counter- feit signature of any such judge, register, or other officer, or a false or counterfeit seal of the court, subscribed or attached thereto, knowing such signature or seal to be false or counterfeit, any such person shall be guilty of felony, and upon conviction thereof shall be liable to a fine of not less than five hundred dollars, and not more than five thousand dollars, and to be imprisoned not exceeding five years, at the discretion of the court. FEES AND COSTS. § 47. And be it further enacted, That in each case there shall be allowed and paid, in addition to the fees of the clerk of tlie court as now established by law, or as may be established by general order, under the provisions of this Act, for fees in bankruptcy, the following fees, which shall be applied to the payment for the services of the registers: Vor issuing every warrant, two dollars. For each day in which a meeting is held, three dollars. For each order for a dividend, three dollars. For every order substituting an arrangement by trust deed for bankruptcy, two dollars. For every bond with sureties, two dollars. For every application for any meeting in any matter under this Act, one dollar. 1542 Bankeuptcy Act of 1867. For every day's service while actually employed under a special order of the court, a sum not exceeding five dollars, to be allowed by the court. For taking depositions, the fees now allowed by law. For every discharge where there is no opposition, two dollars. Such fees shall have priority of payment over all other claims out of the estate, and before a warrant issues, the petitioner shall deposit with the senior register of the court, or with the clerk, to be delivered to the register, fifty dollars as security for the payment thereof; and if there are not sufficient assets for the payment of the fees, the person upon whose petition the warrant is issued shall pay the same, and the court may issue an execution against him to compel payment to the register. Before any dividend is ordered the assignee shall pay out of the estate to the mes- senger the following fees, and no more: First. — For service of warrant, two dollars. Second. — For all necessary travel, at the rate of five cents a mile, each way. Third. — For each written note to creditor named in the schedule, ten cents. Fourth. — For custody of property, publication of notices, and other services, his actual and necessary expenses upon returning the same in specific items, and making oath that they had been actually incurred and paid by l.im, and are just and reasonable, the same to be taxed or adjusted by the court, and the oath of the messenger shall not be con- elusive as to the necessity of said expenses. For cause shown, and upon hearing thereon, such further allowance may be made as the court, in its discretion, may determine. The enumeration of the foregoing fees shall not prevent 'the judges, who shall frame general rules and orders in accordance with the provisions of section ten, from pre- scribing a tariff of fees for all other services of the officers of courts of bankruptcy, or from reducing the fees prescribed in this section in classes of cases to be named in their rules and orders. (R. S., sec. 5127 a (22 June, 1874, ch. 390, sec. 18, 18 Stat. 184). — That from and after the passage of this act, the fees, commissions, charges, and allowances, excepting actual and necessary disbursements, of, and to be made by the officers, agents, marshals, messengers, assignees, and registers in cases of bankruptcy, shall be reduced to one-half of the fees, commissions, charges, and allowances heretofore provided for or made in like cases: Provided, That the preceding provision shall be and remain in force until the justices of the Supreme Court of the United States shall make and promulgate new rules and regulations in respect to the matters aforesaid, under the powers conferred upon them by sections four thousand nine hundred and ninety (ten) and five thousand one hun- dred and twenty-seven (forty-seven) of said act, and no longer, which duties they shall perform as soon as may be. § 5127 b (22 June, 1874, ch. 390, sec. 19, 18 Stat. 184).— That it shall be the duty of the marshal of each district, in "the month of July of each year, to report to the clerk of the district court of such district, in a tabular form, to be prescribed by the justices of the Supreme Court of the United States, as well as such other or further information as may be required by said justices. First, the number of cases in bankruptcy in which the warrant prescribed in section five thousand and nineteen (eleven) of said act has come to his hands during the year ending June thirtieth, preceding; Secondly, how many such warrants were returned, with the fees, costs, expenses, and emoluments thereof, respectively and separately; Thirdly, the total amount of all other fees, costs, expenses, and emoluments, respectively and separately, earned or received by him during such year, from or in respect of any matter in bankruptcy; Fourthly, a summarized statement of. such fees, costs, and emoluments, exclusive of actual disbursements in bankruptcy, received or earned for such year; Fifthly, a summarized statement of all actual disbursements in such cases for such year. And in like manner every register shall, in the same month, and for the same year, make a report to such clerk; of First, the number of voluntary cases in bankruptcy coming before him during aaid year; Secondly, the amount of assets and liabilities, as nearly as may be, of the bankrupt; Thirdly, the amount and rate per centum of all dividends declared; Fourthly, the disposition of all such cases; Bajtkeupt'cy Act of 1867. 1543 Fifthly, the number of compulsory cases in bankruptcy coming before him, in the sama way; Sixthly, the amount of assets and liabilities, as nearly as may be, of such bankrupts; Seventhly, the disposition of all such cases; Eighthly, the amounts and rate per centum of all dividends declared in such cases; Ninthly, the total amount of fees, charges, costs, and emoluments of every sort, re- ceived or earned by such register during said year, in each class of cases above stated. And in like manner every assignee shall, during said month make like return to such clerk; of, First, the number of voluntary and compulsory cases, respectively and separately, in his charge during said year; Secondly, the amount of assets and liabilities therein, respectively and separately; Thirdly, the total receipts and disbursements therein, respectively and separately; Fourthly, the amount of dividends paid or declared, and the rate per centum thereof, in each class respectively and separately; I'ifthly, the to;tal amount of all his fees, charges and emoluments of every kind therein, earned or received. Sixthly, the total amount of expenses incurred by him for legal proceedings and counsel fees; Seventhly, the disposition of the cases respectively ; Eighthly, a summarized statement of both classes as aforesaid; And in like manner, the clerk of said court, in the month of August in each year, shall make up a statement for such year, ending June thirtieth, of, First, all classes in bankruptcy pending at the beginning of the said year; Secondly, all of such cases disposed of ; Thirdly, all dividends declared therein; Fourthly, the number of reports made from each assignee therein; Fifthly, the disposition of all such cases; Sixthly, the number of assignees' accounts filed and settled; Seventhly, whether any marshal, register, or assignee has failed to make and file with such clerk the reports by this act required, and if any have failed to make such report, their respective names and residences. And such clerk shall report in respect of all cases begun during said year. And he shall make a classified statement, in tabular form, of all his fees, charges, costs, and emoluments, respectively, earned or accrued during said year, giving each head under which the same accrued, and also the sum of all inbneys paid into and disbursed out of court in bankruptcy, and the balance in hand or on deposit. And all the statements and reports herein required shall be under oath, and signed by the persons respectively making the same. And said clerk shall in said month of August, transmit every such statement and report so filed with him, together with his own statement and report as aforesaid, to the attorney- general of the United States. Any person who shall violate the provisions of this section shall on motion made, under the direction of the attorney-general, be by the district court dismissed from his ofBce, and shall be deemed guilty of a misdemeanor, and, on conviction thereof, be punished by a fine of not more than five hundred dollars, or by imprisonment not exceeding one year. ) OF MEANING OF TERMS AND COMPUTATION OF TIME. § 48. And he it further eHiacted, That the word " assignee " and the word " creditor " shall include the plural also ; and the word " messenger " shall include his assistant or assistants, except in the provision for the fees of that ofiicer. The word " marshal " shall include the marshal's deputies ; the word " person " shall also include " corporation ; " and the word "oath" shall include "affirmation." And in all cases in which any particular number of days is prescribed by this Act, or shall be mentioned in any rule or order of court, or general order which shall at any time be made under this Act, for the doing of any act, or for any other purpose, the same shall be reckoned, in the absence of any expression to the contrary, exclusive of the first and inclusive of the last day. unless the last day shall fall on a Sunday, Christmas day, or on any day appointed by the President of the United States as «. day of public fast or thanksgiving, or on the Fourth of July, in which ease the time shall be reckoned ex- clusive of that day also. 1544 Bankruptcy Act "of 1867. § 49. And 6e it fwrther enacted, That all the jurisdiction, power, and authority con- ferred upon and vested in the District Court of the United States by this act in cases in. bankruptcy are hereby conferred upon and vested in the Supreme Court of the District of Columbia. And in and upon the Supreme Courts of the several Territories of the United States, when the bankrupt resides in the said District of Columbia or in either of the said Territories. And in those judicial districts which are not within any organized circuit of the United States, the power and jurisdiction of a Circuit Court in bankruptcy may be exercised by the district judge. § 50. And be it fnrfher enacted, That this act shall commence and take effect, as to the appointment of the officers created hereby and the promulgation of rules and general orders, from and after the date of its approval: Provided, That no petition or other proceeding under this act shall be filed, received, or commenced before the first day ot June, Anno Domini eighteen hundred and sixty-seven. III. THE BANKRUPTCY ACT OF 1841. An Act to establish a uniform System of Bankruptcy throughout the United States. (Passed August 19th, 1841, repealed March 3rd, 1843.) Section 1. Be is enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That there be, and hereby is, established throughout the United States a uniform system of bankruptcy, as follows: All persons whatsoever, residing in any State, District or Territory of the United States, owing debts which shall not have been created in consequence of a defalcation as a public ofiBcer; or as executor, administrator, guardian or trustee, or while acting in any other fiduciary capacity, who shall, by petition, setting forth to the best of his knowledge and belief a list of his or their creditors, their respective places of residence, and the amount due to each, together with an accurate inventory of his or their property, rights and credits, of every name, kind and description, and the location and situation of each and every parcel and portion thereof, verified by oath, or, if conscientiously scrupulous of taking an oath, by solemn affirmation, apply to the proper court, as hereinafter mentioned, for the benefit of this act, and therein declare themselves to be unable to meet their debts and engage- ments, shall be deemed bankrupts within the purview of this act, and may be so declared accordingly by a decree of such court. All persons, being merchants, or using the trade of merchandise, all retailers of merchandise, and all bankers, factors, brokers, under- writers or marine insurers, owing debts to the amount of not less than two thousand dollars, shall be liable to become bankrupts within the true intent and meaning of this act, and may, upon the petition of one or more of their creditors, to whom they owe debts amounting in the whole to not less than five hundred dollars, to the appropriate court, be so declared accordingly, in the following cases, to wit: whenever such person, being a merchant, or actually using tl'.e trade of merchandise, or being a retailer of merchandise, or being a banker, factor, broker, underwriter, or marine insurer, shall depart from the State, District or Territory, of which lie is an inhabitant, with intent to defraud his creditors ; or shall conceal himself to avoid being arrested, or shall willingly and fraudu- lently procure himself to be arrested, or his goods and chattels, lands or tenements, to be attached, distrained, sequestered, or taken in execution; or shall remove his goods, chattels and effects, or conceal them to prevent their being levied upon or taken in execution, or by other process ; or make any fraudulent conveyance, assignment, sale, gift or other transfer of his lands, tenements, goods or chattels, credits or evidence of debt: Provided, however. That any person so declared a bankrupt, at the instance of a creditor, may, at his election, by petition to such court within ten days after its decree, be en- titled to a trial by jury before such court, to ascertain the fact of such bankruptcy; or if such person shall reside at a great distance from the place of holding such court, the said judge, in his discretion, may direct such trial by jury to be had in the county of such person's residence, in such manner and under such directions as the court may pre- scribe and give ; and all such decrees passed by such court, and not so re-examined, shall be deemed final and conclusive as to the subject-matter thereof. Sec. 2. And be it further enacted, that all future payments, securities, conveyances, or transfers of property, or agreement made or given by any bankrupt in contemplation of bankruptcy, to any person or persons whatever, not creditor, indorser, surety, or other person, any preference or priority over the general creditors of such bankrupts; and all other payments, securities, conveyances, or transfers of property, or agreements made or given by such bankrupt in contemplation of bankruptcy, to any person or persons what- ever, not being a bona-fide creditor or purchaser, for a valuable consideration, without notice, shall be deemed utterly void, and a fraud upon this act; and the assignee under the bankruptcy shall be entitled to claim, sue for, recover, and receive, the same as ^art of the assets of the bankruptcy; and the person making such unlawful preferences and payments shall receive no discharge under the provisions of this act: Provided, That all dealings and transactions by and with any bankrupt, bona-fide made and entered into more than two months before the petition filed against him or by him, shall not be invali- dated or affected by this act: Provided, That the other party to any such dealings or 1154.5] 1546 Bankeuptcy Act of 1841. transactions had no notice of a prior act of bankruptcy, or of the intention of the bank- rupt to take the benefit of this act. And in case it shall be made to appear to the court, in the course of the proceedings in bankruptcy, that the bankrupt, his application being voluntary, has, subsequent to the first day of January last, or at any other time, in con- teimplation of the passage of a bankrupt law, by assignments or otherwise, given or secured any preference to one creditor over another, he shall not receive a discharge unless the same he assented to by a majority in interest of those of his creditors who have not been so preferred: And provided also. That nothing in this act contained shall be construed to annul, destroy or impair, any lawful rights of married women, or minors, or any liens, mortgages, or other securities, on property, real or personal, which may be valid by the laws of the States respectively, and which are not inconsistent with the provisions of the second and fifth sections of this act. Sec. 3. And be it further enacted, That all the property, and rights of property, of every name and nature, and whether real, personal or mixed, of every bsEnkrupt, except as is hereinafter provided, who shall, by a decree of the proper court, be declared to be a bankrupt within this act, shall, by mere operation of law, ipso facto, from the time of such decree, be deemed to be divested out of such bankrupt, without any other act, assign- ment or other conveyance whatsoever; and the same shall be vested, by force of the same decree, in such assignee as from time to time shall be appointed by the proper court for this purpose, which power of appointment and removal such court may exercise at its discretion, toties quoties ; and the assignee so appointed shall be vested with all the rights, titles, powers and authorities to sell, manage and dispose of the same, and to sue for and defend the same, subject to the orders and directions of such court, as fully, to all intents and purposes, as if the same were vested in or might be exercised by such bankrupt before or at the time of his bankruptcy declared as aforesaid; and all suits in law or in equity then pending, in which such bankrupt is a party, may be prosecvited and defended by such assignee to its final conclusion, in the same way and with the same effect as they might have been by such bankrupt; and no suit commenced by or against any assignee shall be abated by his death or removal from office, but the same may be prosecuted or defended by his successor in the same office: Provided, however. That there shall be excepted from the operation of the provisions of this section the necessary household and kitchen furniture, and such other articles and necessaries of such bankrupt as the said assignee shall designate and set apart, having reference in the amount to the family, condition and circumstances of the bankrupt, but altogether not to exceed in value, in any case, the sum of three hundred dollars; and, also, the wearing apparel of such bank- rupt, and that of his wife and children; and the determination of the assignee in the matter shall, on exception taken, be subject to the final decision of said court. Sec. 4. And be it further enacted. That every bankrupt who shall bona-fide surrender all his property, and rights of property, with the exception before mentioned, for the benefit of his creditors, and shall fully comply with and obey all the orders and directions which may from time to time be passed by the proper court, and shall otherwise con- form to all the requisitions of this act, shall (unless a majority in number and value of his creditors who have proved their debts shall file their written dissent thereto) be entitled to a full discharge from all his debts, to be decreed and allowed by the court which has declared him a bankrupt, and a certificate thereof granted him by such court accordingly, upon his petition filed for such purpose; such discharge and certificate not, however, to be granted until after seventy days' notice in some public newspaper, desig- nated by such court, to all creditors who have proved their debts, and other persons in interest, to appear at a particular time and place, to show cause why such discharge and certificate shall not be granted; at which time and place any such creditors, or other persons in interest, may appear and contest the right of the bankrupt thereto: Provided, That in all cases where the residence of the creditor is known, a service on him personally, or by letter addressed to him at his known usual place of residence, shall be prescribed by the court, as in their discretion shall seem proper, having regard to the distance at which the creditor resides from such court. And if any such bank- rupt shall be guilty of any fraud or wilful concealment of his property or rights of property, or shall have preferred any of his creditors contrary to the provisions of this »ct, or shall wilfully omit or refuse to comply with any orders or directions of such court, or to conform to any other requisites of this act, or shall, in the proceedings under this act, admit a false or fictitious debt against his estate, he shall not be entitled to any Rueh discharge or certificate; nor shall any person, being a merchant, banker, factor, Bakkbuptcy Act of 1841. i'547 underwriter, broker, or marine insurer, be entitled to any such discharge or certificate, who shall become bankrupt, and who shall not have kept proper books of account, after tlie passing of this act; nor any person who, after the passing of this act, shall apply trust funds to his own use: Provided, That no discharge of any bankrupt under this act shall release or discharge any person who may be liable for the same debt as a part- ner, joint contractor, indorser, surety, or otherwise, for or with the bankrupt. And such bankrupt shall at all times be subject to examination, orally, or upon written interroga- tories, in and before such court, or any commission appointed by the court therefor, on oath, or, if conscientiously scrupulous of taking an oath, upon his solemn affirmation, in all matters relating to such bankruptcy, and his acts and doings, and his property and rights of property, which, in the judgment of such court, are necessary and proper for the purposes of justice ; and if, in any such examination, he shall wilfully and cor- ruptly answer, or swear, or affirm, falsely, he shall be deemed guilty of perjury, and shall be punishable therefor in like manner as the crime of perjury is now punishable by the laws of the United States ; and such discharge and certificate, when duly granted, shall in all courts of justice be deemed a full and complete discharge ot all debts, contracts and other engagements of such bankrupt which are provable under this act, and shall be and may be pleaded as a full and complete bar to all suits brought in any court of judicature whatever, and the same shall be conclusive evidence of itself in favor of such bankrupt, unless the same shall be impeached for some fraud or wilful concealment by him of his property or rights of property, as aforesaid, contrary to t?ie provisions of this act, on prior reasonable notice specifying in writing such fraud or concealment; and if, in any case of bankruptcy, a majority in number and value of the creditors who shall have proved their debts at the time of hearing of the petition of the bankrupt for a discharge, as hereinbefore provided, shall at such hearing file their written dissent to the allowance of a discharge and certificate to such bankrupt, or if, upon such hearing, a discharge shall not be decreed to him, the bankrupt may demand a trial by jury upon a proper issue to be directed by the court, at such time and place and in such manner as the court may order; or he may appeal from that decision at any time within ten days thereafter to the circuit court next to be held for the same district, by simply enter- ing in the district court, or with the clerk thereof, upon record, his prayer for an appeal. The appeal shall be tried at the first term of the circuit court -after it be taken, unless, for sufficient reason, a continuance be granted; and it may be heard and determined by said court summarily, or by a jury, at the option of the bankrupt; and the creditors may appear and object against a decree of discharge and the allowance of the certificate, as hereinbefore provided. And if, upon a full hearing of the parties, it shall appear to the satisfaction of the court, or the jury shall find, that the bankrupt has made a full disclosure and surrender of all his estate, as by this act required, and has in all things conformed to the directions thereof, the court shall make a decree of discharge, and grant a certificate, as provided in this act. Sec. 5. And be it further enacted. That all creditors coming and proving their debts under such bankruptcy, in the manner hereinafter prescribed, the same being bona fide debts, shall be entitled to share in the bankrupt's property and effects, pro rata, with- out any priority or preference whatsoever, except only for debts due by such bankrupt to the United States, and for all debts due by him to persons who, by the laws of the United States, have a, preference, in consequence of having paid monies as his sureties, which shall be first paid out of the assets; and any person who shall have performed any labor as an operative in the service of any bankrupt shall be entitled to receive the full amount of the wages due to him for such labor, not exceeding twenty-five dollars : Provided, That such labor shall have been performed within six months next before the bankruptcy of his employer; and all creditors whose debts are not due and payable until a future day, all annuitants, holders of bottomry and respondentia bonds, holders of policies of insurances, sureties, indorsers, bail, or other persons, having uncertain or contingent demands against such bankrupt, shall be permitted to come in and prove such debts or claims under this act, and shall have a right, when their debts and claims become absolute, to have the same allowed them; and such annuities and holders of debts payable in future may have the present value thereof ascertained, under the direction of such court, and allowed them accordingly, as debts in presenti; and no creditor or other person coming in and proving his debt or other claim shall be allowed to maintain any suit at law or in equity therefor, but shall be deemed thereby to have waived all right of action and suit against such bankrupt; and all proceedings already commenced, and all unsatisfied judgments already obtained thereon, shall be deemed to be surrendered thereby; and in all cases where there are mutual debts or mutual credits between the ^^48 Eankruptcy Act cp iS41. parties, the balance only shall be deemed the true debt or claim between them, and the residue shall be deemed adjusted by the set-off; all such proof of debts shall be made before the court decreeing the bankruptcy, or before some commissioner appointed by the court for that purpose; but such court shall have full power to disallow and set aside any debt, upon proof that such debt is founded in fraud, imposition, illegality, or mistake; and corporations to whom any debts are due may make proof thereof by their president, cashier, treasurer, or other officer, who may be specially appointed for that purpose; and in appointing commissioners to receive proof of debts, and perform other duties under the provisions of this act, the said court shall appoint such persons as have their residence in the county in which such bankrupt lives. Sec. 6. And be it further enacted, That the district court in every district shall have jurisdiction in all matters and proceedings in bankruptcy arising under this act, and any other act which may hereafter be passed upon the subject of bankruptcy; the said jurisdiction to be exercised summarily, in the nature of summary proceedings in equity; and for this purpose the said district court shall be deemed always open. And the district judge may adjourn any point or question arising in any case in bankruptcy into the circuit court for the district, in his discretion, to be there heard and determined ; and for this purpose the circuit court of such district shall also be deemed always open. And the jurisdiction hereby conferred on the district court shall extend to all cases and controversies in bankruptcy arising between the bankrupt and any creditor or creditors who shall claim any debt or demand under the bankruptcy; to all cases and controversies between such creditor or creditors and the assignee of the estate, whether in office or removed; to all cases and controversies between such assignee and the bankrupt, and to all acts, matters and things to be done under and in virtue of the bankruptcy, until the final distribution and settlement of the estate of the bankrupt, and the close of the proceedings in bankruptcy. And the said courts shall have full authority and juris- diction to compel obedience to all orders and decrees passed by them in bankruptcy, by process of contempt and other remedial process, to the same extent the circuit courts may now do in any suit pending therein in equity. And it shall be the duty of the district court in each district, from time to time to prescribe suitable rules and regula- tions, and forms of proceedings, in all matters of bankruptcy; which rules, regulations and forms, shall be subject to be altered, added to, revised, or annulled, by the circuit court of the same district, and other rules and regulations and forms substituted there- for; and in all such rules, regulations and forms it shall be the duty of the said courts to make them as simple and brief as practicable, to the end to avoid all unnecessary expenses, and to facilitate the use thereof by the public at large. And the said courts shall, from time to time, prescribe a tariff or table of fees and charges to be taxed by the officers of the court or other persons for services under this act, or any other on the subject of bankruptcy; which fees shall be as low as practicable, with reference to the nature and character of such services. Sec. 7. And be it further enacted. That all petitions by any bankrupt for the benefit of this act, and all petitions by a creditor against any bankrupt under this act, and all proceedings in the case to the close thereof, shall be had in the district court within and for the district in which the person supposed to be a bankrupt shall reside, or have his place of business, at the time when such petition is filed, except where otherwise provided in this act. And upon every such petition, notice thereof shall be published in one or more public newspapers printed in such district, to be designated by such court, at least twenty days before the hearing thereof; and all persons interested may appear at the time and place where such hearing is thus to be had, and show cause, if any they have, why the prayer of the said petitioner should not be granted; all evidence by witnesses to be used in all hearings before such court shall be under oath, or solemn affirmation, when the party is conscientiously scrupulous of taking an oath, and may be oral or by deposition, taken before such court, or before any commissioner appointed by the court, or before any disinterested State judge of the State in' which the deposition is taken; and all proof of debts or other claims, by creditors enti- tled to prove the same under this act shall be under oath or solemn affirma- tions, as aforesaid, before such court or commissioner appointed thereby, or before some disinterested State judge of the State where the creditors live, in such form as may be prescribed by the rules and regu'a'::o::3 hereinbefore authorized to be made and estab- lished by the courts having jurisdiction 'n l-mliruptcy. But all such proofs of debts and other claims shall b-; open to contestation in t1-e proper ro".rt l:Tvi"'; jnvisdiction over the proceedings in the particular cnsu i:i bankruptcy; and as well the assignee as, Bankeuptcy Act of 1841. 1549 the creditor shall have a right to a trial by jury upon an issue to be directed by such court, to ascertain the validity and amount of such debts or other claims ; and the result therein, unless a neve trial shall be granted, if in favor of the claims, shall be evidence of the validity and amount of such debts or other claims. And if any person or persons shall falsely and corruptly answer, svcear or affirm, in any hearing or on trial of any matter, or in any proceeding in such court in bankruptcy, or before any commissioner, he and they shall be deemed guilty of perjury, and punishable therefor in the manner and ,to the extent provided by law for other cases. Sec. 8. And be it further enacted, That the circuit court within and for the district where the decree of bankruptcy is passed shall have concurrent jurisdiction with the district court of the same district of all suits at law and in equity which may and shall be brought by any assignee of the bankrupt against any person or persons claiming an adverse interest, or by such person against such assignee, touching any property or rights of property of said bankrupt transferable to, or vested in, such assignee; and no suit at law or in equity shall, in any case, be maintainable by or against such assignee or by or against any person or persons claiming an adverse interest touching the prop- erty and rights of property aforesaid, in any court whatsoever unless the same shall be brought witliin two years after the declaration and decree of bankruptcy, or after the cause of suit shall iirst have accrued. Sec. 9. And be it further enacted. That all sales, transfers and other conveyances of the assignee of the bankrupt's property and rights of property shall be made at such times and in such manner as shall be ordered and appointed by the court in bankruptcy; and all assets received by the assignee in money shall, within sixty days afterwards, be paid into the court, subject to its order respecting its futr.re safe-keeping and disposition; and the court may require of such assignee a bond, with at least two sureties, in such sum as it may deem proper, conditioned for the due and faithful discharge of all his duties, and his compliance with the, orders and directions of the court; which bond shall be taken in the name of the United States, and shall, if there be any breach thereof, be sued and suable, under the order of such court, for the benefit of the creditors and other persons in interest. Sec. 10. And be it further enacted. That in order to insure a speedy settlement and close of the proceedings in each case in bankruptcy, it shall be the duty of the court to order and direct a collection of the assets and a reduction of the same to money, and a distribution thereof at as early periods as practicable, consistently with a due regard to the interests of the creditors; and a dividend and distribution of such assets as shall be collected and reduced to money, or so much thereof as can be safely disposed of, consistently with the rights and interests of third persons having adverse claims thereto; shall be made among the creditors who have proved their debts, as often as once in six months from the time of the decree declaring the bankruptcy; notice of such dividends and distribution to be given in some newspaper or newspapers in the district, designated by the court, ten days at least before the order therefor is passed; and the pendency of any suit at law or in equity, by or against such third persons, shall not postpone such division and distribution, except so far as the assets may be necessary to satisfy the same ; and in all the proceedings in bankruptcy in each case shall, if practicable, be finally adjusted, settled and brought to a close by the court, within two years after the decree declaring the bankruptcy. And where any creditor shall not have proved his debt until a dividend or distribution shall .have been made and declared, he shall be entitled to be paid the same amount, pro rata, out of the remaining dividends or distributions there- after made, as the other creditors have already received, before the latter shall be entitled to any portion thereof. Sec. 11. And be it further enacted, that the assignee shall have full authority, by or under the order and direction of the proper court in bankruptcy, to redeem and discharge any mortgage or other pledge, or deposit, or lien upon any property, real or personal, whether payable in present or at a future day, and to tender a due performance of the conditions thereof. And such assignee shall also have authority, by and under the order and direction of the proper court in bankruptcy, to compound any debts or other claims, or securities due or belonging to the estate of the bankrupt; but no such order or direction shall be made until notice of the application is given in some public newspaper in tho district, to be designated by the court, ten days at least before the hearing, so that all creditors and other persons in interest may appear and show cause, if any they have, at the hearing, why the order or direction should not be passed. 1550 Bankeuptcy Act of 1841. Sec. 12. And be it further enacted, That if any person who shall have been discharged under this act, shall afterward become bankrupt, he shall not again be entitled to a dis- charge under this act, unless his estate shall produce (after all charges) sufficient to pay every creditor seventy-five per cent, on the amount of the debt which shall have been allowed to each creditor. Sec. 13. And be it further enacted, That the proceedings in all cases in bankruptcy shall be deemed matters of record; but the same shall not be required to be recorded at large, but shall be carefully filed, kept and numbei-ed in the office of the said court, and a docket only, or short memorandum thereof, with the numbers, kept in a book by the clerk of the court; and the clerk of the court, for affixing his name and the seal of the court to any form, or certifying a, copy thereof, when required thereto, shall be entitled to receive, as compensation, the sum of twenty-five cents, and no more. And no officer of the court, or commissioner, shall be allowed by the court more than one dollar for taking the proof of any debt or other claim of any creditor or other person against the estate of the bankrupt; but he may be allowed, in addition, his actual travel expenses for that purposes. Sec. 14. And be it further enacted, That where two or more persons, who are partners in trade, become insolvent, an order may be made in the manner provided in this act, either on the petition of such partners, or any one of them, or on the petition of any creditor of the partners, upon which order all the joint stock and property of the eom- paijy, and also all the separate estate of each of the partners, shall be taken, excepting such parts thereof as are herein exempted; and all the creditors of the company, and the separate creditors of each partner, shall be allowed to prove their respective debts; and the assignees shall also keep separate accounts of the joint stock or property of the company, and of the separate estate of each member thereof ; and after deducting out of the whole amount received by such assignees the whole of the expenses and disburse- ments paid by them, the net proceeds of the joint stock shall be appropriated to pay the creditors of the company, and the net proceeds. of the separate estate of each partner shall be appropriated to pay his separate creditors; and if there shall be any balance of the separate estate of any partner, after the payment of his separate debts, such balance shall bo added to the joint stock for the payment of the joint creditors; and if there shall be any balance of the joint stock, after payment of the joint debts, such balance shall be divided and appropriated to and among the separate estates of the several partners according to their respective rights and interests therein, and as it would have been if the partnership had been dissolved without any bankruptcy; and the sum so appropriated to the separate estate of each partner shall be applied to the pay- ment of his separate debts; and the certificate of discharge shall be granted or refused to each partner, as the same would or ought to be if the proceedings had been against him alone under this act; and in all other respects the proceedings against partners shall be conducted in the like manner as if they had been commenced and prosecuted against one person alone. Sec. 15. And be it further enacted. That a copy of any decree of bankruptcy, and the appointment of assignees, as directed by the third section of this act, shall be recited ill every deed of lands belonging to the "bankrupt, sold and conveyed by any assignees under and by virtue of this act; and that such recital, together with certified copy of such order, shall be full and complete evidence both of the bankruptcy and assignment therein recited, and supersede the necessity of any other proof of such bankruptcy and assignment to validate the said deed; and all deeds containing such recital, and supported by such proof, shall be as effectual to pass the title of the bankrupt, of, in and to, the lands therein mentioned and described, to the purchaser, as fully to all intents and pur- poses, as if made by such bankrupt himself immediately before such order. Sec. 16. And be it further enacted. That all jurisdiction, power and authority, con- ferred upon and vested in the district court of the United States by this act, in cases in bankruptcy, are hereby conferred upon and vested in the circuit court of the United States for the District of Columbia, and in and upon the supreme or superior courts of niy of the Territories of the United States, in cases in bankruptcy, where the bankrupt resides in the said District of Columbia, or in either of the said Territories. Sec. 17. And be it further enacted. That this act shall take effect from and after the first day of February next. ' IV. THE BANKRUPTCY ACT OF 1800. An Act to eatahlish a uniform System of Bankruptcy throughout the United States. {Passed April 4th, 1800; repealed December 19th, 1803.) Section 1. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That from and after the first day of June next, if any merchant or other person residing within the United States, actually using the trade of merchandise, by buying and selling in gross, or by retail, or dealing in exchange, or as a banker, broker, factor, underwriter or marine insurer, shall, with intent unlawfully to delay or defraud his or her creditors, depart from the State in which such person usually resides, or remain absent therefrom, or conceal him or herself therein, or keep his or her house, so that he or she cannot be taken, or served with process, or willingly or fraudulently procure him or herself to be arrested, or his or her lands, goods, money or chattels to be attached, sequestered or taken in execution, or make or cause to be made any fraudulent conveyance of his or her lands, or chattels, or make or admit any false or fraudulent security or evidence of debt, or being arrested for debt, or having surrendered him or herself in discharge of bail, shall remain in prison two months or more, or escape therefrom, or whose lands or effects being attached by process issuing out of, or returnable to, any court of common law, shall not, within two months after written notice thereof, enter special bail and dissolve the same, or in districts in which attachments are not dissolved by the entry of special bail, being arrested for debt after lis or her lands and effects, or any part thereof, have been attached for a, debt or debts amounting to one thousand dollars or upwards, shall not, upon notice of such attachment, give sufScient security for the payment of what may be recovered in the suit in which he or she shall be arrested, at or before the return-day of the same, to be approved by the judge of the district, or some judge of the court out of which the process issued upon which he is arrested, or to which the same shall be returnable, every such person shall be deemed and adjudged a bankrupt: Provided, that no person shall be liable to a commission of bankruptcy if the petition be not preferred, in manner hereinafter directed, within six months after the act of bankruptcy committed. Sec. 2. And be it further enacted, That the judge of the district court of the United States, ART VI— COURTS AND PROCEDURE. Jurisdiction, 63. Sittings and distribution of business, 64. Registrar, powers of, 65. General rules, 66. Fees and returns, 67. Procedure, 68-73. Review and appeal, 74. PART VII— SUPPLEMENTAL PROVISIONS. Married woman, 75. Partnerships, 76. Evidence, 77-79. Seal of court, 80. Death of debtor or witness, 81. Time, computation of, 82. Service of notices, et«., 83. Formal detects, 84. Corporations, firms and lunatics, who t act for, 85. Crown, 86. Barristers and advocates, 87. Banks, 88. PART VIII— BANKRUPTCY OFFENCES. Bankruptcy oftences, 80-97. Commencement of Act, 98. 1566 THE CANADIAN BANKRUPTCY ACT OF I9l9* with General Rules thereunder (Stat, of Can., 9-10 Geo. V, 1919, chap. 36, as amended by 10-11 Geo. V, 1920, chap. 34) An Act Respecting Bankbtjptct. [Assented to 7th July, 1919; amendments assented to 1st July, 1920.] His Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows: SHOBT TITLE. 1. This Act may be cited as The Bankruptcy Act. INTEBPBETATION. 2. In this Act, unless the context otherwise requires or implies, the expressions, — (a) "affidavit" includes statutory declaration and affirmation; (b) "alimentary debt" means a debt incurred for necessaries or maintenance; (c) " appeal court" means the court having jurisdiction in bankruptcy, under this Act, on appeal; ( d) " assignment " includes conveyance ; (e) "assignor" means the maker of an assignment, whether under this Act such maker may lawfully make such assignment or such assignment may lawfully be made, or not; (f) "authorized assignment" means an assignment made as provided in this Act to an authorized trustee by an authorized assignor of all his property for the general beneiit ol his creditors; (g) " authorized assignor " means an insolvent assignor whose debts provable under this Act exceed five hundred dollars; (h) "available act of bankruptcy" means an 'act of bankruptcy available for a bank- ruptcy petition at the date of the presentation of a petition on which a receiving order is made; ( i ) " banker " includes any person owning, conducting or in charge of any bank or place where money or securities for money are received upon deposit or held subject to with- drawal by depositors; (j) "bank" or "chartered bank" means an incorporated bank carrying on the business of banking under The Bank Act; (k) "corporation" includes any company incorporated or authorized to carry on busi- ness by or under an Act of the Parliament of Canada or of any of the provinces of Canada, .",nd any incorporated company, wheresoever incorporated, which has an office in or carries on business within Canada, but does not include building societies having a capital stock, nor incorporated banks, savings banks, insurance companies, trust companies, loan companies or railway companies; (1) "court" or "the court" means the court which is invested with original jurisdiction in bankruptcy under this Act; (m) "creditor" with relation to any meeting held under authority of this Act, shall, in the case of a corporation, include bond-holder, debenture holder, shareholder and member of the corporation, and each class thereof shall in meeting express its views or wishes In manner prescribed by General Rules. (n) "debt provable in 'bankruptcy" or "probable debt" or "debt provable" includes any debt or liability by this Act made provable in bankruptcy or ia proceedings under an authorized assignment; (o) "debtor" includes any person, whether a British subject or not, who, at the time when any act of bankruptcy was done or suffered by him, or any authorized assignment was made by him, (a) was personally present in Canada, or (b) ordinarily resided or had a, place of residence in Canada, or (c) was carrying on business in Canada personally or by means of an agent or manager, or (d) was a corporation or a member of a firm or partner- ship which carried on business in Canada ; and where the debtor is a corporation, as defined by this section, the Winding-up Act, chapter one hundred and forty-four of the Revised Statutes of Canada, 1906, shall not, except by leave of the Court, extend or apply to it notwithstanding anything in that Act contained, but all proceedings instituted under that Act before this Act comes into force or afterwards, by leave of the Court, may and shall * This Act took effect July 1, 1920. See proclamation on page 1565, ante. 1567 1568 Canadian Bankruptcy Act. be a.3 lawfully and effectually continued under that Act as if the provisions of this parv graph had not been made; (p) "discharge" means the release of a bankrupt or authorized assignor from all his debts provable in bankruptcy or under an auithorized assignment save such as are excepted by this Act; (q) "gazetted" means published in the Canada Gazette; (r) "general rules" includes forms; ( s ) " goods " includes all chattels personal and movable property ; " (t) "insolvent person" and "insolvent" include a person, whether or not he has done or suffered an act of bankruptcy, ( i ) who is for any reason unable to meet his obligations as they respectively become due, or (ii) who has ceased paying his current obligations ia the ordinary course of business, or (iii) the aggregate of whose property is not, at a fsiir valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process would not be sufficient, to enable paymemt of all his obligations, due and accruing due, thereout ; (u) "judge" means a judge of the court which is by this Act invested with original jurisdiction in bankruptcy; (v) "judgment" or "execution" or "attachment" shall have operation as if by law the liability of married women thereon and thereunder were personal as well as proprietary; (w) " local newspaper " means a newspaper published in and having a circulation through- out the bankruptcy district or division wherein the debtor has resided or carried on busi- ness' for the longest period during the six months immediately preceding the date of the presentation against him of a bankruptcy petition or the making by him of an authorized assignment ; (x) "locality" of a debtor (whether a bankrupt, assignor or person who has proposed » composition, extension or arrangement to or with his creditors) means either the place within a bankruptcy division or district whereat the debtor has carried on business at any time during the six months immediately preceding the date of the presentation against him of a bankruptcy petition or the making by him of an authorized assignment, or where the greater portion of the property of such debtor is situate, or where the debtor resides; (y) "oath" includes affirmation and statutory declaration; (z) "ordinary resolution" means a resolution carried in manner provided by subsection fourteen of section forty-t-wo of this Act; (aa) "person" includes corporation and partnership; (bb) " petition " means petition in bankruptcy; ( cc) " prescribed " means prescribed by General Rules within the meaning of this Act ; (dd) "property" includes money, goods, things in action, land, and every description of property, whether real or personal, movable or immovable, legal or equitable, and whether situate in Canada or elsewhere; also obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of, or incident to property as above defined; (ee) "registrar" includes any other officer who performs duties like to those of a registrar ; (ff) "resolution" means ordinary resolution; (gg) "secured creditor" means a person holding a mortgage, hypothec, pledge, charge, lien or privilege on or against the property of the debtor, or any part thereof, as security for a debt due or accruing due to him from the debtor; (hh) "sheriff" includes bailiff and any officer charged with the execution of a writ or other process; (ii) "special resolution" means a resolution decided by a majority in number of the creditors present, personally or by proxy, at a meeting of creditors and voting three-fourths in value of the proved debts on the resolution; (jj) "trustee" or "authorized trustee" means, dependent upon the context, (a) one of the persons appointed by the Governor in Council, under authority of this Act as proper persons to be trustees in bankruptcy or otherwise hereunder, or (b) one of such persons named in a receiving order or in an authorized assignment to act, or who is otherwise here- under authorized to act, as a trustee in bankruptcy, or under an authorized assignment or in connection with a proposal by a debtor for a composition, extension or arrangement to or with his creditors ; (kk) "wage-earner" means one who works for wages, salary, commission or hire, at a rate of compensation not exceeding fifteen hundred dollars per year, and who does not on his own account carry on business. PART I. Bankrtiptct and Receivinq Obdebs. ACTS or BANKBUPTCT. 3. A debtor commits an act of bankruptcy in each of the following cases: — (a) If in Canada or elsewhere he makes an assignment of Ms property to a trustee or trustees for the 'benefit of his creditors generally, whether it is an assignment authorized by this Act or not; Canadian Bankruptcy Act. 15G9 (b) If in Canada or elsewhere he makes a fraudulent conveyance, gift, delivery, or transfer of his property, or of any part thereof; (c) If in Canada or elsewhere he makes any conveyance or transfer of his property or any part thereof, or creates any charge thereon, which would under this Act be void as a fraudulent preference if he were adjudged bankrupt; (d) If with intent to defeat or delay his creditors he does any of the following things, namely, departs out of Canada, or, being out of Canada, remains out of Canada, or departs from his dwelling house or otherwise absents himself, or begins to keep house; (e) If he permits any execution or other process issued against him under which any of his goods are seized, levied upon or taken in execution to remain unsatisfied until within four days from the time fixed by the sheriff for the sale thereof, or for fourteen days after such seizure, levy or taking in execution, or if the goods have been sold by the sherifl or the execution or other process has been held by him after written demand for payment with- out seizure, levy or taking in execution or satisfaction by payment for fourteen days, or if it is returned endorsed to the effect that the sheriff can find no goods whereon to levy or to seize or take; provided that where interpleader proceedings have been instituted in regard to the goods seized, the time elapsing between the date at which such proceedings were instituted and the date at which such proceedings are finally disposed of, settled or aban- doned, shall not be taken into account in calculating any such period of fourteen days; (f) If he exhibits to any meeting of his creditors any statement of his assets and lia- bilities which shows that he is insolvent, or presents or causes to be presented to any such meeting a written admission of his inability to pay his debts; (g) If he assigns, removes, secretes or disposes of or attempts or is about to assign, remove, secrete or dispose of any of his goods with intent to defraud, defeat or delay his creditors or any of them; (h) If he makes any bulk sale of his goods without complying with the provisions of any Bulk Sales Act applicable to such goods in force in the province within which he carries on business or within which such goods are at the time of such bulk sale. PETITION AND RECEIVING OKDER. 4. (1) Subject to the conditions hereinafter specified, if a, debtor commits an act ot bankruptcy a creditor may present to the court a bankruptcy petition. (2) The petition shall be verified by affidavit and served on the debtor in the prescribed manner. (3) A creditor shall not be entitled to present a bankruptcy petition against a debtor unless, — (a) the debt owing by the debtor to the petitioning creditor, or, if two or more creditors j";n in the petition, the aggregate amount of debts owing to the several petitioning creditors amounts to five hundred dollars; and, (b) the act of bankruptcy on -which the petition is grounded has occurred within six months before the presentation of the petition. (4) The petition shall be presented to the court having jurisdiction in the locality of the debtor. (5) At the hearing the court shall require proof of the debt of the petitioning creditor, of the Service of the petition, and of the act of bankruptcy, or, if more than one act ot bankruptcy is alleged in the petition, of some one of the alleged acts of bankruptcy, and, if satisfied with the proof, may adjudge the debtor a bankrupt and in pursuance of the petition, make an order, in this Act called a receiving order, for the protection of the estate. (6) If the court is not satisfied with the proof of the petitioning creditor's debt, or of the act of bankruptcy, or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or, in case an authorized assiarnment has been made, that the estate can be best administered under the assignment, or that for other sufficient cause no order ought to be made, it may dismiss the petition. (7) Where the debtor appears on the petition, and denies that he ia indebted to the petitioner, or that he is indebted to such an amount a.B -would justify the petitioner in presenting a petition against him, the court, on such security (if any) being given as the court may require for payment to the petitioner of any debt whiah may be established against him in due course of law and of the costs of establishing the debt, may, Instead of dismissing the petition, stay all proceedings on the petition for such time as may be required for trial of the question relating to the debt. (8) Where proceedings are stayed, the court may, if by reason of the delay caused by tlis stay of proceedings or for any other cause it thinks just, make a receiving order on th? petition of some other creditor, and shall thereupon dismiss, on such terms as it thinks just, the petition in which proceedings have been stayed as aforesaid. (9) A creditor's petition shall not, after presentment, be withdrawn without the leave of the court. (10) The bankruptcy of a debtor shall be deemed to have relation back to and to com- mence at the time of the service of the petition on which a receiving order is made against him. 99 1570 Canadian Bankruptcy Act. (11) Provided, however, that nothing herein contained shall invalidate any proceedings by reason of the same having been commenced, taken or carried on in the wrong court, out the court may at any time transfer to the proper court the petition, application or pro- ceedings, as the case may be. INTERIM EECEIVEK. 5. The court may, if it is shown to be necessary for the protection of the estate, at any time after the presentation of a bankruptcy petition, and b^ore a receiving order is made, appoint an authorized trustee as interim receiver of the property of the debtor, or of any part thereof, and direct him to take immediate possession thereof or of any part thereof. TRUSTEE TJNDEB EECEIVING OEDEB. 6. (1) On the making of a receiving order the trustee shall be thereby constituted receiver of the property of the debtor and thereafter, except as directed by this Act, no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings unless with the leave of the court and on such terms as the court may impose. But this section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with it if this section had not been passed. (2) The court may constitute as such receiver the trustee named in the petition or some other authorized trustee acting for or within the same bankruptcy district as such named trustee, having regard as far as the court deems just to the wislies of the creditors as proved by any sufficient evidence. (3) On a receiving order being made against a debtor the property of the debtor shall forthwith pass to and vest in the trustee named therein and in any case of change of trustee, shall pass from trustee to trustee, and shall vest in the trustee for the time being during his continuance in office, vfithout any conveyance, assignment, or transfer whatever. (4) The court, upon the application of the trustee or of a, creditor proceeding under authority of an ordinary resolution carried by the votes of a majority in number of the known creditors, and upon satisfactory proof that the affairs of the debtor can be more economically administered within another bankruptcy district or division, or for other Bufiicient cause, may at any time by order, transfer any proceedings under this Act, which are pending before it to another bankruptcy district or division wherein thereafter tney may be carried on as effectually as if therein commenced, or the court in which any sucli proceedings were commenced may of itself, for like cause upon satisfactory proof that such proceedings were commenced in good faith and not for the purpose of attempting to vest authority over the estate involved in any particular authorized trustee or in the authorized trustee acting for or within any bankruptcy district, and provided that such proceedings were commenced within the proyince of the debtor's locality, order that such proceedings be retained in the bankruptcy district or division in which they were commenced, although the court so ordering may not be the court in which the proceedings ought to have been commenced. STAY OP PBOCEEDINQS. 7. ( 1 ) The court may, at any time after the presentation of a bankruptcy petition against a debtor, order that any action, execution or other proceeding against the person or prop- erty of the debtor pending in any court other than the court having jurisdiction in bank- ruptcy shall stand stayed until the last mentioned court shall otherwise order, whereupon such action, execution or other proceeding shall stand stayed accordingly; and the court in which any such proceedings are pending may likewise, on proof that a bankruptcy petition has been presented against the debtor, stay such proceedings until the iirst mentioned court shall otherwise order. (2) On the making of a receiving order every such action, execution or other proceeding for the recovery of a debt provable in bankruptcy shall, subject to the provisions of iJie next preceding section as to the rights of secured creditors, stand stayed unless and until the court shall, on such terms as it may think just, otherwise order. 8. (1) The provisions of this Part of this Act shall not apply to wage-earners or to per- sons engaged solely in farming or the tillage of the soil. (2) Notwithstanding anything in this Part appearing, no act or omission of a debtor m respect of any debt which, — (a) was contracted or existed before the coming into operation of this Act; or (b) is or is evidenced by any judgment or negotiable or renewable instrument the cause or consideration whereof (whether or not such judgment or instrument is a renewal or one of several renewals, had or made, before or after the coming into force of this Act, pro- ceeding from the same cause or consideration) existed before the coming into operation of this Act; shall be deemed an available act of bankruptcy, nor shall any such debt be deemed sufficient to found the presentation of a bankruptcy petition, but It shall be prov- able in a.ny proceedings otherwise founded under this Part, and otherwise. Canadian Bankruptcy Act. 1571 PART II. Assignments and Compositions, assignments. 9. Any insolvent debtor whose liability to creditors, provable as debts under this Act, exceed five hundred dollars, may, at any time prior to the making of a receiving order against him, make to an authorized trustee appointed pursuant to section fourteen with authority in the locality of the debtor, an assignment of all his property for the general benefit of his creditors. An assignment so made is in this Act referred to as an " authorized assignment," and every assignment of his property other than an authorized assignment! made by an insolvent delbtor for the general benefit of his creditors shall be null and void. 10. Every authorized assignment shall be valid and sufficient if it is in the form pro- vided by General Rules or in words to the like effect; and an assignment so expressed shall, subject to the rights of secured creditors, vest in the trustee all the property of the assignor at the time of the assignment excepting such thereof as is held by the assignor in trust for any other person and such thereof as is, against the assignor, exempt from execution or seizure under legal process in accordance with the laws of the province within which the property is situate and within which the debtor resides. GENERAL PROVISIONS RELATING TO RECEIVING ORDERS AND ASSIGNMENTS. 11. (1) Every receiving order and every authorized assignment made in pursuance of this Act shall take precedence over, — (a) all attachments of debts by way of garnishment, unless the debt involved has been actually paid over to the garnishing creditor or his agent; and (b) all other attachments, executions or other process against property, except such thereof as have been completely executed by payment to the execution or other creditor ; but shall be subject to a lien for one only bill of costs, including sheriff's fees, which shall be payable to the garnishing, attaching or execution creditor who has first attached by way of garnishment or lodged with the sheriff an attachment, execution or other process against property. (2) An execution levied by seizure and sale on and of the goods of a debtor is not invalid by reason only of its beipg an act of bankruptcy, and a person who purchases tht goods in good faith under a sale by the sheriff shall, in all cases, acquire a good title to them against the authorized trustee. (3) If an authorized assignment or a receiving order has been made, the sheriff or other officer of any court having seized property of the debtor under execution or attach- ment or any other process, shall, upon receiving a copy of the assignment certified by the trustee named therein or of the receiving order certified by the registrar or other clerical officer of the court which made it, forthwith deliver to the trustee all the property of the execution debtor in his hands, upon payment by the trustee of his fees and charges antt the costs of the execution creditor who has a lien as in this section provided. If the sherifi" has sold the debtor's estate or any part thereof, he shall deliver to the trustee the moneys so realized by him less his fees and the said costs. (4) No receiving order or authorized assignment or other document made or executed under authority of this Act shall be within the operation of any legislative enactment now or at any time in force ?a any province of Canada relating to deeds, mortgages, judgments, bills of sale, chattel 'Mortgages, property or registration of documents affecting title to or liens or charges upon property real or personal, immovable or movable; 'but a notice in the prescribed form of such receiving order or assignment and of the first meeting of creditors required to be called pursuant to this Act shall, as soon as possible after the making or executing of such receiving order or assignment, be gazetted, and not less than six days prior to said meeting be published in a local newspaper. (5) Trtie registrars of the courts of bankruptcy, the registrars of all land title and land registration offices and the recorders or clerks of all courts and offices wherein any documents of title relating to property are, according to the provisions of this Act or of the law of a province, registered, recorded or filed, shall keep on file for public reference a copy of each issue of the Canada Gazette which contains any notice or notices, of, incident to or result- ing from receiving orders or authorized assignments referring to bankrupts or assignors who resided or carried on business in the province wherein the said courts or offices are situ- ated; and they shall also keep an index book wherein they shall enter alphabetically the name of each 'bankrupt and authorized assignor who resided or carried on business in suet province prior to the date of the receiving order or assignment and in respect of whose estate a notice may at any time hereafter appear in the said Canada Gazette. (6) A fee not exceeding twenty-five cents for each search and fifty cents for each certifi cate may be charged by such registrar, recorder or clerk. (7) The King's Printer, upon request of any person who is by this Act required to keep on file for public reference a copy of the Canada Gazette, shall regularly supply to such person, gratis, two copies of every issue of such Gazette. 15T2 Canadian Bankruptcy Act. (8) Every receiving order and every authorized assignment (or a true copy certiiied as to sucli order by the registrar or other clerical officer of the court virhich has made it, and as to such assignment certified by the trustee therein named) shall be registered or filed by or on behalf of the trustee in the proper office in every district, county or territory in which the whole or any part of any real or immovable property which the bankrupt or assignor owns or in which he has any interest or estate is situate. (3) The proper office in this section referred to shall be the land titles office, land regis- tration office, registry office or other office wherein, according to the law of the province, deeds or other documents of title to real or immovable property may or ought to be dq>os- ited, registered or filed. (10) From and after such registration or filing or tender thereof within the proper office to the registrar or other proper officer, such order or assignment shall have precedence of all certificates of judgment, judgments operating as hypothecs, executions and attachments against land (except such thereof as have 'been completely executed by payment) within such office or within the district, county or territory which is served by such office, but subject to a lien for the costs of registration and sheriff's fees, of such judgment, execution or attaching creditors as have registered or filed within such proper office their judgments, executions or attachments. (11) Every registrar or other officer for the time being in charge of such proper office to whom any trustee shall tender or cause to be tendered for registration or filing any such re- ceiving order or authorized assignment shall register or file the same according to the ordi- nary procedure for registering or filing within such office documents which evidence liens or charges against real or immovable property (and subject to payment of the like fees) if at the time of the tender of such document for such purpose there be tendered annexed thereto as part thereof an affidavit substantially in the following form: — " In the matter of The Bankruptcy Act." " Canada " Province of " I of in the province oJ , make oath and say — "That the hereunto annexed document is tendered for registration (or filing) unaer the " authority and direction of of " in the Province of a duly appointed trustee under " The Bankruptcy Act. " Sworn before me at " in the province of " this day of 19. .» (12) Such affidavit may be sworn before such registrar or other officer, or before a notary public or a, commissioner authorized to administer oaths for use in any of the courts of the province. (13) Any such registrar or other officer, who upon tender of any such receiving order or assignment or a copy thereof, certified as aforesaid, with the proper fees, and with the request that such document be registered or filed as aforesaid, shall refuse or omit to forth- with register or file the same in manner hereinbefore indicated or who shall omit or refuse to comply with provisions of subsection five of this section in so far as they are applicable to him, shall be guilty of an indictable oflfence punishable upon indictment or summary convic- tion by a fine not exceeding one thousand dollars or by imprisonment for a term not exceed- ing one year "or to both such fine and such imprisonment. (14) If the receiving order or authorized assignment is not registered or filed, or if notice of said receiving order or assignment- is not published within the time and in the manner prescribed by this section, an application may be made by any creditor or by the debtor to compel the registration or filing of the receiving order or assignment, or publication of such notice, and the judge shall make his order in that behalf and with or without costs, or upon the payment of costs by such person as he may, in his discretion, direct to pay the came; and such judge may, in his discretion, impose a penalty on the trustee lor any omission, neglect or refusal to so register, file, or publish as aforesaid, in an amount not exceeding the sum of five hundred dollars, and such penalty when imposed shall forthwith 6e paid by the trustee personally into and for the benefit of the estate of the debtoi-. (15) Saving and preserving the rights of innocent purchasers for value, neither the imnission to publish or register as aforesaid, nor any irregularity in the publication or regis- tration, shall invalidate the assignment or affect or prejudice the receiving order. (16) The provisions of paragraphs one and ten of this section shall not apply ttJ any judgment or certificate of judgment registered against real or immovaJble property in either of the provinces of Nova Scotia and New Brunswick prior to the coming into force of this 3ict, which became, under the laws of the province wherein it was registered, a chargBj lien br hypothec upon such real or immovable property. 12. No advantage shall be taken of or gained by any creditor through any mistake, defect Canadian Bankruptcy Act. 1S73 or imperfection in any authorized assignment or in any receiving order or proceedings con- nected therewith, if the same can be amended or corrected; and any mistake, defect or imperfection may be amended by the court. Such amendment may be made on application of the trustee or of any creditor on such notice being given to other parties concerned as the judge shall think reasonable; and the amendment when made shall have relation hack to the date of the assignment or petition in bankruptcy, but not so as to prejudice the rights of innocent purchasers, for value. COMPOSITION, EXTENSION OK SCHEME OF ARRANGEMENT. 13. (1) Where an insolvent debtor intends to make a proposal for, — (a) a composition in satisfaction of his debts; or, (b) an extension of time for payment thereof; or, (c) a scheme of arrangement of his affairs; he may, either before or after the making of a receiving order against him or the making of an authorized assignment by him, require in writing an authorized trustee to convene at the office of such trustee a meeting of such debtor's creditors, for the consideration of such, proposal. In case the convening of such meeting is required after a receiving order or assignment has been made only the trustee named in such order or assignment, or his suc- cessor, shall be authorized to convene it. , (2) The debtor shall at the time when he requires the convciiing of such meeting, or within such time as the trustee may then fix, lodge with the truste, — (a) a true statement of the debtor's affairs, including n list of his creditors, which list shall show the post office address of and the amount payable to each creditor, the whole statement being verified by the debtor by way of statutory declaration; and, (b) a proposal in writing signed by the debtor, embodying the terms of the proposed com- position, extension or scheme and setting out the particulars of any sureties or securities proposed. (3) The trustee shall, when so required, convene a meeting of creditors, and shall, at least ten days before the meeting, send to each creditor a notice of the time and place of such meeting and a copy of the debtor's statement of affairs and of his proposal ; if at such nicfctir.g a majority in number of creditors who hold two-thirds in r.morv.rt of the proved debts resolve to accept the proposal, either as made or as altered or modiliod at the request of the meeting, it shall be deemed to be duly accepted by the creditors, ar.d if approved by the court shall be binding on all the creditors. (4) Any creditor who has proved his debt may assent to or dissent from the proposal by a letter to that effect addressed postage prepaid and registered to the trustee, prior to the meeting, and any such assent or dissent if received fhy the trustee at or prior to the meeting shall have effect as if the creditor had been present and had voted at the meeting. (5) The trustee shall forthwith, if the proposal is accepted by the creditors, apply to the court to approve it. (6) If creditors who hold ten per cent or more in amount of proved debts request the examination of the debtor, the trustee shall cause him to be examined under oath before the registrar or other officer appointed for that purpose by Greneral Rules and his testimony, to be taken down in writing. The testimony, so taJien, may be read upon the hearing of the application for the approval cf the composition or scheme of arrangement. TTie court if not satisfied with such testimony as so taken, may direct that fhe debtor attend before the court for the purpose of further examination. (7) The court shall, before approving the proposal, hear a report of the trustee as to the terms thereof, and as to the conduct of the debtor, and any objections which may be made by or on behalf of any creditor. (8) If the court is of opinion that the terms of the proposal are not reasonable, or are not calculated to benefit the general body of creditors, or in any case in which the court is required, where the debtor is adjudged bankrupt, to refuse his discharge, the court shall refuse to approve the proposal. (9) If any facts are proved on proof of which the court would be required either to refuse, suspend or attach conditions to the debtor's discharge were he adjudged bankrupt, the court shall refuse to approve the proposal unless it provides reasonable security for pay- ment of not less than fifty cents on the dollar on all the unsecured debts provable against the debtor's estate. (10) In any other case the court (subject to the provisions of subsection sixteen of this section) may either approve or refuse to approve the proposal. (11) If the court approves the proposal, the approval may be testified by the seal of the court being attached to the instrument containing the terms of the proposed composition, extension or scheme, or by the terms being embodied in an order of the court. (12) A composition, extension or scheme accepted and approved in pursuance of thia section shall be binding on all the creditors so far as relates to any debts due to them from the debtor and provable under this Act, but shall rot release the debtor from any liability under a judgment against him in an action for seduction, or under an affiliation order or for 3574 Canadian Bankruptcy Act. alimony, or under a, judgment against him as co-respondent in a. matrimonial case or for necessaries of life or alimentary debts, except to such an extent and under such conditions as the court expressly orders in respect of such liability. (13) The provisions of a composition, extension or sclieme under this Act may be enforced by the court on application by any person interested, and any disobedience of an order of the court made on the application shall be deemed a contempt of court. ( 14) If default is made in payment of any instalment due in pursuance of the composition, extension or scheme, or if it appears to the court, on satisfactory evidence, that tlie com- position, extension or scheme cannot, in consequence of legal difficulties, or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the dmbtor, or that the approval of the court was obtained by fraud, the court may, if it thinks fit, on application by the trustee or by any creditor, adjudge the debtor bankrupt, make a receiving order against him and annul the composition, extension or scheme, but without prejudice to tiie validity of any sale, disposition or payment duly made, or thing duly done, under or in pursuance of the composition, extension or scheme. Where a debtor is adjudged bankrupt under this subsection, any debt provable in other respects, which has been contracted before the adjudication, shall be provable in the bankruptcy. (15) All parts of this Act shall, so far as the nature of the case and the terms of the composition, extension or scheme admit, apply thereto as if the terms " trustee," " bank- ruptcy," " bankrupt," " assignment," " authorized assignment," " assignor," " authorized assignor," " order " and " order of adjudication " included respectively a composition, exten- sion or scheme of arrangement, a compounding, extending or arranging debtor and an order approving the composition, extension or scheme. (16) No composition, extension or scheme shall be approved by the court which does not provide for the payment in priority to other debts of all debts directed to be so paid in the distribution of the property of a bankrupt or authorized assignor. (17) The acceptance by a creditor of a composition, extension or scheme shall not release any person who under this Act would not be released by an order of discharge if the debtor had been adjudged bankrupt. (18) Where a debtor has been adjudged bankrupt or has made an authorized assignment, and the court subsequently approves the composition, extension or scheme, it may make an order annulling the bankruptcy or authorized assignment and vesting the property of tiie debtor in him or in such other person as the court may appoint on such terms and subject to such conditions, if any, as the court may declare. (19) Notwithstanding the acceptance and approval of a composition, extension or scheme, it shall not be binding on any creditor so far as regards a debt or liability from which, under the provisions of this Act, the debtor would not be discharged by an order of dis- charge in bankruptcy, unless the creditor assents, ( as, for the purposes solely of proceedings relating to a composition, extension or scheme he may, notwithstanding any thing in this Act, so assent) to such composition, extension or scheme. PART III. Tbtjstees and Administration of Pbopbbtt. appointment of trustees. 14. (1) The Governor in Council may, upon application made to the Secretary of State of Canada, appoint sufficient fit and qualified persons to be trustees in bankruptcy and under authorized assignments and in proceedings by insolvent debtors to secure compositions, extensions and arrangements under this Act. (2) Every such trustee shall be appointed with authority limited territorially to the whole or part of some one or more bankruptcy districts or divisions but he shall, for the purpose of obtaining possession of, and realizing upon, the assets of a bankrupt or authorized assignor of whom he is trustee, have power to act as such anywhere. Trustees appointed pursuant to this section are in this Act referred to as " authorized trustees." (3) Every person who applies to be appointed an authorized trustee shall state in his application full particulars of his qualifications, ability and previous business experience. (4) No authorized trustee shall accept any assignment or trust or execute any duties under this Act unless and until he has given secvirily to the satisfaction of the Governor in Council, by bond or otherwise, executed to His Majesty as represented by such departmental officer as may be designated by the Governor in Council, for due accounting and for pay- ment over and transfer of all moneys and property received by him as such trustee. If the security required is provided in cash the trustee shall be entitled to be paid thereon such interest as may be prescribed by General Eules. (5) Such departmental officer shall be a special trustee for the creditors and for the estate. (6) The amount of such security shall not, at any time, be less than ten thousand dollars. Canadian Bankruptcy Act. 15T5 (7) The said bond shall be kept in force by the trustee until such time as the appoint- ment of the trustee is revoked or until he resign such appointment, and until the Governor in Council- is satisfied that all moneys and properties received by the trustee have been duly accounted for and paid over to the parties entitled thereto, -whereupon such bond shall be released and discharged. (8) Unless the creditors, either at the first meeting, or at a meeting convened by notice to all the known creditors, resolve to dispense with further security, the trustee shall give security by bond or otherwise to the r:~'~iv?.r of tbs court in the bankruptcy district or division of the debtor's locality, in an amount satisfactory to the registrar, for the due accounting and paymeiit over and transfer of rM moneys and properties received or to be received by him a3 such trustee in respect of the estate of such debtor, and such security shall be given within thirty days of the date of the receiving order or the making of the assignment. The expense incident to the furnishing of such security may be charged by the trustee to the estate of the debtor. (!)) Should the trustee be unable or fail to give the security required, in the manner and within the time hereinbefore provided, he shall within ten days from the expiration of the said thirty days, by notice in writing, convene a meeting of creditors for the, purpose ol appointing a new authorized trustee, and should he neglect or refuse to call such meeting, he shall 'be guilty of an offence and subject to the penalties provided by this Act. (10) In case the trustee fails to give the security provided by this section and a new trustee is not appointed by the creditors, the court may, on the application of any creditor, appoint from among the available authorized trustees a new trustee. 15. (1) A majority in number of the creditors who hold half or more in amount of the proved debts of twenty-five dollars or upwards may, at their discretion, at any meeting of creditors, substitute any other authorized trustee acting for or ■within the same bankruptcy district for the trustee named in the receiving order or to whom an authorized assignment has been made. (2) An authorized trustee may be removed and another substituteed or an additional authorized trustee may be appointed for cause, by the court. (3) When a new trustee is appointed or substituted, all the property and estate of the debtor shall fortIiv.dth vest in the new trustee without any conveyance or transfer, and he shall gazette a notice of the appointment or substitution and register an affidavit; of his appointment in the office of the registrar of the court from which the receiving order was issued, or in the case of an authorized assignment, in every ofiice in which the original assign- ment or copy or counterr)art thereof was lodged, registered or filed. Registration of such affidavit in any land registration district, land titles office, registry office or other land regis- tration of-lce, or lodging or filing such affidavit as aforesaid, shall have the same effect as the registration, lodging or filing of a conveyance or of a transfer to the new trustee. (4) The new trustee shall pay to the removed trustee, out of the funds of the estate, his proper remuneration and disbursements, which shall be ascertained as provided by section forty of this Act. (5) 'Ko authorized trustee shall be bound to accept an authorized assignment or to act as trustee in matters relating to assignments or receiving orders or to compositions, exten- sions, or arrangements by debtors, if, in his opinion, the realizable value of the property ot the debtor is not sufficient to provide the necessary disbursements and a reasonable remu- neration for the trustee, unless and un'Jl the trustee has been paid or tendered a sum sufficient to defray such disbursements and remuneration. OFFICIAL NAME. IS (1) The official name of an authorized trustee acting in bankruptcy or authorized assignment proceedings shall be " The Trustee of the Property of • • a Slnkrupt (or Authorized Assignor)" (inserting the name of the bankrupt or assignor), and bv that name the trustee may in any part of Canada or elsewhere hold property ot every "description, make contracts, sue or be sued, enter into any engagement binding on himself and his successors in office, and do all other acts necessary or expedient to be done in the execution of his office. ,; „ . , „. (21 The official name of an authorized trustee actmg with respect to proceedings b/ a. debtor for a composition of, or extension of time for the payment of his debts, or an arrangement of his affairs shall be " The Trustee acting in re the proposal of ■•.•••■■••;.••; arrangemeni- m (insert the name of the debtor) for a, composition of his debts or " arrangement of his affairs." DUTIES AND POWEES OF TBITSTEES. 17 ni The trustee shall, as soon as may be, take possession of the deeds books and documents of the debtor and all other parts of his property capalble of manual delivery ^9rThe trustee shall, in relation to and for the purpose of acquiring or retaining posses- tioL of tte property of the debtor, be in the same position as if he were a receiver of 1576 Canadian Bankruptcy Act. tlis property, appointed by the court, and the court may, on his application enforce such acquisition or retention accordingly. (3) Unless otherwise directed in writing by the inspectors, the trustee shall forthwith, on the making of a receiving order or execution of an authorized assignment, insure and keep insured in his official name until sold or disposed of by him all the insurable property of the debtor, to the full insurable value thereof, in insurance companies duly authorize! to carry on business in the province wherein the insured property is situate. (4) All insurance covering property of the debtor in force at the date of the making or such receiving order or execution of such assignment shall, immediately upon such maKlng or executing, and without any notice to the insurer or other action on the part of the trustee, and notwithstanding any statute or rule of law or contract or provision to a con- trary effect, become and be, in the event of loss suffered, payable to the trustee, as fully and effectually aa if the name of the trustee were written in the policy or contract of insur- ance as that of the insured, or as if no change of title or ownership had come about and Ihe trustee were the insured. 18. Subject to the provisions of this Act, an authorized trustee may do all or any of the following things: — (a) Give receipts for any money received by him, which receipts shall effectually discharge the person paying the money from all responsibility in respect of the application thereof; (b) Prove, rank, claim and draw a dividend in respect of any debt due to the debtor; (c) Exercise any powers the capacity to exercise which is vested in the trustee under this Act, and execute any powers of attorney, deeds and other instruments for the purpose of carrying into effect the provisions of this Act. 19. (1) Where any property of the debtor vesting in an authorized trustee consists of patented articles or goods which were sold to the debtor subject to any restrictions or limi- tations, the trustee shall not be bound by any such restrictions or limitations but may sell and dispose of any such patented articles, or goods as hereinbefore provided, free and clear of any such restrictions or limitations. (2) If the manufacturer or vendor of any such patented articles or goods objects to the disposition of them by the trustee as aforesaid and gives to tlie trustee notice in writiu^' of such abjection within five days after the date of the receiving order or authorized assign- ment, such manufacturer or vendor shall have the right to purchase such patented articles or goods at the invoice prices thereof, subject to any reasonable deduction for depreciation or deterioration. (3) Where the property of a bankrupt or authorized assignor comprises the copyright in any work or any interest in such copyright, and he is liable to pay to the author of the work royalties or a share of the profits in respect ' thereof, the trustee shall not be entitled to sell, or authorize the sale of, any copies of the work, or to perform or authorize the performance of the work, except on the terms of paying to the author such sums by way of royalty or share of the profits as would have been payable by the bankrupt or authorized assignor, nor shall he, without the consent of the autlior or of the court, be entitled to assign the right or transfer the interest or to grant any interest in the right by license, except upon terms which will secure to the author payments by way of royalty or share of the profits at a rate not less than that which the bankrupt or authorized assignor was liable to pay. 20. (1) The trustee may, with the permission in writing of the inspectors, do all or any of the following things: — (a) Sell all or any part of the property of the debtor '(including the goodwill of the business, if any, and the book debts due or growing due to 'the debtor ) , by public auction or private contract, with power to transfer the whole thereof to any person or company, or to sell the same in parcels; (b) Carry on the business of the debtor, so far as may be necessary for the beneficial wir.ding-up of the same; (c) Bring, institute, or defend any action or other legal proceeding relating to the prop- erty of the debtor; (d) Employ a solicitor or other agent to take any proceedings or do any business, which may be sanctioned by the inspectors; (e) Accept as the consideration for the sale of any property of the debtor a sum of money payable at a future time subject to such stipulations as to security and otherwise as the inspectors think fit; (f) Mortgage or pledge any part of the property of the debtor for the purpose of raising money for the payment of his debts ; (g) Refer_ any dispute to arbitration, compromise any debts, claims and liabilities, whether present or future, certain or contingent, liquidated or unliquidated, subsisting or supposed to subsist between the debtor and any person who may have incurred any liability to the debtor, on the receipt of such sums, payable at such times, and generally on such terms as may be agreed on; Canadian Bankbtjptcy Act. 1577 (h) Make such compromise or other arrangement as may be thought expedient wiUl creditors, or persons claiming to be creditors, in respect of any debts provable against the estate; (i) Make such compromise or other arrangement as may be thought expedient with respect to any claim arising out of or incidental to the property of the debtor, made or capable of being made on the trustee by any person or by the trustee on any person; (j) Divide in its existing form amongst the creditors, according to its es!.imated value, any property which from its peculiar nature or other special circumstances cannot be readily or advantageously sold. (2) The permission given for the purposes of this section shall not be a general permis- sion to do all or any of the above mentioned things but shall only be a permission to do any particular thing or things for which permission is sought in the specified case or cases. (3) (a) All sales of property made by the trustee shall vest in the purchaser all tlie legal and equitable estate of the debtor therein; (b) in the province of Quebec, if the sale has been made at public auction at the place prescribed and after advertisement as required for the sale of immovable property by sneriif, in the district or place where such immovable property is situate, the sale made by the trus- tee shall have the same effect as to mortgages, hypothecs, privileges or other real rights then existing thereon as if the same had been made by the sheriff in the said province under a writ of execution issued in the ordinary course, and the title conveyed by such sale in the said province shall have equal validity with a title created by sheriff's sale, and the con- veyance of the trustee shall have the same effect as a sheriff's deed in the said province. Such sale shall be subject to the contribution to the building and jury fund provided for in the case of sheriff's sales. In case of false bidding the same recourse as in case of sheriff's sale may be exercised against the false bidder in the manner prescribed by General Rules. 21. The trustee, with the permission in writing of the inspectors, may appoint the debtor himself to superintend the management of the property of the debtor or any part thereof, or carry on the trade (if any) of the debtor for the benefit of his creditors, and in any other respect to aid in administering the property in such manner and on such terms as the trustee may direct, and may, with, like permission, make from time to time such allow- ance as he may think just to the debtor out of his property for the support of the debtor and his family, or in consideration of his services, if he is engaged in winding-up his estate, but any such allowance may be reduced by the court. 22. (1) Where the trustee has seized or disposed of any property in the possession or on the premises of a debtor against whom a receiving order has 'been made or by whom an authorized assignment has been made, without notice of any claim by any person in respect of such property and it is thereafter made to appear that the property was not at the date of the making of said receiving order or assignment the property of the debtor, the trustee shall not be personally liable for any loss or damage arising from such seizure or disposal sustained by any person claiming such property, nor for the costs of any proceedings taken to establish a claim thereto, unless the court is of opinion that the trustee has been guilty of negligence in respect of the same. (2) Where any goods of a debtor against whom a receiving order has been made or by whom an authorized assignment has been made, are held by any person by way of pledge, pawn", or other security, it shall be lawful for the trustee, after giving notice in writing or his intention to do so, to inspect the goods, and, where such notice has been given, such per- son as aforesaid shall not be entitled to realize his security until he has given the trustee a reasonable opportunity of inspecting the goods and of exercising his right of redemption if he thinks fit to do so. 23. The authorized trustee of a bankrupt or assignor shall keep, in manner prescribed, proper books, in which he shall from time to time cause to be made entries or minutes of proceedings at meetings, and of such other matters as may be prescribed, and any creditor of the bankrupt or authorized assignor may, subject to the control of the court, personally or by his agent, inspect any such books. 24. ( 1 ) The authorized trustee of a bankrupt or assignor shall from time to time report, — (a) when required by the inspectors, to every creditor; and, (b) when required by any specific creditor, to such creditor, showing the condition of the debtor's estate, the moneys on hand, if any, and particulars of any property remaining unsold. The trustee shall be entitled to charge against the estate of the debtor, for the preparation and delivery of any such report, only his actual dis- bursements. (2) The authorized trustee of a bankrupt or assignor (but not the trustee under a com- position, extension or arrangement of a debtor's debts or affairs) shall promptly after their receipt or preparation mail to the Dominion Statistician, Department of Trade and Com- merce, Ottawa, a true copy of, — . j.,- . ^ (a) the notice referred to in subsection four of section eleven of this Act; (b) the statement referred to in subsection one of section fifty-four of this Act; .1578 Canadian Bankruptcy Act. (c) the iubstract of receipts and disbursements and the dividend sheet referred to in sub- section two of section thirty-seven of this Act; (d) every order made by the court upon the application for discharge of any bankrupt or authorized assignor; and, (e) the statement prepared by the trustee upon which a final dividend is declared. (3) Any person shall be entitled to examine and make copies of all or any of the docu- ments mentioned in subsection two hereof, which are in the possession of the trustee. ADMINISTBATION OF ESTATE. 25. The property of the debtor divisible amongst his creditors (in this Act referred to as the property of the debtor) shall not comprise the following particulars: — (i) Property held by the debtor in trust for any other person; (ii) Any property which as against the debtor is exempt from execution or seizure under legal process in accordance with the laws of the province within which the property is situate and within which the debtor resides. But it shall comprise the following particulars: — (a) All such property as may belong to or be vested in the debtor at the date of the presentation of any bankruptcy petition or at the date of the execution of an authorized assignment, and, in the case of a bankrupt, all property which may be acquired by or devolve on him before his discharge; and, (b) The capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of the property as might have been exercised by the debtor for his own benefit at the date of said petition or assignm'ent, or, in the ease of such bankrupt, before his discharge. 26. (1) No property of an estate of a bankrupt or of an authorized assignor shall be removed out of the province where such property was at the date when any receiving order or authorized assignment was made, without the consent in writing of the inspectors or the order of the court in which proceedings under this Act are being carried on or within the jurisdiction of which such property is situate. (2) The trustee shall deposit in a chartered bank the proceeds of the sale of any property of the estate of the bankrupt or the authorized assignor and all other moneys real- ized on account of any trust estate which he is administering under this Act and he shall not withdraw or remove therefrom, without the consent in writing of the inspectors "or the order of the court, any such moneys, except for payment of dividends and other charges incidental to the administration of the estate. (3) No trustee in a bankruptcy or under any authorized assignment or composition or scheme of arrangement shall pay any sums received by him as trustee into his private banking account. 27. If the trustee is directed to continue the business of a debtor he may incur obligations and make necessary or advisable advances, which obligations and advances so incurred or made shall be discharged or repaid to the trustee out of the assets of the debtor in priority to the claims of the creditors. Provided that, — (a) the creditors or inspectors may by resolution limit the amount of the obligations or advances which may be made or paid by the trustee in the continuance of the business or the period of time for the continuance of the business ; and, (b) the trustee shall not be under obligation to continue the business if in his opinion ^he realizable value of the assets of the debtor is insufficient to fully protect him against possible loss from so doing, and if the creditors, upon demand made by the trustee, neglect or refuse to secure him against such possible loss. 28. (1) The law of set-off shall apply to all claims made against the estate, and also to all actions instituted by the trustee for the recovery of debts due to the debtor in the same manner and to the same extent as if the debtor were plaintiff or defendant, as the case may be, except in so far as any claim for set-off shall be affected by the provisions of this Act respecting frauds or fraudulent preferences. (2) If any debtor who has made an authorized assignment or against whom a receiving order has been made, owes or owed debts both individually and as a member of one or more different co-partnerships, the claims shall rank first upon the estate by which the debts they represent were contracted, and shall only rank upon the other or others after all the creditors of such other estate or estates have been paid in full. SETTLEMENT AND PBEFERENCES. 29. (1) Any settlement of property hereafter made, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or incvimbrancer in good faith and for valuable consideration, or a settlement made on or for the wife or children ot the settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt or insolvent or makes an authorized assignment within one year after the date of the settlement, be void against the trustee in the bankruptcy or of the assignment and shall, if the settlor becomes bankrupt or insolvent or makes an Canadiaut Bankruptcy Act, ' 1579 aiaignment as aforesaid at any subsequent time within five years after the date of the settlement, be void against such trustee, unless the parties claiming under the settlement can prove that the settlor was, at the time of making the settlement, able to pay all his debts without the aid of the property comprised in the settlement, and that the interest of the settlor in such property passed to the trustee of such settlement on the execution thereof. (2) Any covenant or contract hereafter made by any person (hereinafter called " the settlor") in consideration of his or her marriage, either for the future payment of money for the ibenefit of the settlor's wife or husband or children, or for the future settlement on or for the settlor's wife or husband or children, of property, wherein the settlor had not at the date of the marriage any estate or interest, whether vested or contirigent, in possession or remainder, and not being money or property in right of the settlor's wife or husband, shall, if the settlor is adjudged bankrupt or makes an authorized assignment as aforesaid, and the covenant or contract has not been executed at the date of the petition in bank- ruptcy or said assignment, be void against such trustee except so far as it enables the persons entitled under the covenant or contract to claim for dividend in the settlor's bank- ruptcy or assignment proceedings under or in respect of the covenant or contract, but any such claim to dividend shall be postponed until all claims of the other creditors for valuable consideration in money or money's worth have been satisfied. (3) Any payment of money hereafter made (not being payment of premiums on a policy of life insurance in favour of the husband, wife, child or children of the settlor) or any transfer of property hereafter made by the settlor in pursuance of such a covenant or contract as aforesaid, shall be void against the trustee unless the person to whom the pay- ment or transfer was made prove either, — (a) that the payment or transfer was made more than six months before the date of the petition in bankruptcy or the date of the authorized assignment; or, (b) that at the date of the payment or transfer the settlor was able to pay all his debts without the aid of the money so paid or the property so transferred; or, (c) that the payment or transfer was made in pursuance of a covenant or contract to pay or transfer money or property expected to come to the settlor from or on the death of a particular person named in the covenant or contract ar.d v.'::^ made v/ithin three muiiths after the money or property came into the possession or under the control of the settlor ; but, in the event of any such payment or transfer being declared void, the person to whom it was made shall be entitled to claim for dividend under or in respect of the covenant or contract in like manner as it it had not been executed at the date of the said petition or assignment. (4) "Settlement" shall, for the purpose of this section, include any conveyance or transfer of property. 30. ( 1 ) Where a person engaged in any trade or business makes an assignment to any other person of his existing or future book debts, or any class or part thereof, and is subsequently adjudicated bankrupt or makes an authorized assignment, the assignment of book debts shall be void against the trustee in the bankruptcy, or under the authorized assignment, as regards any book debts which have not been paid at the date of the peti- tion in bankruptcy or of the authorized assignment, unless there has been compliance with the provisions of any statute which now is or at any time hereafter may be in force in the province wherein such person resides or is engaged in said trade or business as to registration, notice and publication of such assignments. Provided that nothing in this section shall have effect so as to rerfder void any assignment of book debts, due at the date of the assignment from specified debtors, or of debts growing due under specified contracts, or any assignment of book debts included in a transfer of a business made bona fide and for value, or in any authorized assignment. (2) For the purposes of this section "assignment" includes assignment by way of security and other charges on book debts. 31. (1) Every conveyance or transfer of property or charge thereon made, every pay- ment made, every obligation incurred, and every judicial proceeding taken or suffered by any insolvent person in favour of any creditor or of any person in trust for any creditor with a view of giving such creditor a preference over the other creditors shall, if the per- son making, incurring, taking, paying or suffering the same is adjudged bankrupt on a bankruptcy petition presented within three months after the date of making, incurring, taking, paying or suffering the same, or if he makes an authorized assignment, within three months after the date of the making, incurring, taking, praying or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy or under the authorized assignment. (2) If any such conveyance, transfer, payment, obligation or judicial proceeding has the effect of giving any creditor a preference over other creditors, or over any one or more of them, it shall be presumed prima facie to have been made, incurred, taken, paid or suffered with such view as aforesaid v/hether or not it was made voluntarily or under 1580 Canadian Bankruptcy Act. pressure and evidence of pressure shall not be receivable or avail to support such transac- tion. ( 3 1 For tlie purpose of this section, the expression " creditor " shall include a surety or guaiantor for the debt due to such creditor. 32. (1)- Subject to the foregoing provisions of this Act with respect to the effect of bankruptcy or of an authorized assignment on an execution, attachment or other process against property, and with respect to the avoidance of certain settlements and preferences, nothing in this Act shall invalidate, in the case of a banlcruptcy or an authorized assign- ment, — • (a) any. payment by the bankrupt or assignor to any of his creditors; (b) any payment or delivery to the bankrupt or assignor; _ (c) any conveyance or transfer by the bankrupt or assignor for adequate valuable con- sideration; (d) any contract, dealing, or transaction by or with the bankrupt or assignor for ade- quate valuable consideration; provided that both the following conditions are complied with, namely: — • (i) that the payment, delivery, conveyance, assignment, transfer, contract, dealing, or transaction, as the case may be, is in good faith and takes place before the date of the receiving order or authorized assignment; and, (ii) that the person {other than the debtor) to, by, or with whom the payment, delivery, conveyance, assignment, transfer, contract, dealing or transaction was made, executed or entered into, has not at the time of the payment, delivery, conveyance, assignment, transfer, contract, dealing or transaction, notice of any available act of bankruptcy committed hy the banlirupt or assignor before that time. (2) The expression "adequate valuable consideration" in paragraph (c) of this section means a consideration of fair and reasonable money value with relation to that of the property conveyed, assigned or transferred, and in paragraph (d) hereof means a con- sideration of fair and reasonable money value with relation to the known or reasonably to be anticipated benefits of the contract, dealing or transaction. 33. If a person in whose favour any settlement of property, conveyance or transfer which is void under this Act has been made, shall have sold, disposed of, realized on or collected the property so conveyed or transferred, or any part thereof, the money or other proceeds, whether further disposed of or not, shall be deemed the property of the trustee as such, who may recover such property or the vaUie thereof from the person in whose favour such settlement of property, conveyance or transfer was made or from any other person to whom the person in whose favour such settlement of property, conveyance or transfer was made may have resold, redisposed of or paid over the proceeds of such prop- erty as fully and effectually as the trustee could have recovered the same if it had not been so sold, disposed of, realized on or collected. Provided- that where any person to whom such property has been sold or disposed of shall have paid or given therefor in good faith fair and reasonable consideration he shall not be subject to the operation of this sec- tion but the trustee's recourse shall be solely against the person in whose favour such settlement was made for recovery of the consideration so paid or given or the value thereof; and furUicr provided tliat in case the consideration payable for or upon any sale or resale of such property or any part thereof shall remain unsatisfied the trustee shall be subro- gated to the rights of the vendor to compel payment or satisfaction. 34. (1) All transactions by a bankrupt with any person dealing with him iona fide and for value, in respect of property whether real or personal, acquired by the bankrupt after the making of a receiving order shall, if completed before any intervention by the trustee, be valid against the trusteee, and any estate or interest in such property which by virtue of this Act is vested in the trustee shall determine and pass in such manner and to such extent as may be required for giving effect to any such transaction. For the purposes of this subsection, the receipt of any money, security, or negotiable instrument, from or by the order or direction of a bankrupt by his banker, and any payment and any delivery of any security or negotiaible instrument made to, or by the order or direction of a bankrupt by his banker, shall be deemed to be a transaction by the bankrupt with such banker deal- ing with him for value. (2) Where a banker has ascertamed that a person having an account with him. is an undischarged bankrupt, then, unless the banker is satisfied that the account is on behalf of some other person, it shall be his duty forthwith to inform the trustee in the bankruptcy of the existence of the account, and thereafter he shall not make any payments out of the account, except under an order of the court or in accordance with instructions from the trustee in the bankruptcy, unless by the expiration of one month from the date of giving the information no instructions have been received from the trustee. 35. If at any time a creditor desires to cause any proceeding to he taken which, in his opinion, would be for the benefit of the bankrupt's or authorized assignor's estate, and the trustee, under the direction of the credit r.rs or inspectors, refuses or neglects to take such proceeding after being duly required to ao ljo, Cx:: creditor may, as of right, obtain from Canadian Bankruptcy Act. 1581' the court an order authorizing him to take proceedings in the name of the trustee, but at his own expense and risk, upon such terms and conditions as to indemnity to the trustee a» the court may prescribe, and thereupon any benefit derived from the proceedings shall, to the extent of his claim and full costs, belong exclusively to the creditor instituting the eame; but if, before such order is granted, the trustee sliall, with the approval of the inspec- tors, signify to the court his readiness to institute the proceedings for the benefit of the creditors, the order shall prescribe the time within which he shall do so, and in that case the advantage derived from the proceedings, if instituted within such time, shall belong to the estate. CONTRIBUTORIES TO INSOLVENT CORPOEATIONS. 36. (1) This section shall apply only to corporations which have become bankrupt or authorized assignors under this Act. (2) Every shareholder or member of a corporation or his representative shall be liable to contribute the amount unpaid on his shares of the capital or on his liability to the corpo- ration or to its members or creditors, as the case may be, under the Act, charter or instru- ment of incorporation of the company or otherwise; such shareholder or member will here- inafter be referred to as the " contributory." (3) The amount which the contributory is liable to contribute shall be deemed an asset of the corporation and a debt payable to the trustee forthwith upon the making of a receiving order against the corporation or on the execution by the corporation of an assign- ment for the general benefit of creditors. (4) If a shareholder has transferred his shares under circumstances which do not, by law, free him from liability in respect thereof, or if he is by law liable to the corporation or to its members or creditors, as the case may be, to an amount beyond the amount unpaid on his shares, he shall be deemed a member of the corporation for the purposes of this Act and shall be liable to contribute as aforesaid to the extent of his liabilities to the cor- poration or its members or creditors independently of this Act. (5) The amount which he is so liable to contribute shall be deemed an asset and a debt as aforesaid. (6) The tru3te2 may from time to time make demand on any contributory requiring him to pay to the trustee within thirty days from and after the date of the service of such demand, the amount for which such person is so liable to contribute or such portion thereof as the trustee deems necessary or expedient. Any such demand shall be deemed to have been properly served if delivered personally to the contributory or if a copy of the same is mailed in a registered prepaid letter addressed to the contributory at his last known address or at the address showii in or by the stock register or other books of the corporation. (7) If the contributory disputes liability, either in whole or in part, he shall within fif- teen days from the service of such demand give notice in writing to the trustee stating therein what portion of the demand is disputed and setting out his grounds of defence and he shiU not thereafter, unless by leave of the court, be permitted to plead in any action or proceeding brought against him by the trustee any grounds of defence of which he has not notified the trustee within said fifteen days. (8) If at the expiration of thirty days from the date of the service of such demand the contributory has not paid to the trustee the required amount, the trustee may take pro- ceedings against the contributory for the recovery thereof in the manner provided by Gen- eral Eules. (9) If the contributory considers the demand excessive or unjust he may apply to the court to reduce or disallow it. (10) If the court considers the demand to be grossly excessive or unjust it may order the trustee to pay personally the costs of any such application. (11) The court shall, on the application of any contributory, adjust the rights of the contributories among themselves without the intervention of the trustee and without expense to the estate. DIVIDENDS. 37. (1) SiJbject to the retention of such sums as may be necessary for the costs of admin- istration or otherwise, the trustee in bankruptcy or in authorized assignment proceedings shall, with all convenient speed, declare and distribute dividends amongst the creditors who have proved their debts. &'uch dividend as can be paid shall be so paid within six months from the date of the receiving order or assignment, 4nd earlier, if required by the inspectors. Thereafter a further dividend shall be paid whenever the trustee has sufficint moneys on hand to pay to the creditors ten per cent, and more frequently if required by the inspectors, until the estate is wound up and disposed of. (2) So soon as a final dividend sheet is prepared the trustee shall send by mail to every creditor ( 1 ) a notice of the fact, ( 2 ) an abstract of his receipts and expenditures as trustee which abstract shall indicate what amount of interest has been received by the trustee for moneys in his hands, and (3) a copy of the dividend sheet with notice thereon (a) of the claims objected to and (b) whether any reservation has been made therefor. After the expiry of fifteen days from the date of the mailing of the last of said notices, abstracts and 1582 CaNADIAIT BA:^TKRUPTCY AcT. dividend sheets, dividends on all debts not objected to up to the time of payment shall be paid. (3) Any creditor who has not proved his debt before the declaration of any dividend or dividends shall be entitled to be paid out of any money f^r the time being in llie hands of the trustee any dividend or dividends he may have failed to receive, bufore that money IS applied to the payment of any future dividend or dividends, but he shall not be entitltd to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein. (4) ^Miere one partner of a firm is adjudged bankrupt, or makes an authorized assign- ment, a creditor to whom the bankrupt is indebted jointly with the other partner of the lirm, or any of them, shall not receive any dividend out of the separate property of the bankrupt or authorized assignor until all the separate creditors have received the full {(mount of their respective debts. (5) Where joint and separate properties are beiiig administered, dividends of the joint and separate properties shall, on the application of any person interested, be declared together, and the expenses of and incident to such dividends shall be fairly apportioned by the trustee between the joint and separate properties, regard being had to work done lor r.:'.d the benefit received by each property. (6) When the trustee has realized all the property of the bankrupt, or authorized assignor, or so much thereof as can, in the joint opinion of himself and of the inspectors, be realized without needlessly protracting the trusteeship, he shall declare a final dividena, but before so doing he shall give notice by registered prepaid letter posted to the persons whose claims to be creditors have been notified to him, but not established to his satis- faction, that if they do not establish their claims to the satisfaction of the court within a time limited by the notice (which shall be within thirty days after the mailing or ser- vice of the notice), he will proceed to make a final dividend without regard to their claims. (7) After the expiration of the time so limited, or, if the court on application by any such claimant grants him further time for establishing his claim, then on the expiration of such further time, the property of the bankrupt, or authorized assignor shall be divided among the creditors who have proved their debts, without regard to the claims of any other persons. (8) Where a trustee has published the notice in the form and in the manner provided by section eleven, subsection four, of this Act, and has mailed prepaid and registered a circular to each creditor of the bankrupt or assignor of whom he has notice or knowledge as provided by section forty-two, subsection two, of this Act, such trustee shall at the expiration of thirty days from the date of the mailing of the last of the said circulars or from the date of last publication (whichever date should last occur) be at liberty to dis- tribute the proceeds of the estate of the bankrupt or assignor among the parties entitled thereto, having regard only to the claims of which the trustee has then notice, and shall not be liable for the proceeds of the estate or assets or any part thereof so distributed to any person of whose claim the trustee has not notice at the time of the distribution thereof. The trustee shall, not later than six months after he is at liberty pursuant to the provisions of this section to distribute the proceeds of the estate of the bankrupt or assignor, pay to the Receiver General of Canada all declared but unpaid dividends remaining in his hands, and shall at the same time provide a list of the names and post office addresses, so far as known, of the creditors entitled, showing the respective amounts payable to the respective creditors. The Receiver General shall, thereafter, upon application made, pay to any unpaid creditor his proper dividends as shown on this list, and such payment shall have effect as if made by the trustee. (9) No action for a dividend shall lie against the trustee but if the trustee refuses to pay any dividend, the court may, if it thinks fit, order him to pay it, and also to pay out of hia own money interest thereon for the time that it is withheld and the costs of the application. 38. The debtor shall be entitled to any surplus remaining after payment in full of his creditors with interest as by this Act provided and of the costs, charges and expenses of the proceedings under the bankruptcy petition or under the authorized assignment. APPEALS TROM DECISIONS OP TRUSTEE. 39. If the debtor or any of the creditors or any other person is aggrieved by any act '.r decision of the trustee, he may apply to the court and the court may confirm, reverse or modify the act or decision complained of and make such order in the premises as it thinks just. EEMUNEBATION OF TBTJSTEE. 40. (1) The trustee in bankruptcy or in any other proceedings under this Act shall receive such remuneration as shall be voted to him by the creditors at any general meeting. (2) Where the remuneration of the trustee has not been fixed under the next preceding subsection before the final dividend, the trustee may insert in the final dividend sheet and retain as his remuneration a sum not exceeding five per cent of the cash receipts, sub- ject to reduction by the court upon application of any creditor or of the debtor. Canadian Bankruptcy Act. 1583 (3) The remuneration of the trustee for all services shall not under any circumstances exceed five per cent of the cash receipts. (4) The disbursements of a trustee shall in all cases be taxed by the prescribed authority unless such taxation is waived either by creditors at a general meeting called prior to the declaration of the final dividend, or by the inspectors. DISCHABGE OF TRUSTEE. 41. (1) When the affairs of an estate have been fully administered, or, for sufficient cause, before full administration, an authorized trustee may, upon his own request, be discharged from further performance of all or any of his duties and obligations with respect to such estate. (2)' Such discharge may be granted by order of the court. (3) The grant of such discharge (whether full or partial) shall operate as a release of the special security provided pursuant to subsection eight of section fourteen. (4) The trustee shall finally dispose of all books and papers of the estate of the bank- rupt or authorized assignor in manner prescribed 'by General Kules. PAKT IV. ' Cbeditoes. meetings op creditors. 42. (1) As soon as may be after the making of a receiving order against a debtor or after the making of an authorized assignment by a debtor, a general meeting of creditors (in this Act referred to as the first meeting of creditors) shall be held for the purpose of considering the atiairs of the debtor and to appoint inspectors and give directions to the trustee with reference to the disposal of the estate. (2) It shall be the duty of the trustee to inform himself, by reference to the debtor and his records and otherwise, of the names and addresses of the creditors, and within five days from the date of the receiving order or assignment, to mail prepaid and registered to every creditor known to him a circular calling the first meeting of creditors at his office or some other convenient place to be named in the notice, for a date not later than fifteen days after the mailing of such notice. (3) The trustee may at any time call a meeting of creditors, and he shall do so when- ever requested in writing by twenty-five per cent in number of the known creditors holding twenty-five per cent in value of the known claims. But, after the first meeting he shall not be under obligation to give notice of any meeting to any creditors other than those who have proved their debts. (4) Meetings other than the first thereof shall be called by mailing or otherwise giving nv>tice of the time and place thereof to each creditor at the address given in his proof of claim. (5) At all meetings the chairman shall be such person as the meeting by resolution appoints, and he may with the consent of the meeting adjourn the meeting from time to time and from place to place. (6) A meeting shall not be competent to act for any purpose except the election of a chairman of and the adjournment of the meeting, unless there are present or represented at least three creditors, or all the creditors if their number does not exceed three. (7) If within half an hour from the time appointed for the meeting a quorum of credi- tors is not present or represented, the meeting shall be adjourned to the same day in the following week at the same time and place, or to such other day as the chairman may appoint, not being less than seven nor more than twenty-one days. (8) The chairman shall cause minutes of the proceedings at the meeting to be drawn up and fairly entered in a book kept for that purpose, and the minutes shall be signed by him or by the chairman of the next ensuing meeting. (9) A person shall not be entitled to vote as a creditor at the first or any other meeting of creditors unless he has duly proved a debt provable in bankruptcy or under an author- ized assignment to be due to him from the debtor, and the proof has been duly lodged with the trustee before the time appointed for the meeting. (10) For the purpose of voting, a secured creditor shall unless he surrenders his security, state in his proof the particulars of his security, the date when it was given, and the value at which be assesses it, and shall be entitled to vote only in respect of the balance (if any) due to him, after deducting the value of his security. (11) A creditor shall not vote in respect of any debt on or secured by a current bill of «xchange or promissory note held by him, unless he is willing to treat the liability to him thereon of every person who is liable thereon antecedently to the debtor, and against whom a receiving order has not been made, or by whom an authorized assignment has not been made, as a security in his hands, and to estimate the value thereof, and for the purpose of TOting, but not for the purposes of dividend, to deduct it from hia proof. 1584 Canadian Bankruptcy Act. (12) The chairman of a meeting shall have power to admit or reject a proof for the purpose of voting, but his decision shall be subject to appeal to the court. If he is in doubt whether the proof of a creditor should be admitted or rejected, he shall mark the proof as objected to, and shall allow the creditor to vote, subject to the vote being declared invalid in the event of the objection being sustained. (13) A creditor may vote either in person or by proxy deposited with the trustee at or before the meeting at which it is to be used. The trustee shall send to each creditor with the notice summoning the first meeting of creditors, a proxy in the form prescribed by General Rules; but neither the name of the trustee nor of any other person shall he printed or inserted in the proxy before it is so sent. A proxy shall not be invalid merely because it is in the form of a letter, telegram or cable. (14) Subject to the provisions of this Act, all questions at meeting of creditors shall be decided by resolution carried by the majority of votes, and for such purpose the votes of creditors shall be calculated as follows: — For every claim of or over twenty-five dollars and not exceeding two hundred dollars — one vote; For every claim of over two hundred dollars and not exceeding five hundred dollars — two votes; For every claim of over five hundred dollars and not exceeding one thousand dollars — three votes; For every additional one thousand dollars or fraction thereof- — one vote. (15) No person shall be entitled to vote on a claim acquired after the assignment unless the entire claim is acquired, but this shall not apply to persons acquiring notes, bills or other securities upon which they are liable. (16) A secured creditor shall not be entitled to vote at any meeting of creditors until he has proved his claim and valued his security as hereinafter provided. (17) The trustee, if a creditor or a proxy for a creditor, may vote as a creditor at any meeting of creditors, and, in addition, in case of a tie, shall have a casting vote, personally, as if he were a creditor holding a proved claim of twenty-five dollars. (18) A corporation may vote at meetings of creditors as if a natural person, by an authorized agent. (19) The vote of the trustee, or of his partner, clerk solicitor, or solicitor's clerk, either as creditor or as proxy for a creditor, shall not be reckoned in the majority required for passing any resolution aft'ecting the remuneration or conduct of the trustee. INSPECTORS. 43. ( 1 ) At the first or a, subsequent meeting the creditors shall appoint one or more, but not exceeding five, inspectors of the administration by the trustee of the estate of the debtor. (2) The powers of inspectors may be exercised by a majority of them. (3) The creditors may, at any meeting, revoke the appointment of any inspector and in such event or in case of the death, resignation, or absence from the province of an inspector, may appoint another in his stead. (4) Each inspector may be repaid his actual and necessary travelling expenses incurred in and about the performance of his duties, and may also be paid the following fees: — Estates with assets below SF.5.000 a fee of $2.00 per meeting Estates with assets from .$5,000 to $15.000 a fee of $3.00 per meeting Estates with assets from $15,000 to $30 000 a fee of $4.00 per meeting Estates with assets from $30,000 to $50,000 a fee of $5.00 per meeting Estates with assets from $50,000 to $100,000 a fee of $7.50 per meeting Estates with assets from $100,000 and over a fee of $10.00 per meeting (5) In the event of an equal division of opinion at a meeting of inspectors, tho opinion of any absent inspector shall be sought in order to resolve the difference, and in the case of a difference which cannot be so resolved it shall be resolved by the trustee, unless it concerns his personal conduct or interest. DEBTS PROVABLE. 44. ( 1 ) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise, or breach of trust, shall not be provable in bankruptcy or in pro- ceedings under an authorized assignment. (2) Save aa aforesaid, all debts and liabilities, present or future, to which the debtor is subject at the date of the receiving order or the making of the authorized assignment or to which he may become subject before his discharge by reason of any obligation incurred before the date of the receiving order or of the making of the authorized assignment, shall be deemed to be debts {vovable in bankruptcy or in proceedings under an authorized assignment. Ca'jadiau Bankruptcy Act. 1585 (3) The court shall value, at the time and in the summary manner prescribed by Gen- eral Rules, all contingent claims and all such claims for unliquidated damages as aro authorized by this section, and after, but not before, such valuation, every such claim shall for all purposes of this Act, be deemed a proved debt to the amount of its valuation. PKOOF OF DEBTS. 45. (1) Every creditor shall prove his debt as soon as may be after the making of a receiving order or after the date of an authorized assignment or as soon as possible after such creditor has received notice of meeting for the consideration of a composition, extension or scheme of arrangement. (2) A debt may be proved by delivering or sending through the post in a prepaid and registered letter to the trustee, a statutory declaration verifying the debt. (3) The statutory declaration may be made by the creditor himself or by some person authorized by or on behalf of the creditor. If made by a person so authorized, it shall state his authority and means of knowledge. (4) The statutory declaration shall contain or refer to a statement of account showing the particulars of the debt, and shall specify the vouchers, if any, by which the same can be substantiated. The trustee may at any time call for the production of the vouchers. (5) The statutory declaration shall state whether the creditor is or is not a secured creditor. ('3) Every creditor who has lodged a proof shall be entitled to see and examine the proofs of other creditors before the first meeting, and at all reasonable times. PROOF BY SECnBF,D CREDITORS. 46. (1) If a secured creditor realizes his security, he may prove for the balance due to him, after deducting the net amount realized. (Eng. Sch. 2 No. 10.) (2) If a secured creditor surrenders his security to the trustee for the general benefit of the creditors, he may prove for his whole debt. (Eng. Sch. 2 Ko. 11.) (3) If a secured creditor does not either realize or surrender his security, he shall within thirty days of the date of the receiving order, or of the making of the authorized assign- ment, or within such further time as may be allowed by the inspectors, or in case they shall refuse, then within such further time as may be allowed by the court, file with the trustee a statutory declaration stating therein full particulars of his security or securities, the date when each security was given, and the value at which he assesses each thereof. He shall be entitled to receive a dividend only in respect to the balance due to him after deducting the value so assesseed. (4) Where a security is so valued the trustee may at any time redeem it on payment to the creditor of the assessed value. (5) If the trustee is dissatisfied with the value at which a security is assessed, he may require that the property comprised in any security so valued be offered for sale at such times and on such terms and conditions as may be agreed on between the creditor and thei trustee, or as, in default of such agreement, the court may direct. If the sale be by public auction the creditor, or the trustee on behalf of the estate, may bid or purchase. (6) Notwithstanding subsections four and five of this section the creditor may at any time, by notice in writing, require the trustee to elect whether he will or will not exercise his power of redeeming the security or requiring it to be realized, and if the trustee does not, within one month after receiving the notice or such further time or times as the court may allow, signify in writing to the creditor his election to exercise the power, he shall not be entitled to exercise it; and the equity of redemption, or any other interest in the property comprised in the security which is vested in the trustee, shall vest in the creditor, and the amount of his debt shall be reduced by the amount at which the security has been valued. (7) Where a security has been realized as provided by this section, the net amount real- ized shall be paid to the secured creditor and shall be substituted for the amount at which he valued such security in his claim and shall be treated in all respects as an amended valuation by the secured creditor. The costs and expenses of any such sale shall be in the discretion of the court. (8) If the trustee has not elected to acquire the security as hereinbefore provided, a creditor may at any time within two months after filing his claim amend the valuation and proof on showing to the satisfaction of the trustee, or the court, that the valuation and proof were made lona fide on a mistaken estimate, or that the securitv has diminished or increased in value since its previous valuation; but every such amendment shall be made at the cost of the creditor, and upon such terms as the court shall order, unless the trustee shall allow the amendment without application to the court. (9) Where a valuation has been amended in accordance with the foregoing subsection, the creditor shall forthwith repay any surplus dividend which he may have received in excess of that to which he would have been entitled on the amended valuation, or, as the case may be, shall be entitled to be paid out of any money, for the time being availablei 100 158G Canadian Bankruptcy Act. for dividend, any dividend or share of dividend which he may have failed to receive hy reason of the inaccuracy of the original valuation, before that money is made applicablei to the payment of any future dividend, but he shall not be entitled to disturb the distribu- tion of any dividend declared before the date of the amendment. (10) If a secured creditor does not comply with the foregoing subsections he shall b& excluded from all share in any dividend. (11) Subject to the provisions of subsections five and six of this section, a creditor shall in no case receive more tlian one hundred cents in the dollar and interest as provided by this Act. PBOOF IN EESPECT OF DISTINCT CONTKACTS. 47. If a debtor was, at the date of the receiving order or authorized assignment, liable in respect of distinct contracts as a member of two or more distinct firms, or as a sole contractor, and also as member of a firm, the circumstance that the firms arc in vliole or in part composed of the same individuals, or that the sole contractor is also one of the joint contractors, shall not prevent proof in respect of the contracts, against the properties respectively liable on the contracts. BESTEIOTED CEEDITOES. 48. ( 1 ) Where a, married woman has been adjudged bankrupt or has made an authorized assignment, her husband shall not be entitled to claim any dividend as a creditor in respect of any money or other estate hereafter lent or entrusted by him to his wife for the pur- poses of her trade or business, or claim any wages, salary or compcnsai,ioa for work horo- after done or services hereafter rendered in connection with her trade or business, until all claims of the other creditors of his wife for valuable consideration in money or money's worth have been satisfied. (2) Where the husband of a married woman has been adjudged bankrupt or has made an authorized assignment, his wife shall not be entitled to claim any dividend as a. creditor in respect of any money or other estate hereafter lent or entrusted by her to her husband for the purposes of his trade or business, or claim any wages, salary or eompej\sation for work hej-eafter done or services hereafter rendered in connection with his trade or business, until all claims of the other creditors of her husband for valuable consideration in money or money's worth have been satisfied. (3) Where any person or firm has been adjudged bankrupt or has made an authorized assignment, any father, son, daughter, mother, brother, sister, uncle or aunt of any sucli person or of any member of said firm shall not be entitled to claim by way of dividend or otherwise from the trustee any wages, salary or compensation for work hereafter done or services hereafter rendered to said person or firm exceeding an amount equal to three months' wages, salary or compensation, until all claims of the otlier creditors of said per- son or firm for valuable consideration in money or money's worth have been satisfied. (4) Where any corporation has been adjudged bankrupt or has made an authorized assign- ment no oificer, director or shareholder thereof shall be entitled to claim by way of dividend or otherwise from the trustee any wages, salary or compensation for work hereafter done or services hereafter rendered to such corporation exceeding an amount equal to three months' wages, salary or compensation, until all claims of the other creditors of said corporation for valuable consideration in money or money's worth have been satisfied. INTEEEST. 49. On any debt or sum certain, payable at a certain time or otherwise, whereon interest is not reserved or agreed for, and which is overdue at the date of the receiving order ur authorized assignment and provable under this Act, the creditor may prove for interest at a rate not exceeding six per cent per annum to the date of the order or authorized assignment from the time when the debt or sum was payable, if the debt or sum is payable by virtue of a written instrument at a certain time, and if payable otherwise, then from the time when a demand in writing has been made giving the debtor notice that interest will be claimed from the date of the demand until the time of payment. DEBTS PAYABLE AT A EUTUEE TIME. 50. A creditor may prove for a debt not paj'able at the date of the receiving order or of the authorized assignment as if it were payable presently and may receive dividends equally with the other creditors, deducting only thereout a rebate of interest at the rate of six per ctnt per annum computed from the declaration of a dividend to the time wlien the debt would have become payable according to the terms on which it was contracted. PBIOEITT OF CLAIMS. 51. (1) Subject to the provisions of the next succeeding section as to rent, in the distri- bution of the property of the bankrupt or authorized assignor, there shall be paid, in the following order of priority, — Firstly, The fees and expenses of the trustee; Canadian Bankruptcy Act. 1587 Secondly, The costs of the execution creditor (including sheriflE's fees and disbursements) coming within the provisions of section eleven, subsections one and ten; Thirdly. All wages, salaries, commission or compensation of any clerk, servant, travelling salesman, labourer or workman in respect of services rendered to the bankrupt or assignor during three months before the date of the receiving order or assignment. (2) Subject to the retention of such sums as may be necessary for the costs of admin- istration or otherwise, the foregoing debts shall be discharged forthwith so far as the property of the debtor is sufficient to meet them. (3) In the case of .partners the joint estate shall be applicable in the first instance in payment of their joint debts, and the separate estate of each partner shall be applicable in the first instance in payment of his separate debts. If there is a surplus of the separate estates it shall be dealt with as part of the joint estate. If there is a, surplus of the joint estate, it shall be dealt with as part of the respective separate estates in proportion to the right and interest of each partner in the joint estate. (4) Subject to the provisions of this Act, all debts proved in the bankruptcy or under an assignment shall be paid pari passti. (5) If there is any surplus after payment of the foregoing debts, it shall be applied in payment of interest from the date of the receiving order or assignment at the rate of six per cent per annum on all debts proved in the bankruptcy or under the assignment. (6) Nothing in this section shall interfere with the collection of any taxes, rates or assessments now or at any time hereafter payable by or levied or imposed upon the debtor or upon any property of the debtor under any law of the Dominion, or of the province wherein such property is situate, or in which the debtor resides, nor prejudice or affect any lien or charge in respect of such property created by any such laws. EIGHTS OF LANDLORDS. 52. ( 1 ) Where the bankrupt or authorized assignor is a tenant having goods or chattels on which the landlord has distrained, or would be entitled to distrain, for rent, the right of the landlord to distrain or realize his rent by distress shall cease from and after the date of the receiving order or authorized assignment and the trustee shall be entitled to immediate possession of all the property of the debtor, but in the distribution of the prop- erty of the bankrupt or assignor the trustee shall pay to the landlord in priority to all other debts, an amount not exceeding the value of the distrainable assets, and not exceeding three months' rent accrued due prior to the date of the receiving order or assignment, and the costs of distress, if any. (2) The landlord may prove as a general creditor for (i) all surplus rent accrued due at the date of said receiving order or assignment; and (ii) any accelerated rent to which he may be entitled under his lease, not exceeding an amount equal to three months' rent. (3) Except as aforesaid the landlord shall not be entitled to prove as a creditor for rent for any portion of the unexpired term of his lease, but the trustee shall pay to the land- lord for the period during which he actually occupies the leased prem.ises from and after the date of the receiving order or assignment, a rental calculated on the basis of said lease. (4) In case of continued occupation by the trustee of the leased premises for the pur- poses of the trust estate any payment of accelerated rent made to the landlord shall be credited to the occupation of the trustee. (5) Notwithstanding any provision or stipulation in any lease or agreement, where a receiving order or an authorized assignment has been made, the trustee may within one month from the date of any such receiving order or assignment, by notice in writing signed by him given to the landlord, elect to retain the premises occupied by the bankrupt or assignor at the time of the receiving order or assignment for the unexpired term of any lease under which such premises were held or for such portion of the term as he shall see fit, upon the terms of the lease and subject to payment of the rent therefor provided by such lease or agreement, or he may disclaim the lease or agreement. Should the trustee not give such notice within the time hereinbefore provided, he shall be deemed to have dis- claimed the lease or agreement. (6) If the trustee so elects to retain such premises for such unexpired term or portion thereof and the provisions of the lease do not preclude the lessee from assigning the term or subletting the premises the trustee shall have power to assign or sublet for the unex- pired term. (7) The entry into possession of the premises by the trustee during the said period of one month shall not be deemed to be evidence of an intention on the part of the trustee to elect to retain the premises nor affect his right to disclaim the lease or agreement. DISALLOWANCE OF CLAIMS. 53. (1) The trustee shall examine every proof and the grounds of the debt, and may require further evidence in support of it. If he considers the claimant is not entitled tO' rank on the estate, or not entitled to rank for the full amount ol his claim, or if directed by a resolution passed at any meeting of creditors or inspectors, he may disallow the claim 1588 Canadian Bankruptcy Act. in whole or in part, and in such case shall give to the claimant a notice of disallowance. Ihe said notice may be given either by serving the claimant with a copy thereof personally or by mailing such copy in a registered prepaid letter, addressed to the claimant at his last-known address, or at the address shown in or by the claimant's proof. Such disal- lowance shall be final and conclusive unless within thirty days after the service or mailing of the said notice or such further time as the court may on application made within the same thirty days allow, the claimant appeals to the court in accordance with General Rules from the trustee's decision. (2) The court may also expunge or reduce a proof upon the application of a creditor or of the debtor, if the trustee declines to interfere in the matter. PART V. Dbbtoes. duties of debtobs. 54. ( 1 ) Whero a receiving order or an authorized assignment is made, the bankrupt or assignor shall make out and submit to the trustee a statement of and in relation to his affairs in the prescribed form verified by affidavit and showing the particulars of the debtor's assets, debts, and liabilities, the names, residences and occupations of his creditors, the securities held by them respectively, the dates when the securities were respectivly given and such further or other information as may be prescribed or as the trustee may require. Such statement shall be submitted within seven days from the date of the receiving order or assignment, but the court may, for special reasons, extend the time. (2) Any person stating himself in writing to be a creditor of the bankrupt or assignor, may personally or by agent inspect the statement at all reasonable times and take any copy thereof or extract therefrom, but any person untruthfully so stating himself to be a creditor shall be guilty of a contempt of court, and shall be punishable accordingly on the application of the trustee. (3) Every debtor against whom a receiving order is made and every assignor who makes an authorized assignment shall, unless prevented by siclfness or other sufficient cause, attend the first meeting of his creditors, and shall submit to such examination and give such infor- mation as the meeting may require. (4) He shall give such inventory of his property, such list of his creditors and debtors, and of the debts due to and from them respectively, submit to such examination in respect of his property or his creditors, attend such other meetings of his creditors, wait at such times on the trustee, execute such powers of attorney, conveyances, deeds, and instruments, and, generally, do all such acts and things in relation to his property and the distribution of the proceeds amongst his creditors, as may be reasonably required by the trustee, or may be prescribed by General Rules, or may be directed by the court by any special order or orders made in reference to any particular case, or made on the occasion of any special application by the trustee, or any creditor or person interested. (5) He shall aid, to the utmost of his power, in the realization of his property and the distribution of the proceeds among his creditors. (6) If a debtor wilfully fails to perform the duties imposed on him by this section, or to deliver up possession of any part of his property which is divisible amongst his creditors under this Act and which is for the time being in his possession or under his control, to the trustee, or to any person authorized by tlie court to take possession of it, he shall, in addition to any other punishment to which he may be subject, be guilty of a contempt of court, and may be punished accordingly. ARREST OF DEBTORS. 55. { 1 ) The court may, by warrant addressed to any constable or prescribed officer of the court, cause a debtor to be arrested, and any books, papers, money and goods in his pos- session to be seized, and him and them to be safely kept as prescribed until such time as the court may order under the following circumstances: — (a) If, after the presentation of a bankruptcy petition against him, it appears to the court that there is probable reason for believing that he has absconded, or is about to abscond from Canada, with a view of avoiding payment of the debt in respect of which the bankruptcy petition was filed, or of avoiding appearance to any such petition, or of avoid- ing examination in respect of his affairs or of otherwise avoiding, delaying or embarrassing proceedings in bankruptcy against him; (b) If, after presentation of a bankruptcy petition against him or after an authorized assignment has been made by him, it apjpears to the court that there is probable cause for believing that he is about to remove his goods with a view of preventing or delaying possession being taken of them by the trustee, or that there is probable ground for believing that he has concealed or is about to conceal or destroy any of his goods or any books, documents or writings which might be of use to the trustee or to his creditors in the course of the bankruptcy or authorized assignment proceedings; CAiirADiAiir Bankeuptcy Act. 158£| , (c) If, after service of a bankruptcy petition on him or after he makes an authorized assignment, he removes any goods in his possession above the value of twenty-five dollars without the leave of the trustee. (2) No payment or composition made or security given after arrest made under this section shall be exempt from the provisions of this Act relating to fraudulent preferences. EXAMINATION OF DEBTORS AND OTHERS. 56. (1) Where a receiving order or an authorized assignment has been made, the trustee, upon ordinary resolution passed by the creditors present or represented at a meeting regu- larly called, or upon the written request or resolution of a majority of the inspectors of the estate, may, without an order, examine under oath before the registrar of the court or other prescribed person, the debtor or any person who is or has been an agent, clerk, servant, officer, director or employee of the debtor, respecting the debtor, his dealings or property, and, in the case of a bankrupt, as to any property, acquired or disposed of by him subsequently to the date of the receiving order. (2) If the debtor, or any person liable to be examined as provided by the preceding sub- section, is served with an appointment or summons to attend for examination and is paid or tendered the proper conduct money and witness fees, but refuses or neglects to attend as required by such appointment or summons, or, if attending, refuses to make satisfac- tory answers to any questions asked him or refuses to produce any book, document or other paper, having no lawful impediment made known to the examiner at the time of his sitting for such examination and allowed by him, the court may, by warrant, cause him to be apprehended and brought up for examination, and may order him to be committed to the common gaol of the judicial district in which he resides for any term not exceeding twelve months. (3) The amount of conduct money and witness fee shall be fixed by General Rules. (4) If any person lia;j, or is believed or suspected to have, in his possession or power any of the property of the debtor, or any book, document or paper of any kind relating in whole or in part to the debtor, his dealings or property, or shewing that such person is indebted to the debtor, such person may, upon ordinary resolution passed by the creditors present or represented at a regularly called meetir-g (exclusive of sueli person, if he is a creditor), or upon the written request or resolution of the majority of the inspectors of the estate, be required by the trustee to produce such book, document or paper for the information of such trustee, or to deliver over to him any such property of the debtor. (a) If such person fails to produce such book, document or other paper, or to deliver over such property, within four days of his being served with a copy of the said resolution and ^ request of the trustee in that behalf, or if the trustee or the majority of the inspectors is cr are not satisfied that full production or delivery has been made, the trustee may, without an order, examine the s?,id person before the registrar of the court or other pre- scribed person touching any such property, book or document or other paper which he is supposed to hive received. (6) Any such person may be compelled to attend and testify, and to produce upon his examination any book, document or other paper which under this section he is liable to produce, in the same manner and subject to the same rules of examination, and the same consequences of neglecting to attend or refusing to disclose the matters in respect of which lie may be examined, as is provided by subsections two and three of this section. (7) If any person on such examination admits that he is indebted to the debtor, the court may, on the application of the trustee, order him to pay to the trustee, at such time and in such manner as to the court seems expedient, the amount admitted, or any part thereof, either in full discharge of the whole amount in question or not, as the court thinks fit, with or without costs of the examination. (8) If any person on such examination admits that he has in his possession any property belonging to the debtor, the codi-t may, on the application of the trustee, order him to deliver to the trustee such property, or any part thereof, at such time, and in such man- ner, and on such terms, as to the court may seem just. 57. Where a receiving order is made against a debtor or where a debtor makes an authorized assignment, the court, on the application of the trustee, may from time to time order that for such time, not exceeding three months, as the court thinks fit, post letters, post packets and telegrams addressed to the debtor at any place or places mentioned in the order for re-direction, shall be re-directed, sent or delivered by the Postmaster General or the officers acting under him, or by the various telegraph and cable systems, govern- ment and other, operating in Canada, or by the operators thereof, to the trustee, and the same shall be done accordingly. DiaCHAKGE OF BANKRTTPT OE ASSI6N0B. 58. (1) Any debtor may, at any time after being adjudged bankrupt or making an authorized assignment, apply to the court for an order of discharge, to become effective not eooner than three months next after the date of his being adjudged bankrupt or of his mak- ing such assignment, and the court shall appoint a day for hearing the application. 1590 Canadian Bankeitptcy Act. (2) A bankrupt or authorized assignor intending to apply for his discharge shall pro- duce to the registrar of the court a certificate from the trustee specifying the names and addresses of his creditors of whom the trustee haa notice (whether they have proved or not) and it shall be the duty of the trustee to furnish such certificate upon request therefor by the bankrupt or authorized assignor. The registrar shall, not less than twenty-eight days before the day appointed for hearing the application, give to the trustee notice of the appli- cation and of the time and place of the hearing of it, and the trustee shall not less than fourteen days before the day appointed for hearing the application give to each creditor who has proved his debt like notice. (3) The trustee shall file with the registrar of the court, at least three days before the day appointed for hearing the application, his report as to the conduct and affairs of the bankrupt or assignor (including a report as to the conduct of the bankrupt or assignor during the proceedings under his bankruptcy or assignment ) . If the bankrupt or assignor has been examined, the trustee shall also file such examination, and shall report to the court any fact, matter or circumstance which would, under this Act, justify the court in refusing an unconditional order of discharge. (4) On the hearing of the application the court shall take into consideration the report of the trustee, and may either grant or refuse an absolute order of discharge or suspend the operation of the order for a specified time, or grant an order of discharge subject to any conditions with respect to any earnings or income which may afterwards become due to the bankrupt or authorized assignor or with respect to his after-acquired property. (5) The court shall refuse the discharge in all cases where the bankrupt or authorized assignor has committed any offence under this Act or any offence connected with his bank- ruptcy or assignment or the proceedings thereunder, unless for special reasons the court otherwise determines, and shall on proof of any of the facts mentioned in the next succeed- ing section, either, — (a) refuse the discharge; or, (b) suspend the discharge for a period of not less than two years: provided that the period may be less than two years if the only fact proved of those hereinafter mentioned is that his assets are not of a value equal to fifty cents in the dollar on the amount of his unsecured liabilities; or, (c) suspend the discharge until a dividend of not less than fifty cents in the dollar has been paid to the creditors; or, (d) require the bankrupt or assignor, as a, condition of his discharge, to consent to judgment being entered against him by the trustee for any balance or part of any balance of the debts provable under the bankruptcy or assignment which is- not satisfied at the date of the discharge, such balance or part of any balance of the debts to be paid out of the future earnings or after-acquired property of the bankrupt or assignor in such manner and subject to such conditions as the court may direct; but execution shall not be issued on the judgment without leave of the court, which leave may be given on proof that the bankrupt or assignor has, since his discharge, acquired property or income available towards payment of his debts. Provided that, if at any time after the expiration of one year from the date of any order made under this section the bankrupt or assignor satisfies the court that there is no rea- sonable probability of his being in a position to comply with the terms of such order 'i,he court may modify the terms of the order, or of any substituted order, in such manner and upon such conditions as it may think fit. 59. The facts referred to in the next preceding section are, — (a) that the assets of the bankrupt or assignor are not of a value equal to fifty cents in the dollar on the amount of his unsecured liabilities, unless he satisfies the court that the tact that the assets are not of a value equal to fifty cents in the dollar on the amount of his unsecured liabilities has arisen from circumstances for which he cannot justly be held responsible; (b) that the bankrupt or assignor has omitted to keep such books of account as are usual and proper in the business carried on by him and as sufliciently disclose his business transactions and financial position within the three years immediately preceding his bank- ruptcy or the making of the assignment; (c) that the bankrupt or assignor has continued to trade after knowing himself to be insolvent ; (d) that the bankrupt or assignor has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet his liabilities; (e) that the bankrupt or assignor has brought on, or contributed to, his bankruptcy or assignment by rash and hazardous speculations, or by unjustifiable extravagance in living, or by gambling, or by culpable neglect of his business affairs; (f) that the bankrupt or assignor has put any of his creditors to unnecessary expense by a frivolous or vexlatious defence to any action properly brought against him; (g) that the bankrupt or assignor has, within three months preceding the date of the receiving order or assignment, incurred unjustifiable expense 'by bringing a frivolous or vexatious action; Canadian Bankruptcy Act. 1591 (h) that the bankrupt or assignor has, within three months preceding the date of the receiving order or of the making of the assignment, when unable to pay his debts as they became due, given an undue preference to any of his creditors; (i) that the bankrupt or assignor has, within three months preceding the date of the receiving order or of the making of the assignment, incurred liabilities with a view of making his assets equal to fifty cents in the dollar on the amount of his imsecured liabilities ; (j) that the bankrupt or assignor has, on any previous occasion, been adjudged bank- rupt or has made an authorized assignment or made a composition, extension or arrange- ment with his creditors; (k) that the bankrupt or assignor has been guilty of any fraud or fraudulent breach of trust. 60. ( 1 ) For the purposes of the preceding section the assets of a bankrupt or authorized assignor shall be deemed of a value equal to fifty cents' in the dollar on the amount of his unsecured liabilities when the court is satisfied that the property of the bankrupt or assignor has realized, or is lilcely to realize, or with due care in realization, might have realized an amount equal to fifty cents in the dollar on his unsecured liabilities, and a report by the trustee shall be prima facie evidence of the amount of such liabilities. (2) For the purposes of this and the next preceding sections the report of the trustee shall be prima facie evidence of the statements therein contained. (3) Any statutory disqualification on account of bankruptcy shall cease if and when the bankrupt Obtains from the court his discharge with a certificate to the effect that the bankruptcy was caused by misfortune without any misconduct on his part. The court may, if it thinks fit, grant such a certificate, and a refusal to grant such a certificate shall be subject to appeal. (4) At the hearing of the application, the court may read the examination of the bank- rupt or assignor, and may put such further questions to him and receive such evidence as it may think fit. (5) The trustee, the debtor and any creditor may attend and be heard in person or by counsel. (6) The powers of suspending and of attaching conditions to the discharge of a bankrupt or authorized assignor may be exercised concurrently. (7) In either of the following cases, that is to say: (a) In the case of a settlement made before and in consideration of marriage where the settlor is not at the time of making the settlement able to pay all his debts without the aid of the property comprised in the settlement; or, (b) In the case of any covenant or contract made in consideration of marriage for the future settlement on or for the settlor's wife or children of any money or property wherein he had not at the date of his marriage any estate or interest ( not being money or property of or in right of his wife) ; if the settlor is adjudged bankrupt or makes an authorized assignment or compounds or arranges with his creditors, and it appears to the court that such settlement, covenant or contract was made in order to defeat or delay creditors, or was unjustifiable having regard to the state of the settlor's affairs at the time when it was made, the court may refuse or suspend an order of discharge or grant an order subject to conditions, or refuse to approve a composition or arrangement, as the case may be, in like manner as in cases where the debtor has been guilty of fraud. 61. (1) An order of discharge shall not release the bankrupt or authorized assignor, — (a) from any debt on a recognizance nor from any debt with which the bankrupt or assignor may be chargeable at the suit of the Crown or of any person for any offence against a statute relating to any branch of the public revenue, or at the suit of the sheriff or other public officer on a bail bond entered into for the appearance of any person prosecuted for any such offence, and he shall not be discharged from such excepted debts unless an order in council proceeding from the Crown in the proper right is filed in court consenting to his being discharged therefrom; or, (b) from any debt or liability incurred by means of any fraud or fraudulent breach of irust to which he was party, nor from any debt or liability whereof he has obtained for- bearance by any fraud to which he was a party; or, (c) from any liability under a judgment against him in an action for seduction, or imder an affiliation order, or for alimony or under a judgment against him as a co-respondent in a matrimonial case, except to such an extent and under such conditions as the court expressly orders in respect of such liability; or, (d) from any debt or liability for necessaries of life, and the court may make such order for payment thereof as it deems just or expedient. (2) An order of discharge shall release the bankrupt or assignor from all other debts provable in bankruptcy or under an authorized assignment. (3) An order of discharge shall not release any person who at the date of the receiving order or assignment was a partner or co-trustee with the bankrupt or authorized lAsignor 1592 Canadian Bankruptcy Act, or was jointly bound or had made any joint contract with him, or any person who was surety or in the nature of a surety for him. (4) An order of discharge shall be conclusive evidence of the bankruptcy, and of the validity of the proceedings therein, and in any proceedings that may be instituted against a bankrupt who has obtained an order of discharge in respect of any debt from which he is released by the order, the bankrupt may plead that the cause of action occurred before his discharge. (5) Notice of the order of discharge of a bankrupt or authorized assignor shall be forth- with gazetted, 62. (1) Where, in the opinion of the court, a debtor ought not to have been adjudged bankrupt, or where it is proved to the satisfaction of the court that the debts of the bank- rupt are paid in full, the court may, on the application of any person interested, by order annul the adjudication. (2) Where an adjudication is annulled under this section, all sales and dispositions of property and payments duly made, and all acta theretofore done by the trustee, or other person acting under his authority, or by the court, shall be valid, but the property of the debtor who was adjudged bankrupt shall vest in such person ag the court may appoint, or, in default of any such appointment, revert to the debtor for all his estate or interest therein on such terms and subject to such conditions, if any, as the court may declare by order. (3) Notice of the order annulling an adjudication shall be forthwith gazetted and pub- lished in a local paper. (4) For the purposes of this section any debt disputed by a debtor shall be considered as paid in full if the debtor enters into a bond, in such sum and with such sureties as the court approves, to pay the amount to be recovered in any proceeding for the recovery of or concerning the debt, with costs, and any debt due to a creditor who cannot be found or cannot be identified shall be considered as paid in full if paid into court. PART VI. Courts and Pkocedure. jueisdiction. 63. ( 1 ) The following named courts are constituted Courts of Bankruptcy and invested within their territorial limits as now established, or as these may be hereafter changed, with such jurisdiction at law and in equity as ■will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by ths Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers: — ( a ) In the provinces of Alberta, British Columbia, Nova Scotia, Ontario and Prince Edward Island, the Supreme Court of the province ; (b) In the provinces of Manitoba and S.".skatchewan, the Court' of King's Bench of the province ; (c) In the Province of New Brunswick, the King's Bench Division of the Stipreme Court of the province; (d) In the province of Quebec, the Superior Court of the province; and, (e) In the Yukon Territory, the Territorial Court of the Yukon Territory. (2) Subject to the provisions of this Act and to General Eules, the judge of the court exercising jurisdiction in bankruptcy or in authorized assignment proceedings may exercise in chambers the whole or any part of his jurisdiction. (3) The courts in this subsection named are constituted Appeal Courts of Bankruptcy, and, subject to the provisions of this Act with respect to appeals, are invested with powt'T and jurisdiction to make or render an appeal asserted, heard and decided according to their ordinary procedure, except as varied by Gteneral Eules, the order or decision which ought to have been made or rendered by the court appealed from. All appeals asserted under authority of this Act shall be made, — (a) In the provinces of Alberta, Nova Scotia and Prince Edward Island, to the Supreme Court in bwnc of the province; (b) In the provinces of British Columbia, Manitoba and Saskatchewan, to the Court of Appeal of the province; (c) In the province of Ontario, to the Appellate Division of the Supreme Court of the province ; (d) In the province of New Brunswick, to the Appeal Division of the Supreme Court of the province; (e) In the province of Quebec, to the Appeal side of the Court of King's Bench; (f ) In the Yukon Territory, to the Court of Appeal of the province of British Columbia. Canadiait Bankruptcy Act. 1593 SITTINGS AND DISTEIBUTION OF BUSINESS OF COURTS. 64. (1) The courts having jurisdiction in bankruptcy under this Act shall not be subject to be restrained in the execution of their powers hereunder by the order of any other court. (2) Periodical sittings for the transaction of the business of such courts shall be held at such times and places and at such intervals as each of such courts shall for itself pre- scribe. (3) Except as otherwise provided by this Act, all the powers and jurisdiction in bank- ruptcy and otherwise conferred by this Act may and shall be exercised by or under ilia direction of one of the judges of the court upon which such powers and jurisdiction ai-e ro conferred, and the Minister of Justice shall from time to time assign a judge or judges of such court for that purpose. The judgment, decision or order of such judge Sihall be deemed the judgment, decision or order of the court, and references in this Act to the court shall, ■where necessary, apply to such judge exercising the powers and jurisdiction of such court. Provided that during vacation or during the illness of the judge so assigned or during his absence, or for any other reasonable cause, such 'powers and jurisdiction or any part thereof may be exercised by or under the direction of any judge of the court named for that pur- pose by (he Chief Justice thereof. (4) The Chief Justice of each court upon which such powers and jurisdiction are so con- ferred shall from time to time appoint and assign such registrars, clerks, and other officers in bankruptcy as he deems necessary or expedient for the transaction or disposal of matters in respect of which power or jurisdiction is given by this Act. (5) Each province of Canada shall constitute for the purposes of this Act, one bank- ruptcy district, but the Governor in Council may divide any such bankruptcy district into two or more bankruptcy divisions, and name or number them. A judge shall be assigned to each of such divisions to exercise therein the powers and jurisdiction conferred by this Act on the court of which he is a member. (6) In case the Chief Justice of the court having jurisdiction in bankruptcy in any province shall report to the Minister of Justice that it is impossible or highly inconvenient for any judge of his court to undertake to exercise within any bankruptcy division in such province the powers and jurisdiction conferred on such court, the Minister of Justice may, from time to time, assign to exercise within said division said powers and jurisdiction any district, county or other judge, who shall for all the purposes of this Act he deemed a judge of the court having jurisdiction in bankruptcy, and references in this Act to the court or to the judge of the court shall, where necessary, apply to such district, county or other judge, so assigned. POVv^EKS OF REGISTBAB. 65. ( 1 ) The registrars of the several courts exercising bankruptcy jurisdiction under this Act phall have the powers and jurisdiction in this section mentioned, and any order made or act done by such registrars in the exercise of the said powers and jurisdiction shall be deemed the order or act of the court. (2) Subject to General Rules limiting the powers conferred by this section, a registrar shall have power, — (a) to hear bankruptcy petitions where they are not opposed, and to make receiving orders and adjudications thereon, where they are not opposed; (b) to hold examinations of debtors; (c) to grant orders of discharge where the application is not opposed; (d) to approve compositions, extensions or schemes of arrangement where they are not opposed ; (e) to make interim orders in cases of urgency; (f) to make any order or exercise any jurisdiction which by any rule in that behalf is prescribed as proper to be made or exercised in chambers; (g) to hear and determine any unopposed or ea; parte application; (h) to summon and examine any person known or suspected to have in his possession effects of the debtor or to be indebted to him, or capable of giving information respecting the debtor, his dealings or property; (i) to hear and determine appeals from the decisions of a trustee allowing or disallow- ing a creditor's claim where such claim does not exceed five hundred dollars. (3) A registrar shall not have power to commit for contempt of court. (4) Any person dissatisfied with an order or decision of the registrar may appeal there- from to a judge, in manner prescribed by General Rules. GENERAL RULES. 66. (1) The Governor in Council may make, alter or revoke, and may delegate to the judges of the several courts exercising bankruptcy jurisdiction under this Act the power to make, alter or revoke, General Rules not inconsistent with the terms of this Act for carry- ing into effect the objects thereof. (2) Such rules shall not extend the jurisdiction of the court, save and except that, for the purpose of enabling the provision of rules having application to corporations, but for 1594 Canadian Bankruptcy Act. sucli purpose only, the Winding-up Act, chapter 144 of the Revised Statutes of Ccmada, shall be deemed part of this Act. (3) All General Rules, as from time to time made, shall be laid before Parliament within three weeks after made, or, if Parliament is not then sitting, within three weeks after the beginning of the next jSesoion. Such rules shall be judicially noticed, and shall have effect as if enacted by this Act. FEES AND BETtTKNS. 67. All attorneys, solicitors and counsel acting for the trustee or for the estate of a debtor in respect of proceedings under this Act, shall be paid out of the assets of such estate their reasonable costs and fees as fixed in a tariff provided by General Eules; but, except as hereinafter provided, the aggregate amount of such costs and fees so payable out of the assets of estates whereof the gross proceeds exceed five thousand dollars shall not exceed five per centum of suth gross proceeds. Xhis provision shall not disentitle such attorneys, solicitors and counsel to any costs or fees which may be awarded against or be payable bj; persons other than the trustee or the estate of the debtor, and notwithstanding anything in this Act contained, in estates whereof the gross proceeds do not exceed five thousand dollars, the costs or fees payable may, by unanimous vote of the inspectors, bs increased to any amount not to exceed ten per centum of the gross proceeds of such estate. Such tariff shall direct by v/liom ar.d in what manner such costs and fees are to be collected and accounted for and to what account they shall be paid. PBOCEDTJEE. 68. (1) All proceedings in bankruptcy or under authorized assignments subsequent to the presentation of a bankruptcy petition or the making of an authorized assignment shall be entitled " In the matter of the Bankruptcy " of the debtor, or " In the matter of the Authorized Assignment" of the debtor, as the case may be. (2) Subject to the provisions of this Act and to General Rules, the costs of and inci- dental to any proceeding in court under this Act shall be in the discretion of the court. (3) The court may at any time adjourn any proceedings before it upon such terms, if any, as it may think fit to impose. (4) The court may at any time amend any written process or proceedings under this Act upon such terms, if any, as it may think fit to impose. (5) Where by this Act, or by General Eules, the time for doing any act or thing is limited, the court may extend the time either before or after the expiration thereof, upon such terms, if any, as the court may think fit to impose. (6) Subject to General Eules, the court may in any matter take the whole or any part of the evidence either viva, voce, or by interrogatories, or upon affidavit, or, out of the Dominion of Canada, hy commission. (7) Where two or more bankruptcy petitions are presented against the same debtor or against joint debtors, the court may consolidate the proceedings, or any of them on such terms as the court thinks fit. (8) Where the petitioner does not proceed with due diligence on his bankruptcy petition, the court may substitute as petitioner any other creditor to whom the debtor may be indebted in the amount required by this Act in the case of the petitioning creditor, or may dismiss the petition. (9) If a debtor by or against whom a bankruptcy petition has been presented dies, the proceedings in the matter shall, unless the court otherwise orders, be continued as if he were alive. ( 10 ) The court may at any time, for sufficient reason, make an order staying the pro- ceedings under a bankruptcy petition, either altogether or for a limited time, on such terms and subject to such conditions as the court may think just. 69. ( 1 ) Any creditor whose debt is sufficient to entitle him to present a bankruptcy peti- tion against all the partners of a firm may present a petition against any one or more partners of the firm, without including the others. (2) Where there are more respondents than one to a bankruptcy petition the court may dismiss the petition as to one or more of them, without prejudice to the effect of the petition as against the other or others of them. (3) Where a receiving order has been made on a bankruptcy petition by or against one member of a partnership, any other bankruptcy petition by or against a member of the same partnership shall be filed in or transferred to the court in which the first-mentioned petition is in course of prosecution, and unless the court otherwise directs, the same trustee shall be appointed as may have been appointed in respect of the property of the first mentioned member of the partnership, and the court may give such directions for consolidating the proceedings imder the petitions as it thinks just. 70. (1) Where a member of a partnership is adjudged bankrupt, the court may authorize the trustee to commence and prosecute any action in the names of the trustee and of the bankrupt's partner; and any release by such partner of the debt or demand to which the Canadian Bajstkruptcy Act. 1595 action relates shall be void; but notice of the application for authority to commence the action shall be given to him, and he may show cause against it, and on his application, the court may, if it thinks fit, direct that he shall receive his proper share of the proceeds of the action, and, if he does not claim any benefit therefrom, he shall be indemnified against costs in respect thereof as the court directs. (2) Any two or more persons, being partners, or any person carrying on business under ne'd by the Registrar. The person who has the carriage of any order which in the opinion of the Judge or Registrar requires to be settled shall obtain from the Judge or Registrar as the case may be, an appointment to settle the order and give reasonable notice of the appointment to all persons who may be affected by the order, or to their solicitors. Security im, Court. 21. (1) Except where otherwise provided any security required to be given shall be by bond of a guarantee company or corporation approved by the Court. (2) Provided, however, that the Court may in its discretion permit the security to be given by bond with one or more surety or sureties to the Registrar of the Court or to the person proposed to be secured and in such case the Court may require the surety or sureties to make an affidavit of justification and may also require such notice to be eivea to the person proposed to be secured as the Court deems advisable or expedient 1612 Canadiax Gexeeal Ejles. 22. The bond shall he taken in a penal sum, which shall be not leas than the sum for which security is to be given, and probable costs to be estimated by the Court, unless tha opposite party consents to it being taken for a less sum. 23. Where a person is required to give security he may, in lieu thereof, lodge in Court a sum equal to the sum in question in respect of which security is to be given and the probable costs to be estimated as aforesaid of the trial of the question, together with a memorandum to be approved of by the Registrar and to be signed by such person, his solicitor, or agent, setting forth the conditions on which the money is deposited. 24. Where a person gives security by bond or makes a deposit of money in lieu of giving a bond, he shall forthwith before being entitled to proceed give notice in writing to the per- son to whom the security is to be given. 25. Except as in the Act or these rules otherwise provided the Rules for the time being in force in civil actions or matters before it of the Court relating to payment into or out of Court of moneys shall apply to moneys lodged in Court or to be paid out of Court under these Rules. Affidavits. 26. Every affidavit shall be drawn up in the first person, and shall state the description and true place of abode of its deponent, and shall be divided into paragraphs, and every paragraph shall be numbered consecutively, and as nearly as may be shall be confined to a distinct portion of the subject. No costs shall be allowed for any part of an affidavit containing unnecessary matters or which in the opinion of the taxing officer is unduly prolix. 27. The Court may order to be struck out from any affidavit any matter which is scan- dalous, and may order the costs of any application to strike out such matter to be paid as between solicitor and client. 28. No affidavit having in the jurat or body thereof, any interlineation, alteration, or erasure shall, without leave of the Court, be read or made use of in any matter depending in Court unless the interlineation, alteration or erasure is authenticated by the initials of the officer or person taking the affidavit. 29. Where an affidavit is sworn by any person who appears to the person taking the affi- davit to be illiterate or blind, the person taking the affidavit shall certify in the jurat that the affidavit was read in his presence to the deponent, that the deponent seemed perfectly to understand it, and that the deponent made his signature or declared his inability to sign in the presence of such person. No such affidavit shall be used in evidence in the absence of this certificate, unless the Court is otherwise satisfied that the affidavit wis read over to and appeared to be perfectly understood by the deponent. 30. The Court may receive any affidavit sworn for the purpose of being used in any matter notwithstanding any defect by misdescription of parties or otherwise in the title or jurat, or any other irregularity in the form thereof, and may direct a memorandum to be made on the document that it has been so received. 31. No affidavit (other than a proof of debt) shall be sufficient if sworn before the solici- tor acting for the party on whose behalf the affidavit is to be used, or before any agent, clerk or partner of such solicitor, or before the party himself. 32. Where by this Act or in these Rules it is provided that an affidavit or declaration be made by a debtor, authorized trustee or any other person and such debtor, authorized trus- tee or other person is a corporation, such affidavit or declaration may be made, by the manager or by any officer or employee cf the corporation, who has knowledge of the facts deposed to providing that he states therein that he has such knowledge. 33. The Court shall take judicial notice of the seal and/or signature of any person authorized by or under the Act or these rules to take affidavits or to certify to such authority. Witnesses and Depositions, 34. Any party to any proceeding in Court may by a writ of subpoena in the prescribed form, with or without a clause requiring the production of books, deeds, papers, documents and writings, require the attendance of a witness for the purpose of using his evidence upon any motion, petition or other proceeding before the Court or any judge or registrar. Tile name of one or more witnesses may be inserted in the subpoena. 35. A copy of the subpoena shall be served, personally, on the witness, within a reason- able time before the time of the return thereof, and service of the subpoena may, where required, be proved by affidavit. 36. The costs of witnesses, whether they have been examined or not, may, in the dis- cretion of the Court or taxing officer, be allowed; provided, however, that the Court may at any time limit the number of witnesses to be allowed on taxation of costs. . 37. The Court tnay, in any matter where it shall appear necessary for the purpose of justice, make an order for the examination upon oath before the Court or any officer, or other person, and at any place, of any witness or person, and may empower any party to any such matter to give such depositions in evidence therein on such terma (if any) as the Court may direct. Cathadian General Rules. 1613 38. (1) Where the evidence of any person is taken on or for use on the hearing of any motion, application or issue or in pursuance of an order for examination, commission or letters of request oir where the debtor or any other person is examined under section 56 of the Act, or otherwise vinder the Act or these Rules, such evidence pr examination may be taken in shorthand by a shorthand writer approved and duly sworn by the judge, regis- trar, or person before whom the examination is taken. A shorthand writer who has been duly appointed to report trials at sittings of the Court need not be sworn. (2) When taken in shorthand the evidence or examination may be taken down by ques- tion and answer; and unless otherwise ordered it shall not be necessary for the depositions to be read over to or signed by the person examined, unless the judge or registrar so directs, when the examination is taken before hl judge or registrar, or in other cases unless any of the parties so desire. (3) A copy of the depositions so taken, certified by the judge, registrar or person before whom the same were taken as correct, shall for all purposes have the same effect as the original depositions in ordinary cases. 39. An order for examination, commission or letters of request to examine witnesses, and the writ, order, commission or request, shall follow the forms for the time being in use in the Court in civil actions or matters before it with such variations as circumstances may require. 40. The Court may, in any matter, at any stage of the proceedings, order the attendance of any person for the purpose of producing any writings or other documents named in the order, which the Court may think fit to be produced. 41. Any person wilfully disobeying any subpoena or order requiring his attendance for the purpose of being examined or producing any object, book or document shall t>e deemed guilty of contempt of Court, and may be dealt with accordingly. 42. Any witness required to attend for the purpose of being examined, or to produce any document, or to give evidence, shall be entitled to the witness fees and conduct money provided by the tariff of costs in the appendix hereto. Discovery and Examination. 43. Any party to any proceeding in Court may, with leave of the Court, administer inter- rogatories to or obtain discovery of documents or examination for discovery from any other party to such proceeding, or any other person as authorized by the Court, and may also cross-examine any person upon an affidavit made by him in such a proceeding, i'roceed- ings under this Rule shall be regulated as nearly as may be by the Rules of the Court for the time being in force in relation to like matters in civil actions or matters in such Court. An application for leave under this Rule may be made ex parte. Warrants, Arrests and Commitments. 44. A warrant of seizure, or a search warrant, or any other warrant issued under the provisions of the Act, or these rules, shall be addressed to the Sheriff or Such other officer or person as the Court may in each case direct. 45. When a debtor is arrested under a warrant issued under section fifty-five of the Act, he shall be given into custody of the Governor or Keeper of the prison or gaol men- tioned in the warrant, who shall produce such debtor before the Court as it may from time to time direct, and shall safely keep him until such time as the Court shall other- wise order; and any books, papers, moneys, goods, and chattels in the possession of the debtor, which may be seized, shall forthwith be lodged with the trustee. 46. Where a person is apprehended under a warrant issued under section fifty-six (2) of the Act the officer apprehending him shall forthwith bring him before the Court issuing the warrant to the end that he may be examined, and if he cannot immediately be brought up for examination or examined, the officer shall deliver him into custody of the Governor or Keeper of the prison or gaol mentioned in the warrant, and the said Governor or Keeper shall receive him into custody and shall produce him before the Court as it may from time to time direct or order and subject to such direction or order shall safely keep him. 47. The officer executing a warrant issued under section fifty-six (2) of the Act shall forthwith, after apprehending the person named in the warrant and bringing him before the Court as in the lasit preceding rule mentioned, or after delivering him to the Governor or Keeper of the prison or gaol in the last preceding rule mentioned, as the case may be, report such apprehension or delivery to the court issuing the warrant, and apply to the Court to appoint a day and time for the examination of the person so apprehended, and the Court shall thereupon appoint the earliest practicable day for the examination and shall issue its direction or order to the said Governor or Keeper to produce him for examination at a place and time to be mentioned in such direction or order. Notice of any such appoint- ment shall forthwith be given by the Registrar to the Trustee and to such other person who shall have applied for the examination or warrant. 48. Where an order of committal is made against any person, for disobeying any order of the Court, to do some particular act or thing, the Court may direct that the order (* 1614; Caisabiai^ Generax, Rules. committal shall not be issrued, provided that such person complies with the previous order within a specified time. 49. Where a debtor or witness refuses or neglects to attend at the time and place appointed for his examination or, if attending, refuses to be sworn, or to answer any law: ful question, the rules of practice for the time being in force in similar or analogous pro- ceedings in civil aotions or matters before the Court shall in so far as the same are applicable, and not inconsistent with the Act or these Kules, apply. Service and Execution of Process. 50. Every solicitor suing out, filing or serving any petition, notice, summons, order, or other document, shall indorse thereon his name or firm and place of business, which shall be called his address for service. All notices, orders, documents, and other written com; munications which do not require personal service shall be deemed to be sufficiently served on such solicitor if left for him at his address for service. 51. Service of .notices, orders, or other proceedings shall be effected before the hour of five in the afternoon, except on Saturdays, when it shall be effected before the hour of one in the afternoon. Service effected after five in the afternoon on any week day, except Saturday, shall for the purpose of computing any period of time subsequent to such service be deemed to have been effeoted on the next following day which is not a, legal holiday. Service effected after one in the afternoon on Saturday shall for the like purpose be deemed to have been effected on the next following day which is not a legal holiday. 52. It shall be the duty of the sheriff or bailiff of the Court having jurisdiction or such officer or officers as the Court may direct, to serve such orders, svimmonses, petitions and notices as the Court may require him to serve; to execute warrants and other process; and to do and perform all such things as may be required of him by the Court. Where any notice or other proceeding may be served by post it shall be sent by registered letter. 53. Every order of the Court may be enforced as if it were a judgment of the Court. Costs and Taxation. 54. (1) The Court in awarding costs may direct that the same shall be taxed and paid as between party and party or as between solicitor and client, or the Court may fix a sum to be paid in lieu of taxed costs. (2) In the absence of any express direction costs of an opposed motion shall follow the event, and shall be taxed as between party and party. (3) Where an action is brought by or against an authorized trustee as representing the estate of the debtor, or where an authorized trustee is made a party to a cause or matter, on his application or on the application of any other party thereto, he shall not be personally liable for costs unless the judge before whom the action, cause or matter is tried for some special reason otherwise directs. 55. (1) When a receiving order is made on a creditor's petition the costs of the petition- Tng creditor shall be taxed and be payable out of the estate. (2) When the proceeds of the estate are not sufficient for the payment of the petitioning creditor's costs and of any costs necessarily incurred by the trustee down to the conclusion of the first meeting of creditors, the Court may order such costs to be paid by the petition- ing creditor. 56. The costs directed by any order to be paid shall be taxed on production of a copy of such order, and the allocatur or certificate of taxation shall be signed and dated by the taxing master or officer' and delivered to the person who presented such bill for taxation. 57. ( 1 ) The tariff of costs set forth in the Appendix and the regulations contained in such tariff, shall, subject to these Rules, apply to the taxation and allowance of costs and charges in all proceedings. (2) Where the estimated assets of the debtor, in accordance with the certificate of the authorized trustee, do not exceed the sum of fifteen hundred dollars, a lower scale of solici- tor's costs shall be allowed in all proceedings under the Act in which costs are payable out of the estate, namely — two-thirds of the charges ordinarily allowed, disbursements being added, unless the Court by order directs that increased costs be allowed. 58. Every person whose bill or charges is or are to be taxed shall in all cases give not less than two days' notice of the appointment to tax the same to the Trustee, or to the opposite party or his solicitor, as the case may be. 59. Every person whose bill or charges is or are to be taxed shall on application of the trustee furnish to the trustee a copy of his bill or charges so to be taxed on payment at the rate of fifteen cents per folio, which payment may be charged to the estate. 60. Where the joint estate of any co-debtors is insufficient to defray any costs or charges properly incurred, the trustee may pay such costs and charges as cannot be paid out of the joint estate out of the separate estates of such co-debtors or one or more of them in such proportion as he may determine, with the consent of the inspectors of the estates out of which the payment is intended to be made, or, if such inspectors withhold or refuse their consent, then with the approval of the Court. Canadian General Rules. 1615 61. Subject to the provigions of the Act, no costs shall be paid out of the estate or assets of the debtor, excepting the costs of the solicitor or solicitors employed by the trustee and such costs as have been awarded against the trustee or the estate of the debtor by order of the Court in any action or proceeding under the Act or these Kules. 62. The fees to be charged for or in respect of proceedings under the Act shall be as fixed by the tariff in part three of the Appendix and shall be collected and may be retained by the registrars or other proper oflScers who perform the duties under the Act or these Kules in respect of which such fees are payable. In case of any proceedings not covered by the tariff a fee may be charged of an amount equal to the tariff fee for the proceeding most nearly resembling the one in question. In the case of any dispute as to the amount of fees charged the judge shall fix and settle the amount. Rules Relating to the Business of the Court, 63. The judge or judges of the Court appointed by the Minister of Justice to have juris- diction in bankruptcy shall with the approval of the Chief Justice of the Court regulate the bankruptcy sittings and vacations of the Court. 64. Any Registrar in bankruptcy may act for any other Registrar. 65. Writs of execution shall issue from the proper office of the Court and all proceed- ings thereon and in relation thereto shall be regulated as nearly as may be by the Kules of the Court for the time being in force in relation to executions in civil actions or matters before such Court. 65. Where any registrar, clerk or other officer in bankruptcy refuses or neglects to act as such registrar, clerk or other officer or to perform or carry out any act, matter or thing connected with the office to which he has been appointed or assigned for the transaction or disposal of any matter in respect of which power or jurisdiction is given by " The Bank- ruptcy Act" or by these Rules, then, and in every such case, the registrar, clerk or other officer so neglecting or refusing, shall be guilty of contempt of court and be liable to be punished accordingly. Appeals from Registrar. 67. An appeal from the registrar shall be by ordinary notice of motion to the judge of the bankruptcy district or division in which the proceedings are pending. No appeal shall be brougl^t unless the notice thereof is filed with the registrar and served within ten days after the pronouncing of the order or decision complained of, or within such further time as may be allowed by the judge. The notice shall set forth fully the grounds of appeal. No security for the costs of the appeal need be given by the appellant. Appeals to Appeal Court. 68. No appeal from a judge to the Appeal Court shall be brought unless notice thereof is filed with the registrar and served within ten days' after the pronovmcing of the order or decision complained of or within such further time as may be allowed by a judge. (2) At or before the time of entering an appeal the party intending to appeal shall lodge in the Court the sum of one hundred dollars to satisfy, in so far as the same may extend, any costs that the appellant may be ordered to pay. Provided that the Appeal Court may in any special case increase or diminish the amount of such security or dispense therewith. 69. The proper officer of the Court appealed from shall upon receiving a copy of the notice of appeal promptly transmit to the Registrar of the Appeal Court the notice of appeal and the file of proceedings in the matter under appeal. 70. Where an issue or question is, under the provisions of section seventy-one of the Act, tried by a Court other than the Court in which the bankruptcy proceedings are pending, any appeal from the decision of such Court shall be made to and be heard by the Appeal Court of the province in which the bankruptcy proceedings are pending. 71. Subject to the foregoing Rules, appeals to the Appeal Court in any bankruptcy dis- trict or division shall be regulated by the Rules of such Court, for the time being in force in relation to appeals in civil actions or matters. Appeals to Supreme Court. 72. An application for special leave to appeal from a, decision of the Appeal Court and to fix the security for costs, if any, shall be made to a Judge of the Supreme Court of Canada within thirty days after the pronouncing of the decision complained of and notice of such application shall be served on the other party at least fourteen days before th» hearing thereof. (2) Where any security for the costs of such appeal is fixed the same shall be given to the Registrar in the manner and form prescribed by the rules and practice of the Suprema Court of Canada, or in manner and form to like effect. 1616 Caxadiait General Rules. 73. Subject to the foregoing rules appeals to the Supreme Court of Canada shall, as nearly as possible, be regulated by the rules of such Court for the time being in force in. relation to appeals in civil matters or actions. PART III. Petition in BANKRtrpTCT. 74. Evei-y petition shall be fairly written and no alteration, interlineations, or erasures shall be made therein, after the same has been filed, without the leave of the Registrar. 75. A petitioning creditor who is resident abroad, or whose estate is vested in a. trustee^ under any law relating to bankruptcy, or against whom a petition is pending; under any such law, or who has made default in payment of any judgment, order for payment of money or of any costs ordered by any Court to be paid by him to the debtor, may be ordered to give security for costs to the debtor and proceedings under the petition may be stayed until such security is furnished. 76. With every creditor's petition when filed there shall be lodged a copy to be sealed and issued to the petitioner. The petition shall be deemed to have been presented to- the Court on the day of the filing thereof. 77. A true copy of the creditor's petition together with a notice of the time and place of the presentation and hearing thereof shall be personally served upon the debtor at leasl eight days before the presentation and hearing; provided that where it is proved to the satisfaction of the Court that the debtor has absconded, or in any other case for good cause shown, the Court may, on such terms, if any, as the Court may think fit to impose, hear the petition at such earlier .late and witnout sucU service as tha Court may deem exuedicnt. 78. If the Court is satisfied by affidavit or other evidence that the debtor is keeping out of the way to avoid service of the petition or any other document, or service of any other legal process, or that for any other cause prompt personal service cannot be effected, it may order substituted service to be made by delivery of the petition or such other document to some adult inmate at his usual or last known residence or place of business, or by regis- tered letter, or in such other manner as the Court may direct, and such petition or other document shall tli2n"be deemed to have been duly served on the debtor, 79. Service of the petition may be proved by affidavit, with a sealed copy of the petition attached, and the same shall be filed in Court as soon as practicable after the service. 80. Any notice, petition or other document for which personal service is necessary shall be deemed to be duly served on all the members of a firm if it is served at the principal place or one of the principal places of business of the firm in the province wherein the pro- ceedings are taken, or if there' is no such place then at the principal place of business of the firm in Canada, on any one of the partners, or upon any person having at the time of service the control or management of the partnership business there. 81. The provisions of the last preceding rule shall so far as the nature of the case will admit apply in the case of any person carrying on business within the jurisdiction in a name or style other than his own. 82. Any notice, petition or other document for which personal service is necessary shall be deemed to be duly served on a corporation if it is served at the head oflice or principal place, or one of the principal places of business of a corporation in the province wherein the proceedings are taken or if there is no such place at the head office or principal place of business of the corporation in Canada, on the president, vice-president, secretary, treas- urer, manager or upon any officer of the corporation or upon any person having at the time of service the control or management of the business of the corporation at the place of such service. 83. Where a debtor is not in Canada, the Court may order service of the petition or any other document to be made within such time and in such manner and form as it shall think fit. , 84. If a debtor against whom a bankruptcy petition has been filed dies before service thereof, the Court may order service to be effected on the personal representatives of the debtor, or on such other person as the Court may think fit. Interim Receiver. 85. After the presentation of a petition, upon the application of a creditor, or of an authorized trustee, or of the debtor himself, and upon proof by affidavit of sufficient grounds for the appointment of an authorized trustee as interim receiver of the property of the debtor or any part thereof, the Court may, if it thinks fit, and upon such terms as may be just, make such appointment; such order may be made ex parte. 86. Where, after an order has been made appointing an authorized trustee interim receiver, the petition is dismissed, the Court shall, upon application to be made within 21 days from the date of the dismissal thereof, adjudicate, with respect to any damages or claim thereto arising out of the appointment, including the proper remuneration of the trustee, and shall make such order as the Court thinks fit. Canadia;; Gekekal Rules. 1617 Hearing of Petition. 87. Where a debtor intends to show cause against a petition he shall tile a notice with the proper officer, specifying the statements in the petition which he intends to deny or dispute, and shall transmit by post to the solicitor of the petitioning creditor a copy of the notice three days before the day on which the petition is to be heard. 88. If the debtor does not appear at the hearing, the Court may make a receiving order and adjudge the debtor bankrupt on such proof of the statements in the petition as the Court shall think sufficient. 89. On the appearance of the debtor to show cause against the petition, the petitioning creditor's debt-, and the act of bankruptcy, or such of those matters as the debtor shall have given notice that he intends to dispute, shall be proved to the satisfaction of the Court by affidavit or by any evidence which would be admissible to prove the facts in a civil action in the Court. 90. Where proceedings on a petition have been stayed for the determination of the question of the validity of the petitioning creditor's debt, which question may be deter- mined in such manner as the Court may direct, and such question has been decided in favour of the validity of the debt, Uie registrar shall, on production of the judgment of the Court, or a copy thereof, and on the application of the petitioning creditor, fix a day on which further proceedings on the petition may be had. The petitioning creditor shall within forty-eight hours of the date of said appointment mail or deliver to the debtor, at the address given in his notice of dispute, a notice in writing of such appointment, and a like notice to his solicitor, if known. 91. Where proceedings on a petition have been stayed for the determination of the ques- tion of the validity of the petitioning creditor's debt, and such question has been decided against the validity of the debt, the registrar shall on the production of the judgment of the Court or a copy thereof, and on application of the debtor, fix a day on which he may apply to the Court for the dismissal of the petition with costs. The debtor shall within forty-eight ho'irs of the date of the appointment mail or deliver to the petitioner (and to his solicitor, if known) notice in writing of the time and place fixed for the hear- ing of the application. Receiving Order. 92. When a receiving order is made on a creditor's petition there shall be stated in the receiving order the nature and date, or dates, of the act, or acts, of bankruptcy upon which the order has been made. 93. The Trustee shall cause a copy of the receiving order or of the order appointing the trustee an interim receiver, as the case may be, to be served on the debtor. 94. A receiving order against a firm shall operate as a receiving order not only against the Arm, but also against each person who at the date of the order is a partner in that firm. 95. The rights or liabilities of any past or present limited partner of a limited partner- ship, against which a receiving order has been made or which hag made an authorized assignment, as such rights or liabilities are fixed or defined by the statutory provision (if any) of the province wherein the partnership business is or has been carried on, shall not in any way be prejudiced or affected by these Rules. 96. An application to the Court to rescind a receiving order or to stay proceedings there- under, or to annul an adjudication, shall not be heard except upon proof that notice of the intended application and a copy of the affidavits in support thereof have been duly served upon the trustee. Unless the Court gives leave to the contrary, notice of any such application together with copies of such affidavits shall be served on the trustee not leas than four days before the day named in the notice for hearing the application. Fending the hearing of the application, the Court may make an interim order staying such of the proceedings as it thinks fit. Statement of Affairs. 97. (1) Every debtor shall be furnished by the trustee with instructions for the prepara- tion of his statement of affairs. Such statement of affairs shall be made out in duplicate and shall be verified by the debtor. The trustee shall file with the Kegistrar one of such verified statements. (2) Where the debtor is a partnership it shall submit a statement, in duplicate, of its partnership affairs verified by one of the partners or by the manager in charge of the business and each partner shall submit a statement, in duplicate, of his separate affairs verified personally. (.S) Where the debtor is a corporation the statement of affairs, in duplicate, shall be verified by the president, vice-president, secretary, treasurer, general manager, manager or by any officer or director of the corporation having knowledge of the facts contained in such statement. 102 1618 Canadian General Rules. Composition, Extension or Scheme of Arra/ngement. 98. Where a debtor intends to submit a proposal for a composition, extension or scheme of arrangement the prescribed forms in the appendix, of proposal, ■ notice and report shall be used by the trustee for the purpose of meetings of creditors for consideration of the. proposal. 99. Whenever an application is made to the Court to approve of a composition, extension or scheme, the trustee shall, not less than seven days before the hearing of the application, send notice by registered mail of the application to the debtor and to every creditor who has proved his debt; and the trustee shall file his report not less than two days before the time fixed for hearing the application. 100. In any case in which an application is made to the Court to approve a composition, extension or scheme and the trustee reports to the Court any fact, matter, or circumstance which would justify the Court in refusing to approve of the composition, extension or scheme, such application shall be deemed to be an opposed application within the meaning of section 65(2) (d) of the Act. 101. On the hearing of any application to the Court to approve of a composition, exten- sion or scheme the Court shall in addition to considering the report of the trustee hear the trustee, the debtor and/or any opposing, objecting or assenting creditor thereon, and an appeal to the Court of Appeal shall lie at the instance of the trustee, the debtor or any such creditor from any order of the Court made upon such application. 102. No costs incurred by a debtor, of or incidental to an applicatoin to approve a com- position, extension or scheme, other than the cost incurred by the trustee, shall be allowed out of the estate if the Court refuses to approve the composition, extension or scheme. 103. The Court before making an order approving a composition, extension or scheme shall, in addition to investigating the other matters as required by the Act, require proof that the provisions of section 13(1) and (2) of the Act have been complied with. 104. At the time a composition, extension or scheme is approved, the Court may correct or supply any accidental or formal slip, error, or omission therein, but no alteration in the substance of the composition, extension or scheme shall be made. 105. Where a composition, extension or scheme is annulled, the property of the debtor shall, unless the Court otherwise directs, forthwith re-vest in the trustee, if any, in whom the estate was originally vested without any special order being made or necessary. 106. Every person claiming to be a creditor under any composition, extension or scheme, who has not proved his debt before the approval of such composition, extension or scheme, shall lodge his proof with the trustee thereunder, who shall admit or disallow the same. And no creditor shall be entitled to enforce payment of any part of the sums payable under a composition, extension or scheme unless and until he has proved his debt and his proof has been admitted or allowed. Discharge of Trustee. 107. The application of an authorized trustee for a grant of discharge (whether full or partial) shall be made in the prescribed form to the Registrar and shall be verified by the aifidavit of such authorized trustee. Such application shall contain or have attached thereto a complete and itemized statement showing all moneys realized by such authorized trustee from and out of the property of the bankrupt or assignor and of all moneys dis- bursed and expenses incurred and the remuneration claimed by such authorized trustee; and full particulars, description and value of all property belonging to the estate which has not been sold or realized upon, setting out the reasons why such property has not been sold or realized upon; and full particulars and information with regard to any unsettled disputes, actions or proceedings between such authorized trustee and either the debtor or any creditor or creditors or any other person connected with the estate. 108. The trustee shall, unless otherwise ordered by the Court on an ex parte application, at least ten days prior to the hearing of the application send notice in writing by regis- tered mail to the debtor and to each of the creditors. 109. (1) If the debtor or any creditor desires to oppose the application for discharge he shall file with the Registrar, at least two days prior to the hearing or within such further time as the Court may allow, a notice in writing of his intention to oppose the application setting out his reasons therefor and shall serve a copy of the said notice on the authorized trustee, v/ithin the time aforesaid. (2) If the application for discharge is not opposed the Registrar may either grant or refuse the same. If the application is opposed the same shall be adjourned for hearing Before a judge. 110. The authorized trustee shall keep for a period of at least six years from the date of declaring a fina.1 dividend all current books of record and important documents of the estate of the bankrupt or authorized assignor. After the expiration of such period the trustee may destroy unimportant books and documents but shall continue to keep for a further period of fourteen years from the date thereof all title papers relatino- to real or immovable estate, important documents under seal and such other books and papers which in the judgment of the trustee should be kept. During the said periods the trustee shall at all times produce and dispose of all books and papers in his possession as ordered by the Court. Canadian Genekal Rules. 1613 111. In the case of the sale of immovaible property in the Province of Quebec by the trustee, if the purchaser has not paid the whole of the purchase price or given security when he may lawfully do so under the provisions of the Code of Civil Procedure for the Province of Quebec, the trustee may obtain from the Court an order for the resale of the property; the purchaser may however prevent the resale for false bidding by paying to the trustee, before such resale, the amount of his bid with the interest accrued by reason of his default and all costs incurred thereby; if a resale takes place the false bidder is liable to the trustee for the difference between the amount of his bid and the price brought on the resale with all costs incurred iby reason of his default for the payment of which on applica- tion of the trustee, the Court may make an order against the false bidder; if the price obtained on the resale is greater, it goes to the benefit of the estate. Meeting of Creditors. 112. (1) Where a meeting of creditors is called by notice, the proceedings had and reso- lutions passed at such meeting shall, unless the Court otherwise orders, be valid, notwitli- standing that some creditors shall not have received the notice sent to them and notwith- standing the inadvertent omission to send such notice to one or more creditors. (2) Where a meeting of creditors is adjourned, the adjourned meeting shall be held at the same place as the original place of meeting, unless in the resolution for adjournment another place is specified. 113. A debtor who is required by a trustee to attend any meeting of creditors (other than the first meeting) and who resides at a distance of more than ten miles from the place of such meeting, shall be entitled to be paid for such attendance the like conduct money and expenses as if he were a witness required to attend in Court or for the purpose of being examined. 114. Every class of creditors shall express its views and wishes separately from every other class and the effect to be given to such views and wishes shall, in case of any dis- pute and subject to the provisions of the Act, be in the discretion of the Court having regard to the financial condition of the debtor. Proof of Claims. 115. In any case in which it shall appear from the debtor's statement of affairs that there are numerous claims for wages by workmen and others employed by the debtor, it shall be sufficient if one proof for all such claims is made either by the debtor, or his foreman, or the bookkeeper of the debtor, or some other person on behalf of all such creditors. Such proof shall have annexed thereto, as forming part thereof, a schedule set- ting forth the names of the workmen and others, and the amounts severally due to them. Any proof made in compliance with this Rule shall have the same effect as if separate proofs had been made by each of the said workmen and others. 118. Where a creditor's proof has been admitted the notice of dividend shall be sufficient notification to such creditor of such admission. Disallowance of Claims. 117. The appeal of a claimant from the trustee's decision under section 53 of the Act shall be by notice of motion to a judge and the trustee shall be served with a copy thereof in the ordinary manner provided by these Rules. The judge shall hear and dispose of the appeal summarily on affidavits or viva voce evidence or both as to the judge shall seem lest 118. The trustee shall in no case be personally liable for costs in relation to an appeal from his decision rejecting or disallowing any proof wholly or in part. Contingent or Unliquidated Claims. 119. Where a contingent claim has been filed with a, trustee, or one in the nature of unliquidated damages arising by reason of a contract, promise or breach of trust, and the trustee under the provisions of section 20 of the Act has been unable to make a compromise or other arrangement satisfactory to the inspectors in respect thereto, the trustee shall apply to a judge, by way of notice of motion, to value the claim, serving the claimant with a copy of the notice of motion in the ordinary manner provided by these Rules. The trustee shall prior to the hearing of the motion file with the registrar a copy of the claim in question, and an affidavit or affidavits by the trustee, the debtor or of some other person having knowledge of the claim setting out as full particulars and information as to the claim as have been ascertained, also setting out what steps (if any) were taken to make a compromise or other arrangement in respect of the claim, and particulars of any offer of compromise or arrangement made by the trustee with the permission of the inspectors, and such other facts as the trustee deems advisable. The judge shall hear and dispose of the matter summarily and either on affidavits or viva voce evidence or both aa to the judge shall seem best. 1620 Canadian General Rules. Settlements and Preferences. 120. Applications by a trustee, or any person, to set aside or avoid under the Act, or any other Act or law, any settlement, conveyance, transfer, security or payment, or to declare for or against the title of the trustee to any property adversely claimed, and any proceed- ings under " The Winding-up Act " against any past or present director, manager, liqui- dator, receiver, employee, or officer of any company, against whom a receiving order has been made, or which has made an authorized assignment, shall be to a Judge In chambers by notice of motion served in the ordinary manner as provided by these rules. The Judge may proceed . in a summary manner to try the question or issue in the case or may adjourn the hearing, or may direct or settle any question or issue to be tried, or may give such directions for the preparation and filing of pleadings and for the trial of such question or issue, or may make such other order in the premises as to the Judge shall seem best. 121. Any application or notice of motion under the preceding rulq may contain a description of the land (if any) in question, and upon filing the same or a copy thereof, signed by the solicitor of the applicant, with the proper officer, a certificate of lis pendens may be issued for registration, and in case the said application or motion is refused in whole or in part, a certificate of such order may be issued for registration. Contributories to Insolvent Corporations. 122. The demand of an authorized trustee on any contributory shall be in the prescribed form and there shall be no duty imposed on the authorized trustee to make demands on a pro rata basis so far as the contributories of a debtor are concerned or to adjust rights as between contributories. 123. If a contributory does not pay the authorized trustee the amount demanded and does not give notice in writing, to the trustee, disputing the demand within the time and in the manner provided by the Act, the authorized trustee may from and after the expira- tion of thirty days from the date of service of the demand, make an ex parte application to the Court in the prescribed form for judgment against the contributory and the Court may on such application, without notice to the contributory, give judgment in favour of the trustee for the amount demanded or such amount as the Court finds justly owing anrt for the costs of the application. 124. In the case where a contributory has given notice in writing to the trustee disputing the demand, within the time and in the manner provided by the Act, the trustee may, from and after the expiration of thirty days from the date of service of the demand, make application to the Court in the prescribed form for judgment against the contributory, giving the contributory at least four days' notice of such application, and the Court on the hearing of the application may proceed in a summary way to try the question or issue in the case or may adjourn the hearing or may direct and settle any question or issue to be tried between the authorized trustee and the contributory or may give such directions for the preparation and filing of pleadings or for the trial of such question or issue or may make such other order in the premises as to the Court shall seem best. 125. The authorized trustee may include in any application more than one contributory. 126. At least two days before the hearing of any such application the authorized trustee shall file with the proper officer the verified statement of the affairs of the debtor; an estimate of the authorized trustee as to the, realizable value of all property of the debtor, and a list of all proved or provable claims against the estate of the debtor in so far as the authorized trustee is able to ascertain. 127. If it should appear to the Court that the issue of immediate execution under any judgment recovered or entered by an authorized trustee against a contributory would be an undoubted hardship on the contributory, or would he unjust or inequitable, the Court may, on the application or request of the contributory and on such terms as to security or other- wise as the Court deems advisable, order that execution be stayed pending the adjustment of rights between contributories or for such period as to the Court shall seem best. 128. In case a contributory desires to have the Court adjust rights and liabilities as between contributories he may make application to the Court in the prescribed form setting out his grounds in an affidavit in the prescribed form. He shall give at least four days' notice of such application to all other contributories from whom he claims contributions. The Court may on an ear parte application direct the method of service of said notice, whether by personal service, mail or otherwise, as to the Court may seem best. 129. The Court may on any such application order any one or mere of the contributories of the debtor to pay into Court such amounts as may be found by the judge to be just and equitable and in default of payment of the amount so found tile Court may give judg- ment against any defaulting contributor directing payment of such amount to the applicant or to the trustee or otherwise and may dispose of the costs of such application. 130. All monevs paid into Court shall be adjusted, divided and paid out according to the directions of the judge and where the judge deems advisable such moneys or aay portion thereof may be paid out to the authorized trustee. Canadian General Rules. 1621 Examination of Debtor and Others. 131. Examinations under section fifty-six of the Act or any other examination may be held before a Registrar or before any person or officer who is qualified or authorized to hold examinations for discovery or of judgment debtors in accordance with the Kules, for the time being in force in civil actions or matters of the Court in the bankruptcy district or division in which the examination is held or to be held or before such other person as the Court on an ex parte application therefor may order. 132. Such examination may be held in the bankruptcy district or division in which the debtor or other person to be examined resides or In which he is served with the appoint- ment for examination, or in which the debtor, or such other person, resided or carried on business at the date of the receiving order or authorized assignment, notwithstanding that such bankruptcy district or division may not be the same district or division in which the bankruptcy of the debtor occurred or in which the debtor made an authorized assignment or in which the proceedings are being carried on; or the examination may be held at such, time and place and in such bankruptcy district or division in Canada as the Court on application may order. Such application, unless the Court otherwise directs, msLj be made ex parte. 133. Any such registrar, person, or officea: empowered to hold examinations may grant, in duplicate, an appointment for examination in the form provided py the Appendix or in form to like effect. 134. A duplicate of such appointment shall be served upon the debtor or person to be examined at least forty-eight hours before the time of examination. Discharge. 135. (1) In any case in which an application is made to the Court by a debtor for his discharge and the trustee reports to the Court any fact, matter or circumstance which would, under the Act, justify the Court in refusing an unconditional order of discharge, such application shall be deemed to be an opposed application within the meaning of sec- tion sixty-five (2) (c) of the Act. (2) The Court may, on the application by a debtor for his discharge, cause the debtor to be brought before the Court for examination or further examination. 136. An appeal to the Appeal Court shall lie at the instance of the trustee, the debtor and or at the instance of any creditor or creditors, who oppose the discharge, from any order of the Court made upon the application for discharge. 137. When a, debtor intends to dispute any statement with regard to his conduct and affairs contained in the trustee's report he shall at or before the time appointed for hear- ing the application for discharge give notice in writing to the trustee specifying the state- ments in the report, if any, which he proposes at the hearing to dispute. Any creditor who intends to oppose the discharge of a debtor on grounds other than those mentioned in the trustee's report shall give notice oi the intended opposition, stating the grounds thereof, to the trustee and to the deboor at or before the time appointed for the hearing of the application. In either of such cases the judge or registrar may enlarge the hearing of the application as deemed advisable. 138. ( 1 ) A debtor shall not be entitled to have any of the costs of or incidental to his application for discharge allowed to him out of his estate. (2) If the debtor does not make his application for discharge until after the trustee has paid the final dividend, he shall, before the order of discharge is signed or delivered out, pay to the trustee such remuneration and solicitor's costs as the Court may allorw. 139. (1) Where the Court grants an order of discharge conditionally upon the debtor consenting to judgment being entered against liim by the trustee for the balance or any part of the balance of the debts provable under the bankruptcy or authorized assignment which is not satisfied at the date of his discharge, the order of discharge shall not be signed, completed or delivered out until the debtor has given the required consent. The judgment shall be entered in the Court having jurisdiction in bankruptcy in the district or division in which the order of discharge is granted. (2) If the debtor does not give the required consent within ten days of the making of the conditional order the Court may, on the application of the trustee, revoke the order or make such other order as the Court may think fit. 140. The order of the Court made on an application for discharge shall be dated on the day on which it is made, and shall take effect from the day on which the order is drawn up and signed; but such order shall not be delivered out or gazetted until after the expira- tion of the time allowed for appeal, or, if an appeal be entered, until after the decision of the Appeal Court thereon. 141. ( 1 ) An application by the trustee for leave to issue execution on a judgment entered pursuant to a conditional order of discharge shall be made to the Court in writing, and shall state shortly the grounds on which the application is made. (2) The trustee shall give not less than four days' notice of the application to the debtor, and shall at the same time furnish him with a copy of the application. 1622 Canadian General Rules. 142. Where a debtor is discharged subject to the condition that judgment shall be entered against him, or subject to any other condition as to his future earnings or after-acquired property, it shall be his duty until such judgment or condition is satisfied, from time to time, to give the trustee such information as he may require with respect to his earn- ings and after-acquired property and income, and not less than once a year to file in the Court and with the trustee a statement showing the particulars of any property or income he may have acquired subsequent to his discharge. 143. Any statement of after-acquired property or income filed by a debtor whose discharge has been granted subject to conditions, shall be verified by affidavit, and the trustee may require the debtor to attend before an examiner to be examined on oath with reference to the statements contained in such affidavit, or as to his earnings, income, after-acquired property, or dealings. Where a debtor neglects to file such affidavit or to attend for examination when required so to do, or properly to answer all such questions as the (Jourt may decide to be proper, the Court may, on the application of the trustee, rescind the order of discharge. 144. Where after the expiration of one year from the date of any order made upon a debtor's application for a discharge, the debtor applies to the Court to modify the terms of the order on the ground that there is no reasonable probability of his being in a position to comply with the terms of such order, he shall give 14 days' notice by mail of the hearing of the application to the trustee and to all his creditors. Miscelliineous. 145. No person shall, as against the trustee, be entitled to withhold possession of the books of account belonging to the debtor or to set up any lien thereon. 146. Non-compliance with any of these Rules, or with any rule of practice for the time being in force, shall not render any proceeding void unless the Court shall so direct, but such proceeding may be set aside, either wholly or in part, as irregular, or amended or otherwise dealt with in such manner and upon such terms as the Court may think fit. 147. Where an authorized trustee provides the security required by section 14(4) of the Act in cash, the amount thereof shall be paid by the authorized trustee to the Receiver General, and the authorized trustee shall receive interest thereon, payable yearly at the rate of three per cent per annum. 148. In all cases in which any number of days not directed to be clear days is prescribed by the Act or by these Rules, or by any notice or order in reference to any proceeding under the Act, the same shall be reckoned exclusively of the date from which the computation ia made, but inclusively of the day on which the act or proceeding referred to is to be done or taken. 149. Where notice is to be given or service is required to be made a certain number of days before the day on which something is to be done, if the words " clear days " or " at least " or " not less than " are used, both the day of service or of giving notice and the day on which such thing is to be done shall be excluded from the computation. 150. Where any limited time less than six days from or after any date or event is appointed or allowed for doing any act or taking any proceeding, days on which the offices of the Court are closed shall not be reckoned in the computation of such limited time. 151. Where the time for doing any act or taking any proceeding expires on a Sunday or other day on which the offices of the Court are closed, and by reason thereof such act or proceeding cannot be done or taken on that day, such act or proceeding shall, so far as regards the time of doing or taking same, be held to be duly done or taken on the next da.y on which the said offices are open.. 152. The general practice of the Court in civil actions or matters before it, including the course of proceedings and practice in Judges' chambers, shall in cases not provided for by the Act and amendments thereto, or these Rules, and so far as the same are applicable and not inconsistent with the said Act or these Rules, apply to all proceedings under the said Act. GENERAL INDEX [To Bankruptcy Act; text, General Orders and Forms.] [1623] GENERAL INDEX [This index covers the entire work, including the Bankruptcy Act, General Orders, Forms and text of the treatise. It does not include the Appendix.] A. Abatement- page death or insanity of bankrupt, effect, Bankr. Act, § 8 273 trustee, death or removal, does not effect, Bankr. Act, § 46 716 Ablirevlationa. in schedules or petitions not permitted, Gen. Ord. V 1192 Aceonnts. estates; refusal to permit inspection, Bankr. Act, | 29c 618 trustees to keep, Bankr. Act, § 47a (6 ) 716 Aooonnts and Paper*. of trustee, open to inspection, Bankr. Act, §49 , 749 Acts of Bankrnptey. acts enumerated, Bankr. Act, § 3a ; 82 ( 1 ) fraudulent transfer, Bankr. Act, § 3a ( 1 ) 82 ( 2 ) preferential transfer, Bankr. Act, § 3a ( 2 ) 82 (3) preference through legal proceedings, Bankr. Act, § 3a (3) 82 ( 4 ) general assignment for benefit of creditors, Bankr. Act, § 3a ( 4 ) 82 (5) admission of inability to pay debts, Bankr. Act, § 3a (5) 82 solvency as defense, Bankr. Act, § 3c, d 82 time of commission, petition filed within four months, Bankr. Act, § 3b 82 date of recording or registering transfer, Bankr. Act, § 3b 6i, trial by jury, right of alleged bankrupt, Bankr. Act, g 19a 487 assignment for benefit of creditors; elements 114 transfers constituting 115 insolvency not essential 116 confession of bankruptcy; inability to pay debts 127 corporations subject to 126 power of board of directors 12/ essential elements 127 unqualified admission of inability 128 construction of law 87 not applicable to voluntary bankruptcies 88 rules of ; act remedial 87 creditors at time of commission; petition filed 87 fraudulent transfer ; elements of act 90 disposition of property 91 intent to hinder, delay or defraud creditors 94 allegations in. petition 9F proof ; circumstances of transaction 9b debtor's admissions 96 burden on creditor 97 insolvency, not required to be shown 97 meaning of " transfer " 93 creditors must be defrauded 98 [1625] 1626 Geneeal Index.' Acts of Bankruptcy — Continued. page inaolvency, when essential 88 of partnership ; property of partners 90 pleading; solvency as defense 88 proof of . ; 89 time of 89 legislation, history and analogies 86 comparative ; English and Continental systems 86 Canadian system i 86 former United States acts 87 partnership; receivership constitutes ; 118 commission by one partner 172 embezzlement of funds by one partner 173 what constitute 173 preference through legal proceedings 106 intent not essential 107 Buffered or permitted judgment or levy 108 appeal from judgment, effect 108 resistance not material 109 creditors must have provable debts 109 resultant inequality must be shown 109 legal proceedings, what included 110 sale of final disposition Ill vacating or discharging 112 five days before sale 112 final disposition 112 preferential transfer, essential elements 98 allegations as to preferences 105 intent to prefer 102 knowledge inferred from circumstances 102 presumption, where result is preference 103, 104 where debtor was insolvent 103 distinguished from motive 105 transfer of property; meaning 99 confession of judgment 100 mortgage or security 99 payment of money 99 depletion of estate 101 exchange of securities does not constitute 101 receiver or trustee, appointment 118 application for, constitutes act 119 appointment under equity power of court 120 application for, by corporation 120 insolvency essential 121 actual, allegations as to 122 proof, burden on petitioners 124 precedents under former law 126 Additional Parties. jurisdiction to bring in i 07 Adjudication. appeals to circuit courts of appeals or Supreme Court, Bankr. Act, § 25a 571 certified copies of decrees, trustees to file in recording offices, Bankr. Act, § 47c.. 716 compensation of trustee for filing, Bankr. Act, § 47c 716 definition, Bankr. Act, § 1 1 involuntary proceedings, after determination, Bankr. Act, § 18d 451 where bankrupt does not plead, Bankr. Act, § 18e 451 Geneeal Index. 1627 Adjudication — Continued. PAGE partnership, Bankr. Act, § 5a 164 one or more members solvent, consent, Bankr. Act, § 5h 164 consent and settlement of partnership business, Bankr. Act, § 5h 164 referee to make, in case referred by clerk, Bankr. Act, § 38 650 reference after, to any referee in district, Bankr. Act, § 22 511 form, debtor not a bankrupt. Off. Form No. 11 1251 bankruptcy, Off. Form No. 12 1252 alien having property in United States 43 appeals, order granting or refusing 592 dismissal, a judgment 592 effect of jury trial 592 certified copy of decree; to be recorded 740 date of, wider definition 10 effect, as to property of bankrupt 44 involuntary proceedings, order to be entered 477 effect generally 479 on rights of creditors 480 intervention by other creditors 479 vacating, application 481 by whom made 481 evidence 481 collateral attack 483 limitation of jurisdiction, place of business, residence or domicile in district 38-40 domicile of debtor, what constitutes 39 residence of debtor, what constitutes 39 principal place of business 40 corporations 40 preceding six months 43 partnership, effect of entity doctrine 180 independent of that of partners 181 death of partner, effect 175 insanity of partner .' 176 infancy of partner 176 form ; conformity to petition 180 effect on discharge 180 discharge of partnership debts 181 where there are no firm assets 181 referee to make, reference in absence of judge 484, 653 practice in involuntary cases after reference 653 reference after, entry of order 512 general and limited 512 to any referee in district 512 State courts; effect on jurisdiction 557 assignment or receivership within four months 558 corporations, proceedings for dissolution 659 Administration of Estates. expenses, allowances, Bankr. Act, § 62 931 report, examination and approval, Bankr. Act, § 62 931 priority of payment, Bankr. Act, § 64b ( 3 ) 985 expenses ; allowance 932 priority of payment 932 auctioneer's services 932 preservation of property, allowance of sums paid 933 assignees for benefit of creditors , 933 practice on allowance 934 attorneys; employment and compensation 934 See Attorneys. 1628 Geneeal Index. Admlsilon af loability to Fay Debt*. pass act of bankruptcy, Bankr. Act, § 3a(5) 82 Sec Acts of Bankruptcy. AdTerae Clalmanta. consent to suits against, when required 623, 531 voluntary submission of controversy 532 fund in possession of court 532 surrender equivalent to consent 533 how shown ; appearance without objection 533 effect of objection to jurisdiction 535 determination as to adverse claims 524 ancillary jurisdiction in respect to 551 ownership of property not essential 524 possession of property; controlling element 525 by third person 526 of wife of bankrupt „ 527 assignee or receiver 527 under attachment 528 by lienor 526 surrender of possession; claim becomes adverse 529 inquiry as to basis of claim 529 plenary suits against; jurisdiction 523 poBBea«ion, power of receivers 51 Alleni. bankruptcy, when property is in country 146 Alimony. discharge not to affect liability, Bankr. Act, S 17 , 421 due or to accrue, not provable 438 not discharged by discharge of husband 438 Allowance of Claims, See Proof of Claims. Amendments. petitions and schedules, court may allow. Gen. Ord. XI 1197 how made, Gen. Ord. XI 1197 discharge, petition for, when allowed 349 specifications of objections, when allowed 357 petition for revocation 413 involuntary proceedings ; petition 858 petitions in bankruptcy, when allowed 460 purposes for which made 461 within reasonable time 461 defective verification 462 application, how made 464 effect, when granted 465 proofs of claims; allowance 792 after expiration of year 793 informal presentation ; defects cured 792 schedules *" Ancillary J-nrisdiotion. exercise by bankruptcy court, Bankr. Act, i 2 (20) 22 effect of amendment of 1910 33 includes power to determine adverse claims 551 Gbneral Index. 1629 Ancillary Proceeding!. page jurisdiction of bankruptcy courts, amendment of 1910 33 receivers, appointment 33 release of bankrupt from imprisonment 34 suits for recovery of property 34 testimony of witnesses 34 Antecedent Debts. payment, within four months' period, preference 887 Appeals. cases in which brought, Bankr. Act, § 25a 571 time of taking, Bankr. Act, § 25a 571 trustees not required to give bond, Bankr. Act, § 25c 571 jurisdiction of Supreme Court, Bankr. Act, § 24a 561 appeals not permitted under Act of January 28, 1915 606 circuit courts of appeals, Bankr. Act, § 24a 561 supreme courts of territories, Bankr. Act, § 24a 561 from court of bankruptcy to circuit court of appeals; rules in equity, (Jen. Ord. XXXVI 1221 to Supreme Court, taken within thirty days. Gen. Ord. XXXVI 1221 findings of facts and conclusions of law. Gen. Ord. XXXVI 1221 record; what to contain. Gen. Ord. XXXVI 1221 forms; citation, Supp. Forms, No. 150 1400 circuit court of appeals 591 distinction between, and petitions to revise 575 revision not permitted, in case remedy is appeal 578 appeal, treated as petition to revise 379 in bankruptcy proceedings 564 as in equity cases 59 1 judgments only appealable 59 1 adjudication, granting or refusing 692 order of dismissal a judgment 592 effect of jury trial 592 discharge, granting or denying 593 order dismissing petition to review 594 claim, order allowing or rejecting 594 limited to money demand 595 amount in contioversy 595 validity of lien on property 595 time of taking 598 extension by order for reargument 598 when commences to run 598 parties ; notices 599. trustee to bring, when all creditors interested ■ 599 practice ; petition 600 assignment of errors; defects 600 bond of appellant 601 pauper cases ■ , qOi citation ; service gOl perfecting appeal, by filing bond and issue of citation 602 record ; evidence and findings 602 certifying portions 603 incompetent evidence included 603 incomplete ; dismissal of appeal 604 Dooks and papers which may not be transcribed 604 review of discretionary rulings 604 findings of fact not disturbed 603 composition, from confirmations or rejection 329 1630 General Index. Appeals — Continued. page controversies arising in bankruptcy proceedings 563 what constitute 563 distinction between, and proceedings in bankruptcy 564, 565 importance and effect 566 jurisdiction as in other cases 565 appeals to Supreme Court not permitted 565, 606 decisions final under Act of January 28, 1915 606 procedure outlined 574 section 25a ; scope and meaning 573 Supreme Court, controversies arising in bankruptcy 567 from district court as court of bankruptcy 568 State courts ; cases in which brought 568 from circuit courts of appeal; effect of Act of January 28, 1915 606 jurisdiction prior to Act of January 28, 1915; amount in controversy. . . . 607 federal question involved 607 judgments in certain cases 607 practice; regulated by rules 608 certificates; when issued 609 writ of certioari 610 under Act of 1867 562 section 24 of present act ; scope and meaning of section 562 See also Bevisory jurisdiction. Appearances. involuntary proceedings, bankrupt or creditor 468 voluntary, by bankrupt, effect 470 made within five days 470 in person or by • attorney 471 Appellate Courts. definition, Bankr. Act, § 1 1 Appellate Jurisdiction. Supreme Court, circuit courts of appeals, and supreme courts of territories, Bankr. Act, § 24a 561 exercise of, in certain cases, Bankr. Act, § 25a 571 not permitted under Act of January 25, 1915 606 controversies arising in bankruptcy proceedings 563 distinction between, and proceedings in bankruptcy 564, 565 appeals to Supreme Court not permissible 606 under Act of 1867 562 section 24 of the present law 562 exercise. See Appeals; Circuit Court of Appeals; Revisory Jurisdiction; Supreme Court. Appraisal- property belonging to estates, Bankr. Act, § 70b 1106 appointment of appraisers, Bankr. Act, § 70b 1106 form, appointment, oath and report of appraisers, Off. Form, No. 13 1252 appraisers ; appointment 1 165 number and qualifications 1 165 practice 1 166 Arbitration of Controversies. trustee may submit, Bankr. Act, § 26a '. . 611 appointment of arbitrators, Bankr. Act, § 26b 611 findings of arbitrators, Bankr. Act, 5 26c 611 trustee's application ; contents, Gen. Ord. XXXIII 1218 Geneeal Index. 1631 Arbitration, of Controversies — Continued. page arbitrators ; appointment ^12 findings, effect of verdict 612 submission to arbitration; order of court 612 trustee to apply 612 notice to creditors 612 Arrest. protection of bankrupt from, Bankr. Act, § 9a 277 Assets, collection and distribution, Bankr. Act, § 2(7) 22 partnership, firm and individual, what are 186 marshalling to prevent preferences 187 for payment of firm debts 187 distribution among firm and individual creditors 188 schedule 261 trustees, collection 719 failure to use due diligence 721 Assigned Claims. proof ; ownership of claims 789 prior to proof, and after adjudication 789 date and facts of transfer 790 effect on priorities 790 Assignment- claim of exemption, not permitted 217 Assignment for Benefit of Creditors, act of bankruptcy, Bankr. Act, § 3a (4) 82 time of commission; petition within four months, Bankr. Act, § 3b 82 within four months, void, Bankr. Act, § 67e 1031 act of bankruptcy; requirements 114 what constitutes 115 insolvency not essential 116 allowances to assignees for expenses 933 sums paid to creditors 933 services in preservation of estate 933, 1000 assignee not adverse claimant 527 plenary suit to recover property; jurisdiction 523 creditors assenting, estopped from filing involuntary petition 844 discharge, grounds of objection to , 397 fees and expenses of assignees ; priorities 1000 State courts; adjudication terminates jurisdiction 557 stay of proceedings in State courts ■ 297 trustee acquires title to property assigned 1125 voidable, if within four months' period 1076 Attaclunent. bond, discharge of debt, effect on sureties 418 costs in suits, provability 975 possession under, person or oflSoer bailee of trustee. 528 void, if obtained within four months, Bankr. Act, § 67f 1032 within four months' period, annulled 1084 exempt property, not affected 1085 continued for preservation of estate 1088 Attorney-General. statistical tables; presentation to Congress, Bankr. Act, § 53 761 1632 Genekal Index. Attorney, Letter of. PAOa proof of acknowledgment, Gen. Ord. XXI 1206 Attorney*. fees, priority of payment, Bankr. Act, § 64b ( 3 ) 985 preferences, recovery by trustee, Bankr. Act, § 60d 861 allowances, notice to creditors 836 compensation; allowance by court 935 when to be granted 935 determination of amount 936 services for claimants 937 petitioning creditors ; matter of right 937 amount allowed 937 reasonable allowance 937 payment out of general fund 938 bankrupts in involuntary proceedings 940 in voluntary proceedings 940 receivers, appointed in bankruptcy 938 appointed by State court 939 trustee ; fees an expense of administration 941 allowance ; amount 942 for preservation of estate 941 assignee, prior to bankruptcy 943 priority of payment; allowance 1002 services necessarily rendered 1002 petitioning creditors; amount 1003 bankrupt; in composition 1003 resisting adjudication 1004 receiver of corporation appointed in State court 1004 composition, allowances 327 conduct of proceedings by. Gen. Ord. IV 1191 name and place of business to be entered, Gen. Ord. IV 1191 employment ; necessity to be shown 934 for trustee ; how chosen 935 lien on client's papers ; validity 1018 preferences ; payment by bankrupt 925 in contemplation of bankruptcy 926 recovery of payments ; practice 926 violation of Bankruptcy Act, disbarment or suspension 633 Auctioneers. services ; payment 932 Auxiliary Remedies. determination of ownership of property in custody of court 552 stays and orders to show cause 552 B. Bankrupt. death or insanity, proceedings not to abate, Bankr. Act, § 8 273 definition, Bankr. Act, § 1 1 detention, order issued, Bankr. Act, § 9b 277 duty of marshal, Bankr. Act, § 9b 277 custody pending examination, Bankr. Act, § 9b 277 discharge, application for, when made, Bankr. Act, § 14a 335 debts not affected, Bankr. Act, § 17 421 liability of co-debtors not affected, Bankr. Act, § 16 415 revocation for fraud, Bankr. Act, § 15 407 dividends; balance remaining, payment to Bankr. Act, § 66b 1029 Geneeal Index. 1633 Bankrupt — Continued. page datieg enumerated, Bankr. Act, § 7 251 attend first meeting of creditors, Bankr. Act, § 7 ( 1 ) 251 comply with lawful orders, Bankr. Act, § 7 (2) 251 proofs of claims, examinations, Bankr. Act, § 7 (3) 251 information as to false claims, Bankr. Act, § 7 (7) 251 papers, execution and delivery, Bankr. Act, § 7 (4) 251 transfers of property, execution, Bankr. Act, § 7 (5) 251 trustee, to inform as to evasions of act, Bankr. Act, §7(6) 251 schedules of property and creditors, preparation, Bankr. Act, § 7 (8) 251 examination as to business, etc., Bankr. Act, §7 (9) 251 extradition from one district to another, Bankr. Act, § 10 283 involuntary, persons against whom proceedings may be brought, Bankr. Act, § 4. . 138 corporations may be proceeded against, Bankr. Act. § 4 138 exceptions as to wage earners and farmers, Bankr. Act, § 4 138 service upon, Bankr. Act, § 18a 451 appearance and pleading, Bankr. Act, § 18b 451 where insolvency is alleged, Bankr. Act, § 3d 83 offenses ; punishment, Bankr. Act, § 29b 618 arraignment and trial, Bankr. Act, § 2 (4) 21 protection from arrest, Bankr. Act, § 9a 277 seizure of property by marshal, Bankr. Act, § 69 1102 release upon execution of bond, Bankr. Act, i 69 1102 suits by and against, Bankr. Act, § 11 285 stay of suits against, Bankr. Act, § 11a 285 appearance by trustee, Bankr. Act, § lib 285 trustee may prosecute suits brought by, Bankr. Act, § lie 285 voluntary, person entitled to benefits, Bankr. Act, § 4 138 imprisoned; produced on habeas corpus, Gen. Ord. XXX 1216 discharge, if for provable debt. Gen. Ord. XXX 1216 denial of bankruptcy, Off. Form, No. 6 1246 protection, petition for order, Supp. Forms, No. 87 1334 order, Supp. Forms, No. 88 1335 alien, adjudication 43 attorneys, allowances in composition 327 claims, examination 255 information as to false ' 255 compositions, offer 316 See Compositions. death or insanity, comparative legislation 213 proceedings not to abate 274 one or more partners 274 effect on right of discharge 274 on wife's dower 276 on rights of children 275 on statutory allowances to wife and children 275 detention, purpose of provision 281 application for, when made 281 discharge, application for 344 personal representative in case of death or insanity 344 time of making 345 failure to make effect 347 petition for, allegations 348 where fllud 349 amendments, when allowed 349 grounds of withholding , 366 concealment of property 368 false oath in proceeding 37« 103 !-634 Geneeal Index. Bankrupt — Continued. PAGE books, failure to keep, destruction or concealment 379 false statement of credit 386 fraudulent transfer 395 previous discharge within six years 397 refusal to obey lawful orders or answer questions 399 revocation ; jurisdiction exclusive 408, 409 meaning of section 409 fraud only ground 411 knowledge of fraud 412 practice ; application 413 debts not affected 423 liabilities for certain acts 432 false pretenses or representations 433 wilful and malicious injuries 436 alimony due or to become due 438 debts not scheduled 441 fiduciary debts 444 taxes due 431 domicile, residence or place of business 38, 39, 40 domicile distinguished from residence 39 residence, what constitutes 39 place of business, determination 40 corporations ; . 40 preceding six months ; . . . 43 evasion of act, notification of trustee 257 examination, duty to submit to 264 at first meeting of creditors 265 at such other times as court may order 265 creditors ' rights . 265 production of bankrupt for ; 266 application for order ; when granted 266 conduct; procedure 266 employment of stenographer 266 counsel for bankrupt 267 minutes record of 267 objections and rulings to be entered 267 subject matter ; conduct of business 268 property of bankrupt 268 unsatisfactory answers ; contempt 269 criminating questions; immunity 269 use of books when permissible 271 use of schedules if incriminating 259 refusal to answer, because of incrimination 269, 270 discharge withheld, for refusal to answer material question '. . . 271 exemptions, prescribed by State laws 203 right to ; domicile 212 claim, assertion of ; practice 213 waiver, how made 214 parties entitled to 217 effect of fraud 222 acquisition of property to secure 227 selection out of encumbered property 227 kinds of property 229 See Exemptions. extradition, when to be granted 283 practice; release or order for removal 284 Geneeal Index. 1635! Stsitmpt — Continued. PAGE involuntary, debts to be owed; amount 147 persons who may be adjudged 147 status of alleged bankrupt; time 147 change of, before filing petition 148 wage-earners, exception 149 who are 149 subsequent change of occupation 147 farming or tillage of soil, persons engaged in 149 chief occupation ; cattle buyer 150 dairying and cattle raising 150 lease of farm 151 change of occupation 147 See Involuntary Proceedings. fraternal associations 155 meetings of creditors, attendance 253 order compelling attendance 254 presence at first meeting 253 distance of over 150 miles 254 See Meetings of Creditors. obedience of lawful orders, enforcement '. 76, 254 order directing property to be turned over 254 offenses; conuuission generally 620, 625 false oath in proceeding ; indictment 622 comprehends false swearing 629 evidence 630 concealment of property; indictment 622 knowingly and fraudulently 621 what constitutes 625, 626 trustee must be appointed 627 by corporation 627 omission from schedules 628 evidence 628 conspiracy to conceal; indictment 623 papers, execution and delivery 256 transfer of property, execution '. 256 to pass title to trustee 256 property acquired after petition belongs to 1116' protection from arrest, when right begins 279 right ends with discharge 279 dependent upon debts released by discharge 279 application for order 280 court or referee to grant 280 schedules, preparation and filing 257 time when filed 258 by whom prepared and filed 258 failure to prepare or file 258 duty of referee 258 examination of bankrupt 258, 265 punishment 259 use as evidence ; immunity 259 form and contents 259 creditors and liabilities 260 accuracy of statements 260 abbreviated addresses not permitted 260 residence, suflBcient description 261 assets; omission of property 261 omission an offense 628 1636 General Index. Bankrupt — Continued. page claim of exemptions 237, 262 articles to be described 238, 262 verification 263 suits against, stay. See Stay of Suits. continuance by trustee 302 where bankrupt is defendant 302 where bankrupt is plaintiflf 304 practice , 305 title vests in trustee, as of date of commencement of proceedings. '. 1113 between petition filed and adjudication 1114 and appointment of trustee 1114 See Estates; Property of Bankrupt; Trustee. trustee ; undue activity to secure appointment 707 voluntary, persons who may become 141 debts must, be owed 142 corporations may become 142 board of directors may file petition 143 infants, proceedings by 144 lunatics, disability 145 married women, right to become 146 aliens having property in country 146 Indians may become 146 estates of decedents 146 who may become 139 history and comparative legislation 139 amendatory acts 1903 and 1910 140 Bankruptcy. proceedings not to abate because of death or insanity of bankrupt, Bankr. Act, § 8. 273 corporations, effect, discharge 156, 420 liability of oflicers, directors and stockholders 156, 420 cases prior to amendment of 1910 157 date of ; time of, definition, Bankr. Act, § 1 1 partnership, provisions respecting, Bankr. Act, § 5 164 See Partners; Partnership. persons entitled to privileges 139 history and comparative legislation 139 amendatory act of 1903 140 act of 1910 140 proceedings commenced by filing petition ._.... 458 See Petitions. Bankruptcy Act. construction and interpretation 4 act is remedial 4 purposes of act 4 resort to proceedings of Congress 5 effect on State legislation 6 enforcement by necessary orders, etc 75 requirement as to uniformity 6 suspension of State insolvency laws 6 time of taking effect 1186 Bankruptcy Courts. appeals to circuit court of appeals, equity rules govern, Gen. Ord. XXXVI 1221 to Supreme Court, within thirty days, Gen. Ord. XXXVI 1221 creation, and jurisdiction prescribed, Bankr. Act, § 2 21 definition, Bankr. Act, § 1 - 10 General Index. lG37i Bankruptcy Courts — Continued. paqe depositories, designation, Bankr. Act, § 61 929 bonds to be required, Bankr. Act, § 61 929 discharge, filing application for, Bankr. Act, § 14a 335 objections; hearing, Bankr. Act, § 14b 335 grounds for withholding, Bankr. Act, § 14b 335 jurisdiction specified, Bankr. Act, § 2 21 meetings of creditors, called on request of creditors, Bankr. Act, § 55e 763 newspapers; designation for publication of notices, Bankr. Act, § 28 616 partnership adjudications, jurisdiction, Bankr. Act, § 5e 164 proceedings in equity, equity rules govern. Gen Ord. XXXVII . . . : 1222 referee ; appointment, Bankr. Act, § 34 644 designation of districts, Bankr. Act, § 34 644 number appointed, Bankr. Act, § 37 649 transfer of cases ; petitions filed in different courts, Bankr. Act, § 32 639 additional parties, power to bring in , 67 adjudication, limitation of residence of bankrupt 37 alien bankrupts 37 removal from one district to another 38 effect, as to property of bankrupt 44 ancillary proceedings, amendment of 1910 32 prior to amendment of 1910 32 jurisdiction possessed and exercised 33 receivers, appointment 33 suits for recovery of property 551 testimony of witnesses 34 closing estates, jurisdiction , 72 when and how, estate closed 72 collection and distribution of estate, jurisdiction 67 orders directing delivery of assets 68 disclosure of concealed assets ' 69 consent to reorganization of corporation 70 commission of offenses ; jurisdiction 57 composition, jurisdiction 75 contempts ; jurisdiction to punish for 57 imprisonment for debt ; constitutionality 58 instances 63 proceedings, when will lie 59 possibility of performance 60 ability to produce property 60 failure to explain 61 practice, provisions controlling 64, 66 continuance of goiig business, jurisdiction 54 controversies, jurisdiction as to settlement 70 costs, taxation, jurisdiction 79 discharge, jurisdiction 342 residence within district where proceedings are pending 343 law governing proceedings 343 district courts constitute , 25 equity, court of proceedings 25 rules applicable 26 plenary suit in, jurisdiction 26 enforcement of act by necessary orders, jurisdiction 75 injunctions, other than against suits 76 to restrain sales 78 practice 79 1638 General Index. Bankruptcy Courts — Continued. PAGE exemptions, jurisdiction 210 administration of exempt property 206 jurisdiction, court first acquiring 35 limited by statute 27 expedition in exercise 36 scope and effect, law conferring 515 comparative legislation; former laws 516 effect of decisions 516 under former acts 516 prior to amendment of 1903 520 purpose of amendments of 1903 and 1910 521 plenary suits against adverse claimants 523 adverse claimants, determination 524 who are ; rules determining 524, 529 consent of adverse claimants, when required 531 voluntary surrender equivalent 533 method of showing 533 suits for recovery of property 30, 536 fraudulently or preferentially transferred 536 trustees alone may bring 336 property which may be recovered 537 summary, when exercised ■ 539, 549 effect of amendment of 1903 541 possession, dependent upon 541 unauthorized surrender 545 property in, when 547 of Bankrupt becomes that of court 547 actual not required 544 constructive sufficient 544 liens on property in 545 exercise ; summary process 549 territorial extent 30, 551 ancillary, exercise 32 inherent in, as court of equity 32 effect of amendment of 1910 33 auxiliary remedies, stays and orders to show cause 552 determination of ovmership of property in custody of court 552 newspapers; designation, how made. 616 open at all times 30 partnership jurisdiction where partners domiciled in different districts 43 preference ; recovery ; jurisdiction 920 receiver, jurisdiction to appoint 44 See Receivers. referee; appointment 644 limits of district 645 removal from office 645 term of ofSce 645 reopening estates, jurisdiction 73 grounds ; application 73 suits by trustee, recovery of property, jurisdiction, Bankr. Act, § 23b 513 consent of proposed defendant, Bankr. Act, § 23b 513 transfer, where petitions filed in different courts 639 parties in interest, convenience of 640 practice; illustrative cases 640 General Index. 1639 Banbmptcy Courts — Continued. PAOB trustee; appointment on failure of creditors 703 approval or disapproval of appointment 704 grounds of disapproval 705 violation of act ; jurisdiction to punish 57 lawful orders, punishment 57 Bankruptcy Crimes. See Offenses. Banks. deposit of money; when a preference 893 deposits received while insolvent 1058 misappropriation 1058 depositories; designation, Bankr. Act, § 61 929 bonds to be required, Bankr. Act, § 61 929 disbursement of moneys 930 liens on deposits or dividends due stockholders 1021 not subject to bankruptcy 152 offsets ; deposits against notes 1095 against overdrafts 1096 liability of depositor as indorser 1097 preferences, proof of, surrender of deposits 808 transactions generally, when constitute 892 deposits of money 893 Betting and Gaming. debts based on, provability 967 bucket shop transactions 967 Bills and Notes. debts evidenced by, provability :....*. 960 See Provable Debts; Commercial Paper. Bonds. petitioning creditors, on application to take possession of property, Bankr. Act, § 3e 83 conditioned for payment of costs, Bankr. Act, § 3e 83 seizure of bankrupt's property, Bankr; Act, § 69 1 102 release upon execution by bankrupt, Bankr. Act, § 69 1102 appeals 601 petitioning creditors; purposes and effect 135 liability for costs and expenses 185 remedies against sureties 136 sureties; liability not affected by discharge of principal 417 appeal bonds 417 420 attachment bonds 4jg replevin and jail bonds 42o bonds ; provability gjQ Bonds, Official. filed in office of clerk, Bankr. Act, § 50h 75O referee ; amount, sureties and conditions, Bankr. Act, § 50a 750 filed with clerk of court, Bankr. Act, § 50h 750 suits upon, for use of person injured, Bankr. Act, § 50h 750 brought within two years, Bankr. Act, § 501 75I vacancy, for failure to give, Bankr. Act, § 50k 75I sureties; evidence of value of property, Bankr. Act, § 50d 75O two upon each bond, Bankr. Act, § 50e 75O ^640 Geneeai, Index. Bonds, OfiBcial — Continued. PAGE value of property, amount, Bankr. Act, § 50f 750 corporations may become, Bankr. Act, § 50g 750 truBtee; sureties and condition, Bankr. Act, § 50b 750 amount; creditors to fix, Bankr. Act, § 50c 750 liability for penalties or forfeitures, Bankr. Act, § 50i 751 filed with clerk of court, Bankr. Act, § 50h 750 joint bonds of joint trustees, Bankr. Act, § 50j 751 suits upon, Bankr. Act, § 50h 750 brought within two years, Bankr. Act, § 50j 751 referee; form and requirements 751 sureties ; form of 752 corporations usually act as 752 trustee; failure to give 753 creditors fix amount 752 Books and Papers. production on examination of witnesses 503 Books, Fallnre to Keep. discharge, ground of objection 379 essential elements 380 failure alone insufScient 381 presumption arising from 382 character of business controls 383 improperly kept ; presumption 385 Breach of Promise to Marry. discharge of liability 430 accompanied by seduction, Bankr. Act, § 17a (2) 421 Bulk Sales. evidence of fraud 1069 preference ; evidence of 915 Burdensome Property- petition for instruction as to disposition, Supp. Forms, No. 182 1432 order on, form, Supp. Forms, No. 183 1433 trustee may refuse to accept 1162 See Estates; Trustee. C. Canadian Bankruptcy Act. text 1565 index 1600 general rules 1610 Caveat. filing petition in bankruptcy 459 Certified Copies. as evidence, Bankr. Act, § 21d 495 purpose of provision ■. 509 order approving bond of trustee 509 Certiorari, V^rit of. issued by Supreme Courts, Bankr. Act, § 25d 571 from Supreme Court, to Circuit Court of Appeals 610 appropriation by petition 610 Chattel Mortgage. invalid, if ineffectual against creditors 1074 trustee vested with rights of lien creditors 733 recording or filing ; void for want 1036-1039 object 1039 effect of failure ; New York rule 1040 Geneeal Index. 1641 Chattel Mortgage — Continued. faob within reasonable time 10*1 trustee; right to attack for failure 1041 possession of bankrupt 1042 agreement to withhold 1043 within four months' period 1044 yalid; mortgagor in possession 1057 Circuit Courts. jurisdiction of controversies in bankruptcy, Bankr. Act, § 23a 613 concurrent with bankruptcy courts, Bankr. Act, § 23c 513 abolished by judicial code 516 concurrent jurisdiction over offenses 560 effect of abolition 560 powers and duties conferred upon district courts 517 effect upon jurisdiction of district courts 517 Clronlt Courts of Appeal- appeals from bankruptcy courts, equity rules govern, Gen. Ord. XXXVI 1221 to Supreme Court, within thirty days, Gen. Ord. XXXVI 1221 record; what to contain. Gen. Ord. XXXVI 1221 appellate jurisdiction, Bankr. Act, § 24a 561 exercise of, in certain cases, Bankr. Act, § 25a 571 superintendent and revise in matters of law, Bankr. Act, § 24b 561 Supreme Court, appeals to, Bankr. Act, § 25b 571 appeals; controversies arising in bankruptcy 563 general provisions as to 567 court always in session 584 in bankruptcy proceedings as distinguished from controversies arising in bank- ruptcy 564, 565 importance of distinction 566 as in equity cases 591 judgments only appealable 591 order or decision must be final 592 adjudication, granting or refusing 592 order of dismissal a judgment 592 effect of jury trial 592 discharge, granting or denying 593 order dimissing petition to review 594 claim, order, allowing or rejecting 594 limited to money demand 595 amount in controversy 595 lien on property in hands of trustee 596 priority and secured 595 claims for fees and expenses 597 time of taking 598 order for reargument; extension 598 when commences to run 598 parties ; notices 599 trustee to bring, when all creditors interested 599 practice ; petition 600 assignment of errors 600 bond of appellant 601 citation ; service 601 perfecting appeal • 602 record ; evidence and findings 602 portions certified 603 evidence objected to, included 603 1642 General Index. circuit Oonrt of Appeals — Continued. page incomplete ; dismissal of appeal 604 books and papers which may not he transcribed 604 review of discretionary orders and rulings 604 findings of fact, not disturbed 605 effect of appeal and decision 606 costs on appeal 606 decision final under Act of Jan. 28, 1915 606 revision ; petition to revise in matter of law 575 comparative legislation 576 distinction between, and appeals 575 right exclusive or accumulative 578 if review may he had by appeal 578 dependent on character of controversy 579 questions of law and fact, remedy by appeal 581 uniting appeal and revision 579 appeal treated' as . .■ 579 questions of law only considered 581 matters subject to 582 object and character of proceedings to govern 583 orders during proceedings 583-587 practice ; petition, form 587 record ; state question of law involved 587 evidence taken before referee 587 opinion of district judge on review 588 time of filing petition 588 execution of petition 589 notice to adverse parties 590 dismissal for lack of parties 590 revision on appeal ; procedure outlined 574 Claims. See Provable Debts; Proof of Claims. jurisdiction to allow or disallow. Bank Act, § 2 (2) 21, 44 Claim Fee. referee entitled to 679 Clerks. compensation; filing fee, Bankr. Act, § 52a 758 definition, Bankr. Act, § 1 1 docket to be kept. Gen. Ord. 1 1190 duties specified, Bankr. Act, § 51 754 -earches, certificates of, Bankr. Act, §71 1182 fees, in full compensation. Gen. Ord. XXXV 1219 indexes of petitions and discharges, Bankr. Act, § 51 754 indorsement of papers filed, Gen. Ord. II 1191 transmission of proved claims, Gen. Ord. XXIV 1212 compensation; filing fee as full compensation 759 fees for copies of papers 759 duties ; under general orders and forms 755 fees, accounts for 755 poUection 755 payment to referee and trustee 756 pauper affidavits 756 Oloslng Estates. when and how estates may be closed 72 General Index. 1643 Co-debtors. TAGE discharge of one; liability of others not affected 416 debts of partners 417 indorsers on note ; discharge of maker 417 sureties on bonds; discharge of principal 417 appeal bonds 420 attachment bonds ; discharge of debt 418 suit commenced more than four months before bankruptcy 419 replevin and jail bonds 420 directors of corporations as co-debtors 420 Collection and Distxibntion. bankrupt estates, jurisdiction of bankruptcy courts 67 Commercial Paper. debts evidenced by, provability 960 discharge of maker; liability of indorsers 417 indorser; liability, provable debt. (See Provable Debts) 960 offset by bank, of deposits against 1095 liability of depositor as indorser 1097 proof of, instrument to accompany claim 790 statement of consideration 790 Commission. of certain officers. See Compensation; Marshal; Receiver; Referee; Trustee. Compensation. clerk; filing fee, Bankr. Act, § 52a 758 marshal ; commissions, Bankr. Act, § 48d 741 additional, for business conducted, Bankr. Act, § 48e 742 receiver ; commissions, Bankr. Act, § 48d 741 additional for business conducted, Bankr. Act, § 48e 741 referees, Bankr. Act, § 40 676 trustees ; fees and commissions, Bankr. Act, § 48a 741 additional; business conducted, Bankr. Act, § 48e 742 three trustees instead of one, Bankr. Act, § 48b 741 v?ithheld for removal, Bankr. Act, § 48c 741 referees ; comparative legislation 677 prior to amendment of 1903 677 pauper cases 678 composition cases 678 filing fee Q79 claim fee; purpose 679 charge against estate 680 disbursements to creditors; commissions 680 full compensation ; meaning 681 reference to two or more referees 683 special master, referee acting as 678 trustees, comparative legislation 743 amount generally 743 under act prior to amendment 744 pauper cases 744 commissions on disbursements 744 disbursements to others than creditors 745 exempt property ; proceeds of sale 746 payment out of estate 746 rate of commissions 747 composition, in case of 747 1644 General Index. Oompensation — Continued. page limitation as to amount 1183 effect and purpose 1 184 conducting business, additional 747, 1184 Composition. approval ; judge to grant, Gen. Ord. XII 1198 confirmation, application, when filed, Bankr. Act, § 12b ,308 acceptance by creditors, Bankr. Act, § 12b 308 deposit of consideration, Bankr. Act, § 12b 308 hearing, date and place, Bankr. Act, § 12c 308 judge to order, Bankr. Act, § 12d 308 distribution of consideration, Bankr. Act, § 12e 308 operates as discharge, Bankr. Act, § 14c 335 notices to creditors, Bankr. Act, § 58a ( 2 ) 826 title to property revests in bankrupt, Bankr. Act, § 70f 1107 opposition; appearance of creditor, Gen. Ord. XXXII 1217 specification of objections. Gen. Ord. XXXII 1217 meetings of creditors, to consider, Bankr. Act, § 12a 308 offer of terms, when made, Bankr. Act, § 12a 308 order confirming or setting aside, certified copy, as evidence, Bankr. Act, § 21f . . . . 495 confirming, evidence of revesting title, Bankr. Act, § 21g 495 referee, jurisdiction as to, Bankr. Act, § 38 650 schedules filed, if offered before adjudication, Bankr. Act, § 12a 308 Betting aside confirmation, application of proceeds of property acquired, Bankr. Act, § 64c 985 application for, withiti six months, Bankr. Act, § 13 331 fraud in procuring, Bankr. Act, §13 331 vesting of property in trustee, Bankr. Act, § 70d 1106 forms; petition for meeting to consider. Off. Forms, No. 60 1292 confirmation, application for. Off. Forms, No. 61 1293 order granting. Off. Forms, No. 62 ' 1294 distribution on, order. Off. Forms, No. 63 1295 offer, Supp. Forms, No. 94 1341 notice to creditors, Supp. Forms, No. 95 1342 acceptance by creditors, S«pp. Forms, No. 96 1343 certificate of referee, Supp. Forms, No. 97 1344 order to show cause, Supp. Forms, No. 98 1346 opposition; appearance of creditor, Supp. Forms, No. 99 1347 specifications of objections, Supp. Forms, No. 100 1348 order of reference to special master, Supp. Forms, No. 101 1349 report of special master, Supp. Forms, No. 102 1350 confirmation; order granting or refusing, Supp. Forms, No. 103 1351 petition to set aside, Supp. Forms, No. 104 1353 act of 1867, provisions concerning 311 act of 1898, changes in former act 312 constitutionality 313 construction of section 313 appeals from confirmation or rejection 329 bankrupt not entitled, on rejection 329 Canadian system 311 compensation of referee 678 confirmation; objections, how made 323 only judge may make 323 against best interests of creditors 323 withdrawal of objections 326 ascertaining whether majority has consented 322 nets or omissions barring discharge. 325 Geneeal Index. 1645 Composition — Continued. fagb absence of good faith 326 creditors who may object 323 hearing of objections 327 allowances to attorney of bankrupt 327 order in effect a discharge 314 property revests in bankrupt 314 notice to creditors required 830 setting aside, title vests in trustee 334 consideration, deposit 319 place and time designated by judge 319 amount of deposit 320 cash, sufficient to pay priority debts 321 costs of proceedings 321 counsel and referee's fees 321 deposit of assets of estate 322 continental systems 311 distribution of consideration, judge to direct 328 by check or warrant 328 claims to share 328 unscheduled claims 328 dismissal, when completed 329 effect of, as discharge of debts 314, 405 English system described 310 examination of bankrupt at meeting of creditors 265 informal, settlement outside of bankruptcy 316 jurisdiction of bankruptcy courts 75 liens, effect on 315 offer of terms, made to all creditors 816 who may make 313 after examination of bankrupt 317 discharge of bankrupt 317 either before or after adjudication ^17 withdrawal of offer 317 schedules to be filed 318 meeting of creditors to consider 318 acceptance by creditors 318 paper or instrument signed by creditors 318 creditors, whose claims are allowed 319 security and priority claims 319 majority in number and amount 319 practice 327 purpose and effect of law 314 referee, jurisdiction in respect to 322, 658 report to judge ; referee to niake 323 revision of orders regarding 587 setting aside for fraud 331 fraud, what constitutes 332 false schedules 332 inducement of creditors to accept 332 failure to fulfil terms 329 application, who may make 333 to judge within six months 333 petition ; contents ; 333 notice to creditors 334 trial before referee 334 effect; title revests in trustee 334 CompromiBe. notices to creditors required, Bankr. Act, § 58a (7 ) 826 1646 General Index. Compromise — Continued. PAGE claims, power of trustee 721 controversy; trustee may, Bankr. Act, § 27 613 petition for ; decision of referee 614 approval of court 614 petition for meeting to consider, Supp. Forms, No. 155 1404 Componnding Claims. petition by trustee, bankrupt or creditor Gen. Ord. XXVIII 1214 Computation. time, how made, Bankr. Act, § 31 637 months and years, how computed 638 days and fractions of days 638 Conceal. definition, Bankr. Act, § 1 2 includes what 16 Concealment of Property. discharge, ground for withholding 368 essential elements 368, 369 absence of fraudulent intent 369 failure to schedule property 370 undervaluation may be considered 372 evidence ; fair preponderance 373 continuing ; what constitutes 374 effect on right of exemption 223 offense; indictment on information 622 conspiracy for ; indictment on information 623 what constitutes 625 Conditional Sales, Contracts for. recording or filing ; void for want 1036 unrecorded ; validity 1039 trustee vested with rights of credit as against 733 title of trustee ; effect of failure to file 1 145 trustee acquires rights of creditors as against 1 146 lease with option to purchase 1147 goods consigned for sale 1148 option to purchase or return 1150 Confession of Bankruptcy. act of bankruptcy; essential elements 127 written admission of inability to pay debts 127 corporations; power of directors 127 partnership ; by one member 129 See Acts of Bankruptcy. Conspiracy to Conceal. offense ; indictment on information 623 violation of bankruptcy act; punishment 632 Contempts. before referee, Bankr. Act, § 41a 684 certificates of facts to judge, Bankr. Act, § 41b 684 commitments by judge, Bankr. Act, §41b 684 examination of bankrupt; evasion or refusal to answer 269 jurisdiction to punish, Bankr. Act, § 2(13) 22, 67 imprisonment for debt, constitutionality 58 Gebteeal Index. 164T Contempts — Continued. paob instances of contempt 63 fines for, not dischaTgea,ble 426 proceedings, when will lie 59 evidence of guilt 59 possibility of performance 60 control of property; possession 61 failure to explain inability to perform 61 property traced to possession 62 practice in general 64 notice of hearing 65 order of commitment 66 referee, contempts before 66 referee ; comparative legislation 685 disobedience of orders 686 order to restore property 686 wilful failure to obey 688 ability to obey, affirmatively shown 687 denial of ability insufScient 688 refusal to explain disposition 690 misbehavior in presence 690 witnesses, refusal to appear 690 lawful mileage to be paid 691 refusal to be sworn •. 691 to answer material questions 691 evasive and indirect answers 692 practice; statute must be followed 692 notice to person charged 692 certificate to judge 693 filed with clerk 693 petition and order 693 service on person charged 693 reference to special master 694 punishment; fine or imprisonment 695 commitment; order 695 refusal to answer, on examination of third party 502 schedules, failure or refusal of bankrupt to file 258 Continnance of Business. jurisdiction to permit, by receiver 54 period limited; due diligence 55 contracting indebtedness 55 conduct of business. 55 compensation of receiver or trustee 56 Contracts. claim founded on, provable debt, Bankr. Act, § 63a (4) 944 debts founded on ; provability 966 form not material 967 gambling transactions 967 breach of warranty 968 executory, damages for breach 968 contingent liabilities 970, 977 continuing; bonds 970 employment and commissions 971 breach of covenant in lease .....' 972 implied ; same as gMosi-contracts 972 torts; liability 973 conversion of personal property 973 Ifi'^S Gbnebal Index. Contracts — Continued. page executory; trustee may disclaim burdensome 1162 liabilities based on, provable '. 949 em contractu and ex delicto 949 based on torts 951 rights under, vest in trustee, Bankr. Act, § 70a (6) 1106 OomtroTeralea. settlement, jurisdiction of bankruptcy courts 70 application by trustee, contents. Gen. Ord. XXXIII 1218 Controversies Arising in Bankruptcy. appellate jurisdiction ; what constitute 563 distinction between controversies and proceedings in bankruptcy 564, 566 exercise of jurisdiction as in other cases 565 appeals to Supreme Court not permitted 565, 606 Conversion. discharge of liability for; judgment 428 based on contractual relation 428 agents, brokers, etc. ; release of debt 429 Copies. of proceedings as evidence, Bankr. Act, § 21d 495 certified, use as evidence 509 Copyrights. title vests in trustee, Bankr. Act, § 70a (2) 1106 trustee, title vests in 1123 Corporations. adjudged involuntarily bankrupts, Bankr. Act, § 4 138 municipal, railroad, insurance or banking corporations excepted, Bankr. Act, § 4 138 bankruptcy not to release liability of ofiScers, directors or stockholders, Bankr. Act, f 4 138 definition, Bankr. Act, § 1 2 letter of attorney; oath or acknowledgment. Gen Ord. XXI 1206 admission of inability to pay debts 127 directors, power to declare 127 writing essential ; unqualified admission 128 bankrupt; right of trustee to sue directors 1160 claims by, proof and allowance 788 concealment of assets by 627 directors and stockholders; liabilities released by discharge 420 discharge; liability of directors continues 420 application for ■ 344 dissolution, proceedings in State courts, effect of adjudication 559 increase of capital stock, fee a provable debt 965 involuntary bankrupts; corporations included 152 effect of dissolution in State Courts 153 unincorporated companies 15* petition against, allegations 155 banking and insurance, exceptions as to 152 effect of bankruptcy; discharge 156 liability of directors, officers and stockholders 157 subject to bankruptcy prior to amendment of 1910 157 place of business, determination for purpose of adjudication 40 designation of, in certificate of incorporation 41 recovery of unpaid stock subscriptions 724 liabilities of stockholders and directors 724 General Index. 1C49 Corporations — Continued. PAGE provable debt, ultra vires contract 947, 966 of bondholder of stockholder 788, 954 notes, proceeds used for corporate purposes 961 bonds, holders may prove 964 rights of action, when to vest in trustee neo officers, misconduct 1160 unpaid subscriptions 724 1160 directors; right of stockholders do not pass 1161 right to sue for unauthorized dividend 1161 taxes; priority of payment 99; franchise ; not entitled to priority 998 voluntary bankruptcy, proceedings 142 directors may file petition 142 Costs. involuntary proceedings; contested adjudication, Gen. Ord. XXXIV 1218 where petition is dismissed or withdrawn, Bankr. Act, § 3a 83 jurisdiction of bankruptcy courts, Bankr. Act, §2(18) 22 taxable against bankrupt, provable debt, Bankr. Act, § 63a ( 2 ) 944 incurred in good faith by creditor. Bank. Act, § 63a(3) 944 allowance, where petition is dismissed or withdrawn 135 discharge, in contested applications 401 exemptions, payment out of 243 provability; incurred in suits by or against bankrupt 973 against involuntary bankrupt 974 in action to recover provable debts 974 in attachment suits 975 Teclamation proceedings 1158 taxation, jurisdiction of courts of bankruptcy 79 Counterclaim. allpwed against estate, Bankr. Act, § 68b 1090 See Set-offs. Oonrts. definition, Bankr. Act, § 1 1 See Bankruptcy Courts; District Courts; Referee. Creditors. See Debts; Proof of Claims; Provable Debts. definition, Bankr. Act, § 1 1 discharge, objections to, hearing, Bankr. Act, § 14b 335 dismissal of proceedings; notice and hearing, Bankr. Act, § 59g 8S7 notices to creditors, Bankr. Act, § 58a 826 first meeting; publication, Bankr.. Act, § 58b 826 referee to give, Bankr. Act, § 58c 826 payment of dividends, Bankr. Act, § 65 1022 residing within the United States, Bankr. Act, § 65d 1022 petition in involuntary proceedings, Bankr. Act, § 59b 837 number and amount of claims, Bankr. Act, § 59b 837 hearing as to number and amount, Bankr. Act, § 59d 837 computation of number, Bankr. Act, § 59e 837 intervention and answer, Bankr. Act, § 59f S37 term includes what " jj gg2 trustee, appointment by, Bankr. Act, § 44 '. .'.'.'.'.'.*.'. . .' 699 voters at meetings, Bankr. Act, § 56a " ' ygg compositions, acceptance of terms 3 jg 104 1650 GrBNEEAL, InDEX. Creditors — Continued. pagii discharge, notice of hearing 349 intervention before adjudication in involuntary proceedings 855 when will be ordered 855 creditor who may file petition 857 application to join in petition " 858 notices to ; under statute and orders 827 construction and effect of law 828 not required in certain cases 829 effect on jurisdiction 830 See Notices to Creditors petitions in involuntary proceedings 129- 131 number and amount of claims 843 See Involuntary Proceedings. provable debts. See Provable Debts. trustee ; appointment at first meeting 701 See also Meetings of Creditors. Creditor's Bill. prior to four months' period not affected by adjudication 1087 lien, when not dissolved 1087 trustee may intervene to preserve lien 1088 Creditor's Meetings. See Meetings of Creditors. Crimes, Bankruptcy. See Offenses. Criminating Questions. bankrupt need not answer 269 use of schedules 269 books and papers not to be used 271 privilege of immunity, on examination of third persons 505 See Evidence. D. Days. computation, how made 638 fractions, how counted 638 Death. of bankrupt, proceedings not to abate, Bankr. Act, § 8 273 rights of widow and children, Bankr. Act, § 8 273 no abatement after filing petition 274 effect on right of discharge 274 dower and allowances to children 275 trustee, does not abate suit or proceeding, Bankr. Act, § 46 715 Debts. appeals from rejection or allowance, Bankr. Act, § 25a 571 definition, Bankr. Act, § 1 1 discharge, not affected by, Bankr. Act, § 17 421 appeals; order allowing or rejecting 594 amount in controversy 595 liens, validity ! 595 priority and secured 595 released by discharge. See Discharge. partnership, firm or individual 193 commercial paper, firm as maker or indorser 194 signing in firm or individual name I95 Geneeal Index. 1651 Debts — Continued. page assumption, by partner 196 of individual debts by partnership 197 provable debts means. See Provable Debts 11 taxes not provable 965, 994 Decedent's Estate. bankruptcy proceedings against 146 3efiiiitions. courts' of bankruptcy, Bankr. Act, § 1 1 referee not included 10 creditor, Bankr. Act, § 1 1 term includes what ; 1 1 date of bankruptcy, Bankr. Act, § 1 1 debt, Bankr. Act, § 1....J 1 provable, what is 1 discharge, Bankr. Act, § 1 1 dividends 20 document, Bankr. Act, § 1 2 adjudication, Bankr. Act, § 1 1 what contitutes 10 appellate courts, Bankr. Act, § 1 1 bankrupt, Bankr. Act, § 1 1 bankruptcy; time of; date of, Bankr. Act, § 1 1 clerk, Bankr. Act, § 1 1 coimnencement of proceedings, Bankr. Act, §1 1 conceal, Bankr. Act, § 1 2 term includes what 16 corporations, Bankr. Act, 1 1 courts, Bankr. Act, § 1 ; 1 term does not include referee 10 holiday, Bankr. Act, § 1 2 insolvency, Bankr. Act, § 1 2 term includes what 12-16 judge, Bankr. Act, § 1 2 oath, Bankr. Act, § 1 2 officer, Bankr. Act, § 1 2 property 20 persons, Bankr. Act, § 1 2 petition, Bankr. Act, § 1 2 preferences 19 referee, Bankr. Act, § 1 2 secured creditor, Bankr. Act, § 1 .' 2 term includes what 16 States, Bankr. Act. § 1 2 transfer, Bankr. Act, § 1 2 meaning applied and considered 17 trustee, Bankr. Act, § 1 2 wage-earner, Bankr. Act, § 1 2 meaning applied and considered 18 SepositioiiB. right to take, Bankr. Act, § 21b 495 notice of taking, Bankr. Act, § 21c 495 in bankruptcy proceedings, how taken 508 notice to adverse parties 509 -'^"^^ Geneeai, Index, Depositories. TABS banking institutions, designation, Bankr. Act, { 61 929 bonds to be required, Bankr. Act, § 61 929 payment by check or warrant. Gen. Ord. XXIX 1216 trustee to deposit moneys, Bankr. Act, § 47a (3) 716 Detention. of bankrupt, order issued, Bankr. Act, § 9 277 marshal to arrest, Bankr. Act, § 9 277 custody and release on bail, Bankr. Act, § 9b 277 application for order ; when made 281 purpose of provision 281 Disbursement. trustee; check or draft, Bankr. Act, § 47a (4) 716 Discharge. appeals to circuit courts of appeals or Supreme Court, Bankr. Act, § 25a S71 application for, when made, Bankr. Act, § 14a 335 h„„., V iudg.,/"""-,^' ' "' "^ i Gen. Ord. XII 1198 notice to creditors," Bankr. Act, § 98a (9 ) 926 confirmation of composition operates as discharge, Bankr. Act, § 14c 336 co-debtors of bankrupt, liahility not affected, Bankr Act, § 16 415 definition, Bankr. Act, § 1 1 debts not affected specified, Bankr. Act, | 17 421 taxes, Bankr. Act, § 17 421 liabilities for false pretenses, Bankr. Act, § 17 421 alimony due or to become due, Bankr. Act, § 17 421 maintenance of wife or child, Bankr. Act, § 17 421 seduction or criminal conversation, Bankr. Act, § 17 421 not included in schedules, Bankr. Act, i 17 421 fraud, embezzlement, etc., Bankr. Act, J 17 421 indexes, clerks to prepare and keep, Bankr. Act, § 51 754 jurisdiction of bankruptcy courts, Bankr. Act, § 2 (12) 22 objections by trustees or parties in interest, Bankr. Act, § 14b 335 hearing by judge, Bankr. Act, § 14b 335 trustee to interpose, when authorized by creditors, Bankr. Act, § 14b 335 opposition, creditor to enter appearance. Gen. Ord. XXXII 1217 specifications of objections. Gen. Ord. XXXII 1217 order granting or setting aside, certified copy as evidence, Baukr. Act, § 21f 4195 petition to state facts of case. Gen. Ord. XXXI 1217 revocation, application filed within six months, Bankr. Act, § 15 407 fraud of bankrupt, Bankr. Act, § 15 407 setting aside, proceeds of property ar quired, Bankr. Act, § 64c 985 vesting of property in trustee, Bankr. Aut, § 70d 1106 forms; petition and notice thereon. Off. Forms, No. 57 1289 opposition; specification of objections, Off. Forms, No. 58 1291 order granting, Off. Forms, No. 59 1291 extension of time to apply; petition, Supp. Forms, No. 105 1354 referee's certificate, Supp. Forms, No. 106 1355 order of referee, Supp. Forms, No. 107 1356 application; order to show cause, Supp. Forms, No. 108 1357 certificate of conformity; referee, Supp. Forms, No. 109 1358 opposition; appearance by creditor, Supp. Forms, No. 110 1359 specification of objection, Supp. Forms, No. Ill 1359 exceptions by bankrupt, Supp. Forms, No. 112 1360 Geneeal Index. 1653 Discharge — Continued. PAOK reference to special master, order, Supp. Forms, No. 113 1361 notice of hearing, Supp. Forms, No. 114 1362 order denying, Supp. Forms, No. 116 1363 appeals, order granting or denying 693 order dismissing petition to review 594 application by bankrupt 344 by corporation or partner 344 denial in former proceedings 344 personal representative in case of death or insanity 344 time of making 345 extension for cause 345 filing after expiration 347 failure to make, within time limited 347 effect same as denial 347 made to judge 343 reference to referee as special master 343 petition for, allegations 348 verification ; requirement 348 where filed 349 amendments, when allowed 349 notices to creditors and trustees 349, 831 form 349, 831 co-debtors, liability not affected 416 section 16 declaratory of law 416 construction of section 416 discharge of one co-debtor 416 debts of partners 417 indorsers on notes, discharge of maker 417 demand note, where presentment is delayed 417 sureties on bonds, release of principal 417 appeal bonds 420 attachment bonds : 418 replevin and jail bonds 420 directors of corporation 420 comparative legislation 273 composition, order of confirmation has effect of 314 405 constitutionality of restrictions ' 342 costs on contested applications 401 death of bankrupt, effect 274 debts not affected, rule in England 423 rule in Canada 423 under act of 1867 423 scope of section 423 proof of, effect 423 fines, penalties and debts due government 426 taxes due 431 liabilities for certain acts 432 conversion 428 effect of amendment of 1903 432 false pretenses or representations 433 fraud involving moral turpitude , 433 property obtained by false pretenses or representations .• 434 includes things of substance and not services 434 actual fraud must appear 435 purchase of goods without intention to pay 435 wilful or malicious injuries 436, 440 intent or malice ; determination 436 acts included 437 judgments for personal injuries 438 1654 General Index. Discliarge — Continued. . page alimony, due or to become due 438 maintenance or support of wife or child 430, 439 not applicable to purchase of goods by husband 439 seduction of. unmarried female 440 criminal conversation 440 debts not scheduled 441 names and addresses of creditors 441 what constitutes due scheduling 441 effect of actual notice of bankruptcy 443 failure to give residence 441 fiduciary debts ; what constitute 444 persons in fiduciary capacity 445 public officers and trustees ' 446 bailee of money 447 acting as public officer or in fiduciary capacity 446 sureties on bonds; discharge 447 debts subject to; provable debts ' 425 judgment debts 426 fines, penalties and debts due government 426 not affected by failure to prove 425 persons claiming ; effect 427 aliens; debts discharged 427 liabilities for torts; judgment 427 effect of amendment of 1903 427 waiver of tort 428 conversion, liabilities for; judgment 428 based on contractual relation 428 agents, brokers, etc., released 429 stock ; waiver of fraud 429 breach of promise to marry; liabilities 430 factor, liability for proceeds of goods consigned 431 stockholders' and directors' liabilities 431 definition and nature 341 effect, in general 402 on liens in garnishment proceedings 405 liens not affected 402 relates back to date of adjudication 403 must be pleaded 406 composition, has effect of 405 determining effect of discharge 424 granting or withholding; discretion of judge 400 order to be issued 400 grounds of opposition, one must be shown 366 offense of larceny before petition was filed 367 additional, under amendments of 1903 and 1910 367 concealment of property 368 essential elements • 368, 369 absence of fraudulent intent 369 ;' knowingly and fraudulently;" proof required 369 property belonging to estate 370 failure to schedule property 370 property transferred to wife 371 salary of public officer 372 undervaluation may be considered 372 evidence; fair preponderance 373 Geiteeal Index. 1655 Discharge — Continued. PAGE continuing; where accomplished before bankruptcy 374 conveyance prior to four months ' period 374 placing title in wife 'a name 374 false oath in proceedings 376 knowingly and fraudulently made 376 verification of answer containing false statement is not 376 oath to schedules 377 examination of bankrupt, false oath 378 matter material to the inquiry 378 omission of property from schedule 373 omission of creditor from schedule 379 decreasing claim of secured creditor 379 books, failure to keep, destruction or concealment 379 effect of amendment of 1903 379 essential elements 380 after passage of act 380 by bankrupt or by his direction , 380 intent to conceal financial condition 381 mere failure insuficient 381 presumption arising from failure 382 character of business controls intent 383 what constitutes, generally 383 business not requiring 385 improperly kept ; presumption 385 destruction of vouchers 385 burden of proof 386 false statement of credit, amendment of 1903 and 1910 386 elements of proof 386 meaning of clause 387 obtaining money or property 388 intent to defraud essential 388, 389 statement of financial condition 389 must be written 389 giving check 389 falsity must be proven ^90 purpose of obtaining credit 392 to mercantile agencies ^°^ equivalent to statement to creditor . . . 392 general statements not sufficient 393 special statements within clause 393 continuing effect 394 must be made by bankrupt 394 fraudulent transfer ; meaning 395 within four months ' period 395 recording within four months' period 396 preferential transfer not included 396 worthless equity of redemption 396 assignment for creditors within four months' period 397 previous discharge in voluntary proceedings 397 effect on debts provable in former proceedings 397 within six years ; measure of time 398 refusal to obey lawful orders or answer 271, 399 what constitutes • 399 to answer ; effect 399 hearing on application, appearances 350 creditors in person or by attorney 350 specifications of objections to be filed 351 time and place of filing 351 filed by trustee or party in interest 351 J-656 Geneeal Index. Olscharge — Continued PAca creditors with dischargeable debt are parties in interest 352 member of firm must show that he acts with consent 353 form and contents 353 particularity of allegations 353 general averments not sufficient 354 concealment of books, allegations 357 interest of creditors must be alleged 355 " knowingly and fraudulently " committed o.T.n^a 356 conclusions of law insufficient ' 355 concealment or transfer of property 356 false statement to secure credit . . : 357 amendments, when allowed 357 waiver of defects 359 exceptions by bankrupt 359 creditor proceeding under those of another 360, verification 360 by partnership 360 ground of withholding must be shown 366 reference to referee as special master 361 rulings as to evidence 361 report and minutes 362 proceedings ; objections as beginning of suit ^62 death of creditor after objections 362 rules of evidence 362 burden of proof on objecting creditor 362 presumption in favor of bankrupt 363 proof beyond reasonable doubt not required 363 testimony, preservation 365 report of special master 365 compensation and disbursements of special master 366 efiect of withdrawal of objections 400 history and comparative legislation 339 Roman and continental systems 339 Canadian system 340 English system 34C origin and nature 340 in United States, prior acts 341 jurisdiction of courts of bankruptcy ' 342 residence within district where proceedings arc pending 343 partnership debts ; effect of adjudication 180 where there arc no firm assets 181 debts must be scheduled ■ 181 pleaded as bar of debts 405, ■ 448 by bankrupt ov privies in title 405, 448 suit pending at time of bankruptcy 448 present law, original act 342 amendment of 1910 342 previous effect and application 397 within six years, computation 398 referee, jurisdiction as to, Banki . Act, § 38a (4) 658 revision of orders regarding 587 revival of debt by new promise 449 revocation, under English act 408 under former acts in this country 408 jurisdiction ; collateral attack •■ • 408 excludes other remedy 409 Genekai. Index. 1657 Discbarge — Continued. page meaning of section 409 " parties in interest " 409 " undue laches " 410 " within one year " 410 " upon a trial " 411 " obtained through fraud " 411 " facts did not warrant discharge " 411 grounds, fraud of bankrupt 411 fraud in fact must be shown 411 acts constituting fraud . . . .• 412 knowledge of fraud 412 application; burden of proof 413 made to judge 413- petition; what to state 413 notice to bankrupt 413 effect to nullify discharge 414 title vests in trustee .' 414 Dlimissal. of proceedings, creditors to have notice and opportunity to be heard, Bankr. Act, § 59g 837 involuntary proceedings, after trial 478 . lack of jurisdiction 478 consent of parties ; notice to creditors 479, 833 intervention by other creditors 479 District Courts. appeals to Supreme Court 668 See Appeals; Supreme Court. bankruptcy courts, jurisdiction , 515 See Bankruptcy Courts. circuit courts, powers conferred upon 517 effect upon jurisdiction in bankruptcy 517 removal of suits 519 District of Columbia. appeals to Supreme Court from Supreme Court of, Bankr. Act, § 24a 561 DistrictB. referees, designation, Bankr. Act, § 34 644 Dividends. creditors' rights not affected by subsequent claims, Bankr. Act, § 65c 1022 residing within United States, Bartkr. Act. § 65d 1022 declaration and payment on allowed claims, Bankr. Act, § 65a 1022 first, when declared, Bankr. Act, § 65b 1022 amount, Bankr. Act, § 65b 1022 dividends subsequent to first, Bankr. Act, % 65b 1022 final, when declared, Bankr. Act, § 65b 1022 notices to creditors, Bankr. Act, | 58a ( 5 ) 826 payment by check or warrant. Gen. Ord. XXIX 1215 referee to declare, Bankr. Act, § 29a ( 1 ) 662 trustees to pay, Bankr. Act, § 47a (9) 716 unclaimed ; paid into court, Bankr. Act, § 66a 1029 after one year; distribution, Bankr. Act, § 66b 1029 belonging to minors, Bankr. Act, § 66b 1029 balance paid to bankrupt, Bankr. Act, $ 66b 1029 1658 Geneeal Iitdex. I^ivitLemtls — Continued. PAGE forms, list of claims and, OflF. Forms, No. 40 1275 notice of payment. Off. Forms, No. 41 1276 first, order declaring and directing payment, Supp. Forms, No. 162 1410 final order of distribution, Supp. Forms, No. 164 1413 combined check and receipt, Supp. Forms, No. 165 1416 allowance of claims subsequent to payment 1027 declaration, at irregular intervals 1024 pro rata distribution of assets ' 1024 allowed claims of creditors 1024 iirst, time and amount 1024 not more than fifty per cent 1025 subsequent, as soon as amount sufficient 1025 practice; order 1027 order restraining payment 1027 final ; when to be made 1027 effect of failure to prove claims 1027 definition of term 20 cistribution; pro rata share of creditors 738 garnishment, when permitted 1025 meetings of creditors for declaration 1024 notices to creditors of declaration and pa.yment ' 832 referee to declare 664, 1025 to prepare sheets 664 residents of United States; preference 102S unclaimed ; comparative legislation 1029 practice in disposition 1029 payment of balance to bankrupt 1030 disposition, after payment of claims 1030 Socket. clerk to keep. Gen. Ord. 1 1190 contents specific. Gen. Ord. 1 1190 open to public inspection. Gen. Ord. 1 1190 Socument. definition, Bankr. Act, § 1 2 title vests in trustee, Bankr. Act, § 70a ( 1 ) 1106 title vests in trustee; character 1122 definition 1122 Domicile. of bankrupt, in district 38 controls right to exemption 212 Dourer. bankrupts right, when to vest in trustee. 1136 property of husband, vests subject to 1136 effect of death of bankrupt husband 274 E. Embezzlement. by trustee ; punishment, Bankr. Act, § 29a 618 preference ; payment of funds embezzled 900 Employees. claim for services under contract, provability 97 1 damages before completion of contract 971 priorities, wages entitled to 1005-1011 General Index. 1659 Ztqnitable Uens. PAQB on special funds; validity 1060 bankrupt commingling funds with his own 1060 Equity. bankruptcy proceedings are proceedings in 25 plenary suit in, bankruptcy court when not to entertain 26 Equity Bnles. govern appeals to circuit court of appeals, Gen. Ord. XXXVI 1221 practice In proceedings in equity in bankruptcy courts, Gen. Ord. XXXVII 1222 Estates. administration, expenses, Bankr. Act, § 62 931 report, approval and allowance, Bankr. Act, § 62 931 expenses, indemnity for. Gen. Ord. X 1196 appraisal of property, Bankr. Act, § 70b 1106 appointment of appraisers, Bankr. Act, § 70b 1106 information, referee to furnish, Bankr. Act, § 39a ( 3 ) 662 preservation, cost, priority of payment, Bankr. Act, § 64b ( 1 ) 985 sales of property; public auction. Gen. Ord. XVIII 1205 at private sale. Gen. Ord. XVIII 1205 perishable property, without notice, Gen. Ord. XVIII 1205 trustees to collect and reduce to money, Bankr. Act, § 47a (2) 716 furnish Information to parties in interest, Bankr. Act. § 47a (5) 716 administration expenses, allowance . 032 priority of payment 932 auctioneer's services 932 preservation of property 933 assignee for benefit of creditors 933 practice on allowance 934 attorneys ; compensation 934 See Attorneys. appraisers and appraisal 1165 cost, a charge against estate 933 number and qualification 1165 practice on appointment 1166 bnrdensome property; trustees may disclaim 1162 executory contracts and leases 1162 practice; report for instruction 1163 order to disclaim 1163 claim of, against another estate, proof 791 closing, jurisdiction of bankruptcy courts, Bankr. Act, § 2(8) 22 when estate deemed closed 72 collection and distribution, jurisdiction of bankruptcy court, Bankc. Act, § 2 ( 7 ) . 22, 67 recovery of property • 68 preservation ; payment of cost 933, 1000 cost, priority of payment 1002 actual and necessary cost 1000 rent for premises occupied 1000 recovering property; expenses of creditors 1000 referee to give information 664 reopening, lack of administration sole ground 73 application, by whom made 73 when to be granted 73 practice 73 lt><")0 Gbneeai, Index. Estates — Continued. page sales of bankrupt's property (see Sales of Property) 69, 1166 incumbered property, free of liens 1171 liens should be protected 1176 payment of liens out of proceeds 1 173 notices to lienors 1173 validity and priority of liens 1175 practice; public or private 1171 resale ; when granted 1176 transfer of title to purchasers 1177 title vests in trustee; comparative legislation 1111 scope of section as to vesting 1111 conflict between bankruptcy act and State law 1111 as of date of adjudication, relating back to time of filing 1113 property which vests; in general 1115 determination of question 1115 possession of bankrupt 1115 acquired after filing petition belongs to bankrupt 1116 subject to claims, liens and equities 1117 same plight or condition 1119 defenses, legal and equitable 1119 acts of bankrupt prior to bankruptcy 1120 property subject to trust 1120 subject to liens and incumbrances 1121 in possession of bankrupt as bailee 1121 effect of amendment of § 47a(2) by Act of 1910 1122 specific property; in general 1122 documents relating to bankrupt's property 1122 patents, copyrights and trade-marks 1123 personal powers 1123 fraudulently transferred 1 124 See Fraudulent Transfer. might have been transferred or levied upon 1127 test to be applied 1127 property pledged 1 128 stock purchased for customer 1 129 shares in possession of broker 1130 includes every vested right 1130 remainders and contingent interests 1 133 trust inttTests 1133 resulting and constructive trusts 1133 surplus income from trust funds 1134 funds mingled with bankrupt's 1135 dower and* curtesy rights 1 136 personal contracts of bankrupt 1137 franchises and licenses 1137 liquor licenses 1138 seat in stock exchange 1138 life insurance policies 1144 See Life Insurance Policies. fire insurance policies 114'^ property sold on condition 1 14o See Conditional Sale. fraudulent representations, effect of 1150 right of action of bankrupt 1 158 personal injuries not included 1150 Obneeai, Index. ' 1661 Eatatea — Continued. page torts affecting property 1159 stock subscriptions, unpaid 1160 corporations; liabilities of stockholders and directors 1160 reclamation proceedings; rights in general 1151 goods purchased without intent to pay 1153 purchase on verge of bankruptcy 1 153 proof of insolvency- 1153 false financial statement 1154 property sold subject to approval 1156 expression of dissatisfaction 1156 under rental contracts 1156 payment on delivery 1157 title does not pass on failure to pay 1157 proof of identity of articles sold 1 158 practice , 1158 ZiTldence. certified copies of proceedings, Bankr. Act, § 21d 495 order approving bond of trustee, Bankr. Act, § 21e 495 confirming or setting aside composition, Bankr. Act, § 2 If 495 granting or setting aside discharge, Bankr. Act, § 21f 495 depositions in proceedings in bankruptcy, Bankr. Act, § 21b 495 notice of taking, Bankr. Act, § 21e 495 examination of witnesses; order compelling, Bankr. Act, § 21a 495 wife, concerning business transacted by her, Bankr. Act, § 21a 495 referee to cause to be preserved, Bankr. Act, § 39a (9 ) 662 referee to take when no stenographer 665 See also Examination of bankrupt; Examination of witnesses. Esamination of Bankrupt. bankrupt to submit to, Bankr. Act, § 7 (9) 251 attendance at distance of more than 150 miles, Bankr. Act, § 7 251 composition when offer is made, Bankr. Act, § 12a 308 notice to creditors required, Bankr. Act, § 58a (1) 820 form of order, Off. i'orms, No. 28 1265 at first meeting of creditors 264 any time during proceedings 264 creditors entitled to 265 composition, meeting of creditors for 318 ascertaining whether majority of creditors have accepted 322 conduct ; procedure 266 application for order 266 production of bankrupt, when in prison 266 employment of stenographer 266 counsel for bankrupt 267 minutes ; record of testimony 267 objections and rulings to be entered 267 excluded testimony part of record 267 discharge, false oath as ground of objection 376 discharge withheld, for refusal to answer 271 incriminating evidence 269-27 1 notice to creditors required 830 not required in certain cases ; 830 subject-matter; conduct of business 268 property acquired before petition 268 unsatisfactory answers; contempt 269 evasion or refusal to answer 269 1662 General Index. Ezamination of Witnesses. page before referee; conduct, Gen. Ord. XXII 1210 deposition taken in writing and signed, Gen. Ord. XXVII 1212 referee, refusal of witness to be examined, contempt, Bankr. Act. § 41a 684 order compelling, Bankr. Act, § 21a 495 wife, concerning business transacted by her, Bankr. Act, § 21a ,. . . . 495 form of examination, Off. Forms, No. 29 ^ ^ 1266 summons to witnesses, Off. Forms, No. 30 1266 return of summons. Off. Forms, No. 30 1266 application for, by whom made 498 when to be made; prior to adjudication 499 comparative legislation 497 compulsory ; scope of section 497 contempts, refusal of witness to appear 690 refusal to be sworn 691 to answer material questions 691 evasive and impertinent answers 692 jurisdiction of referee, Bankr. Act, § 38 654 persons subject to 500 officers of bankrupt corporation 500 wife of bankrupt; scope of examination 501 practice ; application 507 special masters to conduct 501 referee, administration of oaths 654 conduct; admission of evidence '. 654 exclusion of rejected evidence 655 refusal to appear and testify ; contempts 507 scope and conduct; acts and property of bankrupt 502 right to counsel 502 production of books and papers 503 privileged communications 504 attorney and client 504 confidential communications 504 criminating questions ; immunity 505 privilege as to books and papers 505 use, in proceedings in other courts 506 Execmtion. stay, levy against salary of bankrupt 1083 within four months' period, release 1081 sale under, may be enjoined 1082 Exemptions. bankrupts entitled to, Bankr. Act, § 6 200 jurisdiction of bankruptcy courts, Bankr. Act, § 2(11) 22 report of trustee as to setting apart. Gen. Ord. XVII 1256 trustees to set apart, Bankr. Act, § 47a( 11 ) 716 forms; order determining, when no trustee appointed, Supp. Forms, No. 77 1324 exceptions to trustee's report, Supp. Forms, No. 78 1325 order determining, after, Supp. Forms, No. 79 1326 petition for review, Supp. Forms, No. 80 ' 1327 acts in United States relative to •. 202 acquisition of property to secure 227 administration of property 206 assertion of claim, necessity 213 compliance with State statute 213 manner 214 time ; prior to discharge 214 Geneeal Index. ICG 3 Exemptions — Continued. page schedules to contain claim 214 specific property to be claimed 214 State law determines character and amount 214 attachment against, not affected by adjudication 210 claim, bankruptcy court to determine merits 205 waiver, determination as to 209 notes, jurisdiction in respect to 209 jurisdiction ceases on determination 210 requirements of State law 242 proof of right; burden on bankrupt 242 referee's findings not disturbed 242 cost and expenses, payment out of 243 fraud, effect on right 222 depends on State statutes 222 concealment of assets 223 fraudulent transfer by bankrupt 224 property subject to exemption 225 preferential transfer, effect 226 claim out of property recovered 226 history and constitutionality 202-203 incumbent property, lien dissolved by adjudication 227 liens acquired through legal proceedings 228 kinds of property, State law governs 229 watches and jewelry 229 wearing apparel; implements of trade 229 homesteads; State decisions 231 occupancy in fact 231 federal homesteads 231 persons entitled to 232 acquisition by proceeds of non-exempt property 232 sale; jurisdiction of bankruptcy court 233 insurance policies; surrender value 234 State statute exempting 234 pension money 236 unpaid purchase money 236 parties entitled ; right is personal 217 assignee may not claim 217 wife or children, claim for benefit 218 failure of husband to assert claim 218 householder or head of family 219 unmarried bankrupts 219 partners; right depends on State law 219-220 partnership assets 221 persons in certain occupations 222 property, administration 206 no part of bankrupt estate 207 trustee has no title 208 suits in respect to, no jurisdiction 210 right of bankrupt; domicile controls 212 time of residence or domicile 212 sale of property, exemptions out of proceeds .' 240 schedules to assert claim • 237 enumeration of articles 238-262 amendment for insertion of claim 237-262 to contain description of articles 238 claim must be filed as part of 239 1664 Geneeai, Index, Zzejnptions • — Continued. PAOE setting-off, where no trustee is appointed 236 out of proceeds of sale of property 237 State statutes and decisions control 203 force and effect declared 204 residence of bankrupt 205 time and manner of claiming 205 trustee to set apart 210, 738 does not take title 208, 1164 pi-oceeds of insurance policy 208, 1164 rights and duties as to •. 210 surrender of possession of property 211 trustee's report, exceptions by creditors 240 right of bankrupt to except 241 report and exceptions as pleadings 242 waiver of claim ; failure to claim 214 surrender of right 215 effect ; property remains in estate 216 waive note; right of holder 216 • discharge withheld until determined 216 Expenses. administration of estates, allowance, Bankr. Act, § 62 931 priority of payment 1002 auctioneer's services 932 preservation of property ; sums paid 933 assignees for benefit of creditors 933 practice on allowance 934 attorneys ; compensation 934 See Attorneys. indemnity for, clerk, marshal or referee may require. Gen. Ord. X 1196 referee ; allowances ..." 682 Extortion. from bankruptcy estate ; punishment 632 Extradition. of bankrupt from one district to another, Bankr. Act, § 10 283 jurisdiction of bankruptcy courts, Bankr; Act, § 22 ( 14 ) 22 when may be granted '. 283 practice ; release or order for removal 284 F. Factor. discharge of liability for goods consigned 481 liens for advances on property consigned 1061 False Claim. presentation a crime 622 False Oath. offense ; punishment, Bankr. Act, § 29b •. 618 indictment or information 622 false swearing comprehended 62!) discharge, ground of objection 37l> oath to schedules 377 examination of bankrupt, false oath 378 Oenbeal Inbex. 1CG5 False Pretenses. FAOB discharge not to affect liabilities for, Bankr. Act, § 27 421 debt for property acquired, not discharged 433, 434 fraud must be shown 435 False Statement of Credit. discharge, ground of objection 386 elements of proof 386 obtaining money on property 386 intent to defraud essential 388 statement of financial condition 389 giving cheek 3g9 purpose, to obtain credit 392 to mercantile agencies 392 must be made by bankrupt 394 Farmers. involuntary proceedings, not to be brought against, Bankr. Act, § 4 138 bankruptcy proceedings against, exception 149 chief occupation; dairying 150 lease of farm .' 157 change of occupation 147 Fees. additional, ofiScers not to receive, Bankr. Act, $ 72 1183 claims, for filing proof, referee, Bankr. Act, § 40 676 clerk; filing fee, Bankr. Act, § 52a 758 to account for fees, Bankr. Act, § 51 754 to collect those of clerk, referee and trustee, Bankr. Act, § 51 754 payment to referee and trustee, Bankr. Act, § 51 754 filing, priority of payment, Bankr. Act, § 64b (2) 985 full compensation for services. Gen. Ord. XXXV 1219 payable out of estate, Gen. Ord. XXXV. . 1219 marshal ; same as in other cases, Bankr. Act, § 52b 758 trustees ; amount in each case, Bankr. Act, § 48a 741 deposited with clerk, Bankr. Act, § 48a 741 certificates of search, Bankr. Act, §51 754 claims, filing, of referee ; purpose 679 when payable; charge against estate 680 clerk ; filing fee as full compensation 759 for copies of papers - 759 filing, in involuntary cases, priority of payment 1001 referee 679 See Compensation. Fiduciary Capacity. debts of person, for fraud, embezzlement, etc., not affected by discharge, Bankr. Act, § 17 421 what conatitutfis 444 persona in fiduciary capacity 445 Filing. papers after reference, with clerk or referee, Gen. Ord. XX 1206 Final Reports. trustee to make, Bankr. Act, § 47a(8) 716 Fines and Penalties. judgments not provable 426 105 ^666 Geneeal Index. Fixed IiiabUity. PAOS absolutely owing, provable debt, Bankr. Act, | 63a ( 1 ) 994 provability of debt 956 owing at time of filing petition 957 judgment, evidenced by • 957 instrument in writing, evidenced by 960 FomiB. adjudication, debtor not a bankrupt. Off. Form, No. 11 1251 bankruptcy, Off. Form, No. 12 1252 order of, and reference, Supp. Forms, No. 140 1390 denying, Supp. Forma, No. 141 1391 petition to vacate, Supp. Forma, No. 142 1392 notice of motion to vacate, Supp. Forma, No. 143 1393 amendment of achedulea; petition, Supp. Forma, No. 81 . . 1328 order to show cause, Supp. Forma, No. 82 1329 order granting, Supp. Forma, No. 83 1330 appeals ; citation, Supp. Forma, No. 150 1400 appearance of creditors, Supp. Forma, No. 122 1372 by intervening creditors, Supp. Forms, No. 123 , 1373 appraisers, appointment, oath and report. Off. Form, No. 13 1252 attorney for trustee, order appointing, Supp. Forms, No. 181 1431 bankruptcy, denial of. Off. Form, No. 6 '. 1246 burdensome property, petition for instruction, Supp. Forma, No. 182 1432 order on, form, Supp. Forma, No. 183 1433 composition; petition for meeting to consider, Off. Forma, No. 60 1292 confirmation, application for, Off. Forma, No. 61 1293 order granting. Off. Forms, No. 62 1294 distribution on, order. Off. Forms, No. 63 1295 offer, Supp. Forms, No. 94 1341 notice to creditors, Supp. Forma, No. 95 1342 acceptance by creditors, Supp. Forma, No. 96 1343 certificate of referee, Supp. Forms, No. 97 1344 order to show cause, Supp. Forms, No. 98 1346 opposition ; appearance of creditors, Supp. Forma, No. 99 1347 specifications of objections, Supp. Forms, No. 100 1348 order of reference to special master, Supp. Forms, No. 101 1349 report of special master, Supp. Forma, No. 102 1350 confirmation; order granting or refusing, Supp. Forma, No. 103 1351 petition to set aside, Supp. Forms, No. 104 1353 compromise, petition for meeting to consider, Supp. Forms, No. 155 1404 notice of meeting, Supp. Forma, No. 156 1405 order authorizing, Supp. Forms, No. 157 1405 concealed assets; petition to turn over, Supp. Forms, No. 85 1332 order to bankrupt, Supp. Forms, No. 86 1333 continuance of business, order allowing, Supp. Forma, No. 184 1433 discharge; petition and notice. Off. Forms, No. 57 1289 opposition; specification of objections. Off. Forms, No. 58 1291 order granting. Off. Forms, No. 59 1291 extension of time to apply; petition, Supp. Forma, No. 105 1354 referee's certificate, Supp. Forms, No. 106 1355 order of referee, Supp. Forms, No. 107 1356 application; order to show cauae, Supp. Forms, No. 108 1357 referee'a certificate of conformity, Supp. Forms, No. 109 1358 opposition; appearance by creditor, Supp. Forms, No. 110 1359 specifications of objections, Supp. Forms, No. Ill 1359 exceptions by bankrupt, Supp. Forms, No 112 1360 General Index. 1667 X'oTias — Continued. page special master; order of reference, Supp. Forms, No. 113 1361 notice of hearing, Supp. Forms, No. 114 1362 order denying, Supp. Forms, No. 116 1363 dividends, list of claims and. Off. Forms, No. 40 1275 notice. Off. Forms, No. 41 1276 first, order declaring, Supp. Forms, No. 162 1410 final order of distribution, Supp. Forms, No. 164 1413 combined check and receipt, Supp. Forms, No. 165 1416 examination of bankrupt, order. Off. Forms, No. 28 1265 or witnesses, substance. Off. Forms, No. 29 1266 summons to witnesses. Off. Forms, No. 30 1266 return of summons. Off. Forms, No. 30 1266 exemptions; trustees report. Off. Forms, No. 47 1282 order determining, when no trustee appointed, Supp. Forms, No. 77 1324 report of trustee. Off. Forms, No. 47 1282 exceptions, Supp. Forms, No. 78 1325 order determining after exceptions, Supp. Forms, No. 79 1326 petition for review, Supp. Forms, No. 80 1327 injunction; other than against suits, petition, Supp. Forms, No. 73 1319 stay and show cause order, Supp. Forms, No. 74 1320 order that writ issue, Supp. Forms, No. 75 1322 after stay and show cause, Supp. Forms, No. 76 1323 intervention of creditors; appearance, Supp. Forms, No. 123 1373 petition of creditors, Supp. Forms, No. 124 1374 order allowing, Supp. Forms, No. 125 ,. 1375 involuntary proceedings; trial, notice of, Supp. Forms, No. 133 1383 special master; order of reference, Supp. Forms, No. 131 1381 notice of hearing, Supp. Forms, No. 132 1382 report, Supp. Forms, No. 134 1383 exceptions to report, Supp. Forms, No. 135 1384 order upon report, Supp. Forms, No. 136 1385 jury, demand for, Supp. Forms, No. 144 1394 dismissal; petition of creditors, Supp. Forms, No. 137 1386 order to show cause, Supp. Forms, No. 138 1388 order, on petition and notice, Supp. Forms, No. 139 1389 jury trial, order for, form, Off. Form, No. 7 1247 letter of attorney of creditor. Off. Form, No. 20 1259 special, of attorney in fact. Off. Form, No. 21 1260 marshal, special warrant to seize property. Off. Form, No. 8 1248 bond of petitioning creditors. Off. Forms, No. 9 1249 bond of bankrupt for release, Off. Forms, No. 10 1250 meetings of creditors, notice of first. Off. Forms, No. 18 1257 first, list of debts proved. Off. Forms, No. 19 1258 notices; final meeting of creditors, Supp. Forms, No. 176 1426 special clauses, Supp. Forms, No. 177 1427 combined, to creditors ; Supp. Forms, No. 178 1428 affidavit of publication, Supp. Forms, No. 179 1429 mailing, Supp. Forms, No. 180 1430 order to show cause, on creditor's petition. Off. Forms, No. 4 1245 partnership; voluntary petition, all partners not joining, Supp. Forms, No. 117.. 1364 petition of one creditor against, Supp. Forms, No. 119 1368 pauper affidavit, certificate as to falsity, Supp. Forms, No. 169 1420 petition and schedules. Off. Forms, No. 1 1228 partnership, Off. Forms, No. 2 1242 creditor, involuntary proceedings, Off. Forms, No. 3 1244 16 68 Geneeai. Index. Forms — Continued. paqe involuntary; by three creditors, Supp. Forms, No. 118 1366 one creditor against partnership, Supp. Forms, No. 119 1368' proof of claims; by agent or attorney. Off. Forms, No. 35 1271 secured debt by agent. Off. Forms, No. 36 1272 aflBdavit of lost bill or note. Off. Forms, No. 37 1273 reduction of claim, order, Off. Forms, No. 38 1274 expunging claim, order, Off. Forms, No. 39 1275 special clauses for proofs, Supp. Forms, No. 170 1421 reconsideration and rejection, petition, Supp. Forms, No. 171 1422 notice of petition, Supp. Forms, No. 172 1423 secured debt, Supp. Forms, No. 173 1423 order expunging or reducing debt, Supp. Forms, No. 174 1424 allowing claim, Supp. Forms, No. 175 1425 proof of unsecured debt. Off. Forms, No. 31 1267 secured debt. Off. Forms, No. 32 1268 debt due corporation. Off. Forms, No. 33 1269 by partnership. Off. Forms, No. 34 1270 protection of bankrupt, petition, Supp. Forms, No. 87 1334 order, Supp. Forms, No. 88 1335 receivers; before adjudication, petition, Supp. Forms, No. 64 1303 order appointing, Supp. Forms, No. 65 1305 after adjudication, petition, Supp. Forms, No. 66 1306 order appointing, Supp. Forms, No. 67 1308 continuance of business; petition, Supp. Forms, No. 68 1309 order authorizing, Supp. Forms, No. 69 1310 contracts; order ' requiring completion, Supp. Forms, No. 70 1310 reports and accounts, Supp. Forms, No. 71 1310 order confirming, Supp. Forms, No. 72 1318 reclamation proceedings; demand, Supp. Forms, No. 187 1436 petition to reclaim, Supp. Forms, No. 188 1436 answer to petition, Supp. Forms, No. 189 1439 redemption from lien, petition and order. Off. Forms, No. 43 1278 referee; order of reference, Off. Form, No. 14 1254 order, in judges absence. Off. Form No. 15 1255 oath of office, Off. Form No. 16 1255 official bond. Off. Form No. 17 1256 certificate of disqualification, Supp. Forms, No. 145 1395 certificate of fees payable, Supp. Forms, No. 166 1417 renew, certificate by referee to judge. Off. Forms, No. 56 1289 of referee's order, petition, Supp. Forms, No. 158 1406 certificate of referee, Supp. Forms, No. 159 1407 revision in matters of law, petition, Supp. Forms, No. 146 1396 order allowing petition, Supp. Forms, No. 147 1397 notice to respondent, Supp. Forms, No. 148 1398 order of circuit court of appeals, Supp. Forms, No. 149 1399 sales: petition and order for sale by auction, Off. Forms, No. 42 1277 subject to liens; petition and order, Off. Forms, No. 44 1279 private ; petition and order. Off. Forms, No. 45 1280 perishable property; petition and order. Off. Forms, No. 46 1281 petition, under Gen. Ord. XVIII (2), Supp. Forms, No. 190 1440 order for sale, Supp. Forms, No. 191 1441 confirmation ; petition, Supp. Forms, No. 192 1442 order, after notice to creditors, Supp. Forms, No. 193 1443 ■ private; petition, Si«pj<. Forms, No. 194 1444 order by tr dssee, Supp. Forms, No. 195 1445 Geneeal Index. 1669 Foms — Continued. page free of liens, petition, Supp. Forms, No. 196 1446 notice of motion, Supp. Forms, No. 1C7 Iii9 order directing sale, Supp. Forms, No. 198 1450 Bchedules; affidavit, where bankrupt cannot be found, Supp. Forms, No. 84 1331 (See Petitions Supra.) service by publication; petition, Supp. Forms, No. 120 1370 order denying, Supp. Forms, No. 121 ; 1371 stay of suits ; petition, Supp. Forms, No. 89 1336 by referee; order to show cause, Supp. Forma, No. 90 1337 stipulation as to hearing by referee, Supp. Forms, No. 91 1338 decision and report of referee, Supp. Forms, No. 92 1339 order that writ issue, Supp. Forms, No. 93 1340 subpoena to alleged bankrupt. Off. Form No. 5 1246 suits by trustee, petition for leave, Supp. Forms, No. 185 1434 order authorizing, Supp. Forms, No. 186 1435 trustee, appointment by creditors. Off. Form, No. 22 1261 appointment by referee. Off. Forms, No. 23 1262 notice of appointment, Off. Forms, No. 24 1262 bond, official. Off. Forms, No. 25 1263 order approving. Off. Forms, No. 26 1264 order, that none be appointed, Off. Forms, No. 27 1264 return of no assets. Off. Forms, No. 48 1283 accounts; receipts and disbursements. Off. Forms, No. 49 1284 final; oath. Off. Forms, No. 50 1285 allowing ; order. Off. Forms, No. 51 ^ 1286 discharging; order. Off. Forms, No. 51 1286 removal ; petition. Off. Forms, No. 52 1286 notice of petition. Off. Forms, No. 53 1287 order. Off. Forms, No. 54 1287 vacancy; order for election, Off. Forms, No. 55 1288 appointment order approving, Supp. Forms, No. 160 1408 reports, first, Supp. Forms, No. 161 1409 final, and account, Supp. Forms, No. 163 1411 distribution, final order, Supp. Forms, No. 164 1413 bond, with justification of sureties, Supp. Forms, No. 167 1418 order approving, Supp. Forms, No. 168 1419 writ of error, from Supreme Court, petition, Supp. Forms, No. 153 1402 form of writ, Supp. Forms, No. 154 1403 Forms in Bankruptcy. official to be followed. Gen. Ord. XXXVIII 1222 Forms, Official. Supreme Court to prescribe, Bankr. Act, § 30 634 should be followed 634 Four Months' Period. transfers or judgments within, preferences 871 date of filing petition controls 871 agreement to be performed within 872 recording required; statutes considered 876 change of possession, unless filed or recorded 879 judgment procured or suffered 881 transfer of property ; what constitutes 881 method immaterial 881 payments on account 882 intent or good faith 884 1670 Gbneeal Index. Pour Months' Period — Continued. I'A™ payment of antecedent debts ^^^ mortgage of property ^^^ notes and checks 891 deposit of money in bank 893 Prand. debts based on, not provable ^^° FTandalent Transfer. act of bankruptcy, Bankr. Act, § 3a ( 1 ) 82 time of commission; petition filed within four months, Bankr. Act, § 3b 82 date of recording or registering, Bankr. Act, § 3b 82 property vests in trustee, Bankr. Act, § 70a (4) 1106 suit to recover property, jurisdiction of bankruptcy courts, Bankr. Act, § 23b 513 trustee to recover property, Bankr. Act, § 70e 1106 jurisdiction of court of bankruptcy, Bankr. Act, § 70e 1106 act of bankruptcy; elements '. intent to hinder, delay or defraud ^^ allegations and proof "^ insolvency, not required to be shown " ' meaning of transfer bankrupt's property, within four months 1062 void; if with intent to hinder, delay or defraud 1062 insolvency not essential 1063 within four months; meaning 1063 intent to hinder, delay or defraud 106* meaning as at common law 106* evidence; question of fact 1068 payments without fraudulent intent 1065 antecedent debts ; payment in good faith 1066 fraud implied from circumstances 1068 sales on account 1069 bulk sales 1069 burden of proof ^070 discharge, ground of objection, if within four months' period 395 recording, within four months distinction between preference and 224 exemption, effect upon right property subject to prior to four months, suits to recover assignment of right to bring purchasers in good faith; transfers valid 1070 inquiries as to solvency 1"'^ sale of entire stock present fair consideration recovery of property; suits 536, 1072, 1178 trustee to bring; in what courts 536, 1072 jurisdiction of district courts • 536, 1072, 1181 trustee; property passes to creditors' rights action effect of general assignment claims against United States under State laws; if within four months ^^l^ ., 1178 trustee may avoid trustee subrogated to rights of creditors 1 ' suits to set aside „^ jurisdiction of bankruptcy courts Gbneeal Index. 1671 o. Gambling. PAGE debts based on, not provable 967 bucket shop transactions 967 Garniiihineiit. preferences through legal . proceedings 113 dividends in hands of trustee 1025 right of State court, when exercised 1025 proceedings within four months 1083 stay of, when granted 295 effect of discharge of bankrupt 405 recovery of money garnisheed 1084 General Orders in Bankruptcy. schedule and preamble 1189 H. Habeas Corpus. imprisoned debtor produced on. Gen. Ord. XXX 1216 discharge, if for provable debt. Gen. Ord. XXX 1216 Holiday. definition, Bankr. Act, § 1 3 Homesteads. exemptions ; State decisions 231 federal homesteads 231 ' persons entitled to 232 acquisition by proceeds of non-exempt property 232 sale ; jurisdiction of bankruptcy court 233 I. Indemnity. for expenses may be required. Gen. Ord. X 1196 Indians. bankruptcy, subject to 146 Indictment on Information. offenses in bankruptcy; sufficiency 621 false oath in proceedings 622 allegations as in perjury ' 622 concealment of property 622 knowingly and fraudulently 623 conspiracy to conceal property 623 IndoFsers. liability, provable debt 963 offset by bank, of liability •• 1097 payment of note ; subrogation 810 preference ; payment to relieve 891 See Commercial Paper; Proof of Claims. Infants. voluntary bankruptcy proceedings 146 Information. duty of trustee to furnish 739 1672 Gek-eral Index. InJTinctioii. PA6K against acts other than suits, jurisdiction 76 commission of acts interfering with administration 77 sales of property 78 removal of property from jurisdiction 78 protecting taxpayer from wrong assessment 79 practice, form of order 79 forms; other than against suits, petition, Supp. Forms, No 73 1319 stay and Show cause order, Supp. Forms, No. 74. . . . .' 1320 order that writ issue, Supp. Forms, No. 75 1322 after stay and show cause, Supp. Forms, No. 76 1323 referee, jurisdiction to grant 6^9 staying proceedings, judge to grant, Gen. Ord. XII 1198 lajnrles to Person or Property. wilful, discharge not to aflFect liabilities, Bankr. Act, § 17 421 right of action does not pass to trustee 1159 unliquidated claims ; provability 975 employers liability; judgment not provable 976 wilful or malicious, debt not dischargeable 436, 440 intent and malice, how ascertained 436 " wilful " means intentional ; 436 liabilities included 437 libel or slander 437 Insanity. of bankrupt, proceedings not to abate, Bankr. Act, § 8 273 Insolvency. definition, Bankr. Act, § 1 2 dismissal of petition for failure to prove, Bankr. Act, § 3c 82 examination of bankrupt to determine, Bankr, Act, § 3d 82 preferences, recovery by trustee, Bankr. Act, § 60b 861 trial by jury, application, Bankr. Act, § 19a 487 commission of act of bankruptcy during 88 determination, valuation of property 12, 13 property fraudulent conveyed or concealed 13 fair valuation ; present market value , 14 time proceedings were commenced 15 evidence of valuation 16 essential to act of bankruptcy 88 time and proof 89 involuntary proceedings, when to be shown 88, 132 fraudulent transfer, not material 97, 132 preferential transfers, material 98, 133 proof, burden on petitioning creditors 103, 133 partnership, determination 90, 173 what constitutes ; individual property 174 preference, element of 869 allegation and proof 870 determination ; valuation of property 870 schedules as evidence 870 reasonable cause to believe 909 evidence of cause to believe 910 receivership, proof required, to constitute act of bankruptcy 121, 124 insolvency as sole ground 121 allegations as to other grounds 122 Geneeal Index. 1673 bsolvenoy Iaws. paoS dissolution of insolvent coporations 7 state, suspension 6 what constitute 7 XauitTiiiiient in 'Writing. debt evidenced by, provability 960 See Commercial Paper. Interest. trustees to account for, Bankr. Act, § 47a ( 1 ) 716 on taxes; priority 999 payable on written instrument, provability 962 trustee to account for 735 on deposits in depositories 735 Intervention. forms; appearance of intervening creditors, Supp. Forms, No. 123 1373 petition of creditors, Supp. Forms, No. 124 1374 order allowing, Supp. Forms, No. 125 1376 creditors in involuntary proceedings 479, 855 who may be permitted 856 petition to join in ; hearing 853 notice of entry of order 858 Involnntary Proceedings. adjudication, on presentation of issues, Bankr. Act, § 18d 451 or dismissal, where no pleadings filed, Bankr. Act, § 18e 451 appearance by bankrupt within five days, Bankr. Act, § 18b 451 appearance of creditors; form, Supp. Forms, No. 122 1372 by intervening creditors, Supp. Forms, No. 123 1373 attorneys, petitioning creditors, priority of payment, Bankr. Act, § 64b (3)' 985 bankrupt, denial of bankruptcy, form, Off. Form No. 6 1246 costs in contested adjudications, Gen. Or. XXXIV 1218 creditors who may file petition, Bankr. Act, § 59b 837 hearing as to number and amount of claims, Bankr, Act, § 59d 837 computation of number, Bankr. Act, § 59e 837 appearances ; intervention and answer, Bankr. Act, § 59b 837 creditors' petition, form, Oflf. Form, No. 3 1244 order to show cause, form. Off. Form, No. 4 1245 subpoena to alleged bankrupt, Off. Form, No. 5 1246 dismissal, creditors to have notice and opportunity to be heard, Bankr. Act, § 59g . . 837 notices to creditors, Bankr. Act, § 58a ( 8 ) 820 jury trials in contested cases, Bankr. Act, § 19a 487 act of bankruptcy or insolvency, Bankr. Act, § 19a 487 form of order for. Off. Form, No. 7 1247 partnership ; partner may resist adjudication. Gen. Ord. VIII 1194 schedule in case of adjudication, Gen. Ord. VIII 1194 persons against whom brought, Bankr. Act, § 4 ; 138 corporations included ; exceptions, Bankr. Act, § 4 138 exceptions as to wage-earners and farmers, Bankr. Act, § 4 138 petition filed within four months after commission of act, Bankr. Act, § 3b 82 time, when begins to run, Bankr. Act, § 3b 82 petition, filed by three or more creditors, Bankr. Act, § 59b 837 amount of provable claims, Bankr. Act, § 59b 837 answer alleging greater number, Bankr. Act, § 59d 837 service on alleged bankrupt, Bankr. Act, § 18a 451 1*>74 General Index. InTolnntary Proceedings — Continued. page with writ of subpoena, Bankr. Act, § 18a 451 service by publication, Bankr. Act, § 18a 451 petitioning creditor's bond where property is seized, Bankr. Act, § 3e 83 pleading by bankrupt, Bankr. Act, § 18b 451 pleadings; form of answer, Supp. Forms, No. 127 1376 answer alleging more than 12 creditors, Supp. Forms, No. 128 ,. 1378 demurrer to petition, Supp. Forms, No. 129 1379 notice of argument, Supp. Forms, No. 130 1380 reference, where judge is absent, Bankr. Act, § 18b 451 schedules; petitioning creditors to file when bankrupt cannot be found, Gen. Ord. IX 1194 seizure of bankrupt's propierty, Bankr. Act, § 69 1102 release upon bond of bankrupt, Bankr. Act, § 69 1 102 solvency as defense, Bankr. Act, § 3c 82 , examination of alleged bankrupt, Bankr. Act, § 3d 83 trial, notice of, Supp. Forms, No. 133 1383 special master; order of reference, Supp. Forms, No. 131 1381 notice of hearing, Supp. Forms, No. 132 1382 report, Supp. Forms, No. 134 1383 exceptions to report, Supp. Forms, No. 135 1384 order upon report, Supp. Forms, No. 136 1385 jury, demand for, Supp. Forms, No. 144 1394 dismissal ; petition of creditors, Supp. Forms, No. 137 1386 order to show cause, Supp. Forms, No. 138 1388 order, on petition and notice, Supp. Forms, No. 139 1389 verification of pleadings, Bankr. Act, § 18c 451 adjudication or dismissal ; order entered 477 voluntary appearance of bankrupt 47o dismissal after trial 478 lack of jurisdiction 478 consent of parties ; notice to creditors 479 intervention by other creditors 479 effect generally 479 on rights of creditors 480 vacating, applications 481 by whom made 481 application to be made seasonably 481 grounds to be stated 482 appearances, bankrupt or creditor 468 creditors who may make 469 voluntary, by bankrupts, effect 470 made within five days 470 in person or by attorney 471 attorneys ; employment 934 petitioning creditors; allowance of fees 937 allowance should be reasonable 937 bankrupts ; compensation 940 when allowance authorized 940 bond of petitioning creditors, on seizure of property 135, 1103 order appointing receiver to provide for 135 remedies under ; liability 135 dismissal of petition; liability of sureties 136 corporations, proceedings against 152 effect of dissolution in State court 152 amendment of 1910, effect 152 cases prior to, not applicable 155 General Index. 1675 Involuntary Proceedings — Continued. PAGE unincorporated companies 154 petition against, allegations 155 banking, exceptions as to 152 effect of bankruptcy ; discharge 156 liability of directors, oflScers and stockholders 157 subject to bankruptcy prior to amendment of 1910 157 defaults ; duty of judge 483 immediate adjudication made 483 reference, where judge is absent 484 defense, solvency as a 88 ■when insolvency need not be shown 88 material, in cases of second and third acts 133 solvency immaterial, in case of fraudulent transfer 132 dismissal, when permitted 859 notice to creditors 833, 859 effect, without notice 833 withdrawals not permitted 859 notices to creditors 859 purpose and intent 859 exceptions as to wage-earners 149 who are wage-earners ■ 149 change of occupation 147 as to farmers and tillers of soil 149 chief occupation 150 change of occupation 147 pleading exceptions 151 insolvency, allegation and proof 78S time of 89 intervention by creditors before adjudication 855 order, when granted 855, 856 petition for ; hearing 858 creditors who may file 857 notice of entry of order 858 answer by intervening creditor 857 jury trials in contested cases 488 question of insolvency 488 alleged act of bankruptcy 489 right confined to bankrupt 489 issue of insolvency ; burden of proof 489 demand for ; application 489 effect of failure 490 lunatics, may not commit act of bankruptcy 145 partnership, petition when filed 176 effect of death of partner ; 175 insanity of partner 175 infancy of partner 176 petition, allegations as to debts and credits 176 non-consenting partner; rights 177 form and contents 17£ petition ; against whom filed 12' person or corporation 12;. time when filed 130 when four months after commission of act 130 record or register of transfer 130 when begins to run 131 open possession of property 131 1676 Genekal Index. Involuntary Proceedings — Continued. paoe allegations negativing exceptions 151 creditors may file 842 at time of commission of act of bankruptcy 843 number, and amount of claims 843 suflScient at adjudication , 843 assignment, to prevent petition 844 holding voidable preferences 848 claims collusively divided 845 provable claims must be held 846 unliquidated debts 846 secured creditor not to file 848 preferred, right to join 848 claims provable and to be counted 848 attachment, right to join 849 advantages through fraud 850 estoppel, by assenting to assignment 850 participation in receivership proceedings 851 relatives v^ithin third degree excluded 854 employees not to be counted , 854 one creditor filing, counting creditors 852 preferred creditors not counted 852 fraudulently reducing number 852 filed in duplicate with clerk 458 waiver of duplicate 458 amendments, when allowed 460 within reasonable time 461 conform to evidence 461 correction of mistakes 461 status of bankrupt 462 setting forth new acts of bankruptcy 463 number and amount of claims 462, 858 in different districts, procedure. Gen. Ord. VI - 1192 priority; first act of bankruptcy. Gen. Ord. VII 1194 pleadings ; bankrupt or creditor may appear 468 who deemed creditor 469 answer or demurrer; replication 472 form and contents 472 amendments as in equity '472 insuflScient denial of insolvency 473 verification ; how made 474 by attorney 475 practice, if answer avers more than twelve creditors 853 insufiiciency of allegation 853 list of creditors to be filed 853 hearing before special master 854 process, when returnable ; 465 form of subpoena 466 service, personal, how made 466, 467 by publication 466 effect, on jurisdiction 468 proofs, how made 468 seizure of bankrupt's property; rights of creditors 1103 petitioning creditors; bond 1103 conditions of bonds; form 1103 justification of sureties 1105 payment of damages sustained 1104 Gbneeal Index. 1677 XjiToIiuitary Proceedings — Continued. face property claimed by third person '. 1104 liability of marshal 1104 practice; application 1105 remedy of bankrupt 1105 solvency as a defense ' 132 at time of transfer 132 preferences, when material 133 production of books and papers 134 trial ; without a jury. . . ; 475 notice, how given 476 burden of proof on petitioners 476 jury ; act of bankruptcy or insolvency 476 referee or special master 476 to hear and report 477 J. Jndge. definition, Bankr. Act, § 1 1 Judgment!. claims founded on, provable debts, Bankr. Act, § 63a (6) 944 void, if obtained within four months, B'ankr. Act, § 67f 1032 entered after bankruptcy; provability 973 prior to bankrupt's discharge 973 preference; procured or suffered within four months 881 proof, transcripts to be attached. . : 791 provability; fixed liability evidenced by 957 verdict for damages 957 effect of verdict of jury 957 appeal does not affect 958 barred by statute of limitations 969 state courts, not to be impeached 950 within four months' period annulled 1080 execution and levy within period 1081 Judgment Creditor. trustee vested with rights and remedies, Bankr. Act, § 47a (2) 716 liens; trustee rights in respect to 1047 effect of amendment of 1910 of § 47a(2) 727-733, 1049 rights and remedies vested in trustee 1048 purpose and effect of amendment of 1910 .' 1049 unrecorded liens and mortgages 1046 contracts for conditional sale required to be filed 1039 Jndleial Code. circuit courts abolished 616 powers conferred upon district courts » 617 Jurisdiction. appellate, Bankr. Act, § 24 661 See Appellate Jurisdiction; Appeals. bankruptcy courts, suits by trustee for recovery of property, Bankr. Act, § 23b 513 circuit courts of United States, Bankr. Act, § 23a 613 concurrent jurisdiction, with courts of bankruptcy, Bankr. Act, S 23c 513 courts in bankruptcy, Bankr. Act, § 2 21 limited by statute 27 expedition in exercise 36 first acquiring, exercise of 36 referee, prescribed, Bankr. Act, 8 38 850 1678 Geneeal Index. Jnrisdifrtlon — Continued. page bankruptcy courts ; scope and effect of law conferring 515 comparative legislation; former laws 516, 520 effect of decisions . 516 exclusive or concurrent 28 under prior acts 516 prior to amendment of 1903 516, 520 purpose of amendments of 1903 and 1910 516, 521 districts courts as 25, 522 exclusive jurisdiction in bankruptcy, under former acts 28 adverse claimants, plenary suits 523 determination as to adverse claims 524 ancillary jurisdiction, exercise of 551 absolute ownership of property not essential 524 sureties on bail bond 524 possession of property, controlling 525 by lienor 526 by third person in behalf of bankrupt 526 of wife of bankrupt 527 assignee or receiver 527 under attachment 528 claim of lien 526 surrender of possession ; claim becomes adverse 529 inquiry as to basis of claim 529 ancillary, exercise, prior to amendment of 1910 32, 551 inherent in, as court of equity 32 effect of amendment of 1910 33 suits by trustee; consent of adverse claimant, when required 531 voluntary submission of controversy 533 fund in possession of court 533 surrender equivalent to consent 533 how may be shown 533 objection to jurisdiction 535 appearance without objection 534 recovery of property 30, 536 fraudulently or preferentially transferred 536, 920, 1072 trustee alone may bring 536 by creditor in case no trustee 537 when to be brought 537 property actually or constructively in possession of trustee 538 summary, when exercised 539 effect of amendment of 1903 541 dependent upon possession 541 unauthorized surrender of possession 545 when property is in possession of court 547 possession of bankrupt that of court 544 actual, not required 544 constructive, sufficient 544 liens on property in 545 when takes effect 547 claim against bank deposits 549 exercise ; process 549 conferred by filing petition 458 district courts, effect of transfer of powers of circuit courts 517 as courts of bankruptcy 522 referee ; comparative legislation 651 not possessed unless conferred 65S General Index. 1679 JniiBdiotlan — Continued. paob adjudications or diBmissal of petitions 663 reference in case of absence of judge 653 effect of reference; Gen Ord. XII 653 examinations of witnesses ; oaths to witnesses 654 conduct; admission of evidence 654 exclusion of rejected evidence 655 property, seizure and release 655 statutory jurisdiction of judge 656 court rules conferring 656 powers exercised under grant 657 suits, plenary, for recovery of property 658 discharges and compositions 658 injunctions, not to grant certain 659 stenographer, employment and compensation 660 State courts ; concurrent with bankruptcy courts 553 controlled by State statutes 554 possession of property, prior to four months' period 555 suits against bankruptcy ofBcers 556 adjudication, terminates 557 assignment or receivership within four months 558 proceedings for dissolution of corporation 559 Jury Trials. demand for, form, Supp. Forms, No. 144 1394 involuntary proceedings, insolvency or act of bankruptcy, Bankr. Act, § 19a 487 application in writing, Bankr. Act, § 19a 487 before answer is filed, Bankr. Act, § 19a 487 jury, when specially summoned, Bankr. Act, §19b 487 right, in case of offense under act, Bankr. Act, § 19c 487 adjudication ; review by writ of error 592 comparative legislation 488 involuntary proceedings, questions of insolvency or commissions of act of bankruptcy 488 right conferred to bankrupt 489 issue of insolvency; burden of proof 489 demand for ; application 489 effect of failure to make 490 offenses and other controversies 491 constitutional right to jury trial 491 contested discharges 491 trial ; conduct 490 verdict; judge may direct 490 special ; effect 491 I.. Iieases. breach of covenant; provability 972 liability for continued use by bankrupt. 972 instalments of rent due at time of bankruptcy 972 burdensome; trustee may disclaim 1162 rent to accrue, not fixed liability 980 surrender by trustee 1163 Iiegal Proceedings. See Preferences ; Liens. preferences through, what constitute HO attachment proceedings HO distraint for rent .■ HI garnishment proceedings HO supplementary proceedings HO 1G80 General Inbex. Iietter of Attorney. FAQB proof or acknowledgment, how made, Gen. Ord. XXI 1206 by partnership or corporation. Gen. Ord. XXI 1206 of creditor, form, Oflf. Form, No. 20 1259 special, of attorney in fact, Off. Form, No. 21 1260 void, if obtained within four months, Bankr. Act, § 67f 1032 within four months' period 1081 Iiloeiuea. rights under, vest in trustee 1137 liquor, when pass to trustee 1 138 seat in stock exchange 1138 Xiiens. present consideration, if recorded, not affected by bankruptcy, Bankr. Act, § 67d. . 1031 sales free from; form of petition and order. Off. Forms, No. 44 127P through legal proceedings, begun within four months, dissolution, Bankr. Act, § 67c. 103? obtained while defendant was insolvent, Bankr. Act, § 67c ( 1 ) 1031 reasonable cause to believe defendant was insolvent, Bankr. Act, § 67c(2) .. 1031 sought or permitted in fraud, Bankr. Act, § 67c(3) 1031 void, if obtained within four months, Bankr. Act, § 67f 1032 property passes to trustee, Bankr. Act, § 67f 1032 composition, effect of 315 creditor's rights; subrogation of trustee 1047 trustee stands in position of 1047 judgment-creditor, in effect 1048 effect of amendment of 1910 of § 47a(2) 1049 discharge, effect of - ^^'^ fraudulent; what constitute , 1062 Insolvency not essential 1063 within four months; meaning 1063 enforcement within, of prior mortgage 1084 intent to hinder, delay or defraud 1064 meaning as at common law 1064 revival of outlawed debt 1065 evidence; question of fact 1065 payments without fraudulent intent 1065 antecedent debts; payment in good faith 1066 fraud implied from circumstances 1068 sales on account; bulk sales 1069 burden of proof 1070 Invalid, under former laws 1035 scope of § 67, declaring 1035 construction and general effect of section 1036 under State statute 1046 mortgages to secure antecedent debts 1073 within four months' period. , 1073 possession of mortgagor 1073 chattel mortgages, if ineffectual against creditors 1074 voluntary settlements on wife 1075 assignments for benefit of creditors 1076 legal proceedings; distinction between § 67, subsections c and f 1076 invalid, if within four months 1077 comparative legislation 1077 insolvency essential 1079 prior to four months' period, not affected 1079 judgment; prior to four mouths' period 1080 General Index. ICSl Iilens — Continued. page when a lien; State statute controls 1081 within four months' period, annulled 1081 execution and levy within four months, annulled 1081 levies, include what 1081 sale may be enjoined 1082 attachment, released by adjudication 1084 eflFect of nullification 1085 exempt property, not affected 1085 prior to four months' period, not dissolved 1086 creditor's bill ; begun prior to four months' period 1087 lien, when not dissolved 1087 garnishment ; proceedings annulled 1083 recovery of money garnisheed 1084 preservation for benefit of estate 1088 trustee may intervene for 1088 attachment may be continued 1088 priority, under State laws; persons entitled 1013 continuing after bankruptcy 1013 recognized in bankruptcy courts 1013 unrecorded mortgages 1014 landlord's claim for rent 1015 recording, void because of failure 103£ State law controls 1037 effect generally 1038 validity as between parties 1038 want of record, what constitutes 1039 chattel mortgages and conditional sales 1039 object of recording 1039 conditional sale; right of trustee 1039 unrecorded, rights of creditors 1045 effect of failure to file; New York rule " 1040 within reasonable time 1041 possession of bankrupt 1042 agreement to withhold 1043 recording or filing within four months 1044 place 1045 trustee, right to attack, effect of amendment of § 47a(2) by Act of 1910. . 1046 redemption; form of petition and order, Off. Forms, No. 43 1278 stay of proceedings to enforce ; 294 trustee acquires property subject to 1117 subrogation to rights of creditors 1047 liens preserved for benefit of estate 1047 judgment creditor, possesses rights of 1048 rule under former law . 1048 present act 1049 effect of amendment of § 47a(2) by Act of 1910 1049 rights of judgment creditor under 728 purpose and effect of § 47a(2) as amended in 1910 727-733 valid; for present consideration and duly recorded 1050 good faith of transaction 1050 present consideration; what constitutes 1050 determination of validity; jurisdiction 1051 mortgage to secure existing debt 1052 employees, under State law 1052 mechanics' liens; not through legal proceedings 1053 106 ^^®2 GeNEEAL IkDEX. Iilens — Continued. page not affected by adjudication 1053 failure to perfect , 1054 landlord liens; priority of payment 1054 State statute controls 1054 mortgages to secure future advances 1056 covering after-acquired property '. 1056 chattel mortgages; in possession of mortgagor 1057 on special funds ; equitable 1057 deposit received by bank while insolvent 1058 pledge; unaffected by bankruptcy 1058 retention of possession by pledgor 1059 vendors ; purchase money 1059 equitable, when sustained 1060 attorneys ; on papers of client 1060 bankers ; on dividends to stockholders 1060 livery-stable keepers 1061 maritime; for repairs and supplies 1061 factors ; consignment of goods 1061 deed of trust 1061 want of record, not liens against estate, Bankr. Act, § 67a 1031 Iilfe Insurance Policies. rights under, vest in trustee, Bankr. Act, § 70a(5) 1106 exemption; right dependent on State statute 234 title ; when vests in trustee 1 139 cash surrender value, vests in trustee 1139 what constitutes and how determined 1140 loan value does not constitute , 1141 effect of assignment 1141 payable to wife or beneficiaries 1 141 effect of right to change beneficiaries , 1142 bankrupt as beneficiary 1 144 Iilmitations, Statute of. debts barred by ; not provable 983 Iiiqnor Licenses. rights of trustee 1138 Iiitigation, Iiiqnidation by. proof of claims; exception to time limitation 821 meaning of term 822 Livery-stable Keepers. liens; validity 1061 Lunatics. bankruptcy proceedings against 146 M. Malicious Prosecution. fraudulent or oppressive proceedings 840 Maritime Liens. for repairs and supplies; validity 1061 Married 'Women. bankrupts, right to become 146 See Wife; Dower. General Index. 1683 Marshals. PAOE accounts of expenses, Gren. Ord. XIX 1206 compensation; commissions, Bankr. Act, § 48d : . . . . 741 additional, for business conducted, Bankr. Act, § 48e 741 prohibited, Bankr. Act, § 72 1183 fees for performance of services, Bankr. Act, § 52b 758 detention of bankrupt, Bankr. Act, § 9b 277 seizure of bankrupt's property, Bankr. Act, § 69 1102 bond to be given, Bankr. Act, § 69 1102 seizure of property, special warrant, form, Off. Form, No. 8 1248 bond of petitioning creditors, form, Off. Form, No. 9 1249 bond of bankrupt for release, form, Off. Form, No. 10 1250 fees fixed by general law 759 while acting as receiver 760 accounts to be made 760 Mechanic's liien. stay of foreclosure, not granted 296 valid ; not through legal proceedings 1053 not affected by adjudication 1053 failure to perfect 1053 Meetings of Creditors. compositions, consideration, Bankr. Act, § 12a 308 discharge, authorize trustee to oppose, Bankr. Act, § 14b 335 duty of bankrupt to attend, Bankr. Act, §7(1) 251 attendance at distance of more than 150 miles, Bankr. Act, § 7 251 final, trustees report to, Bankr. Act, § 47a (7 ) 716 when estate is ready to be closed, Bankr. Act, § 55f 763 first ; time and place, Bankr. Act, § 55a 763 judge or referee to preside, Bankr. Act, § 55a 763 forms, petition for, to consider compromise, Supp. Forms, No. 155 1404 notices. Off. Forms, No. 18 1257 notices required, Bankr. Act, § 58a (3 ) 826 publication ; first meeting, Bankr. Act, § 58b 826 no trustee appointed, only first to be held. Gen. Ord. XV 1202 proceedings; promotion of best interests of estate, Bankr. Act, § 55c 763 special, court .may call. Gen. Ord. XXV 1212 subsequent to first; consent of creditors, Bankr. Act, § 55d 763 court to call on request of creditors, Bankr. Act, § 55e 763 voters; majority in number and amount, Bankr. Act, § 56a 768 secured and priority creditors, Bankr. Act, § 56b 768 not to be counted, except as to excess, Bankr. Act, § 56b 768 attendance of bankrupt, order compelling 254 first meeting, attendance required 253 distance of over 150 miles * 254 payment of expenses out of estate 254 continuances of first meeting 254 dividends, declaration 1024 final; ordered when estate is ready to be closed 767 first; appointment of trustee 701 call by referee after adjudication 765 time and place of holding 765 continuances by adjournment ., 765 notices to creditors, of meetings generally 765, 835 •^^^^ Gbnbeal Index. Meetiaga of Creditor* — Continued. page first meeting, publication 835 proof of publication 835 procedure; order of business 765 appearances 766 bankrupt to attend for examination 766 special ; purposes 766 referee presides 767 on call of creditors 767 scope of section 55 764 voters ; comparative legislation 769 election of trustee, when to take place 769 postponement ; effect 769 presence ; what constitutes 770 persons present not entitled to vote, not to be counted 770 creditors not to vote until claim proved 771 only entitled to vote 770 appearing specially, to assert title 771 partners or officers of corporation 771 majority of creditors in number and amount 77 1 secured creditors; claims not to be counted 772 excess over value of security 772 priority creditors 773 preferred creditors ; surrender of preference 773 attorneys in fact; proxies 773 power of attorney; form 774 practice of voting outlined 775 Mereaiitile Agencies. statement of financial condition, false, bars discharge 392 equivalent to statement to creditor 392 general and special statements, effect 393 continuing effect 394 Minors. dividends ; payments to, Bankr. Act, § 66b 1029 Months. computation, how made 638 Mortgages. fraudulent; within four months 1062 intent to hinder, delay or defraud 1062 See Fraudulent Transfers; Liens. invalid; to secure antecedent debts 1073 possession of mortgagor 1073 record, agreement to withhold, evidence of fraud 1043 stay of foreclosure proceedings 295 valid ; to secure existing debt 1052 to secure future advances 1056 covering after-acquired property 1056 if mortgage in good faith 1070 inquiries as to solvency 1070 present fair consideration 1071 Mutual Debts and Credits. set-off, when permitted Bankr. Act, § 68a 1090 See Set-offs. Geneeal Index. 1685 V. Newspapers. PAOE publication of notices ; designation, Bankr. Act, § 28 616 how designation is made 616 Ifotioes. creditors may request to be sent to certain place. Gen. Ord. XXI 1206 expenses of publishing or mailing, indemnity. Gen. Ord. X 1 196 forms ; final meeting of creditors, Supp. Forms, No. 176 1426 special clauses, Supp. Forms, No. 177 1427 to creditors, combined, Supp. Forms, No. 178 1428 affidavit of publication, Supp. Forms, No. 179 1429 mailing, Supp. Forms, No. 180 1430 newspapers for publication, designation 616 service on attorneys. Gen. Ord. IV 1191 Notioea to Creditors. publication; first meeting, Bankr. Act, § 58b 826 number of times, Bankr. Act, § 58b 826 referee to give, Bankr. Act, § 39a ( 4 ) 662 ten days, by mail, Bankr. Act, § 58a 826 given by referee, Bankr. Act, § 58c 826 attorneys ; allowances 835 composition, notice of confirmation 830 discharge; application for 344, 831 form of notice 349, 831 application to extend time 345, 831 discharge, hearing on application 349, 351, 831 dismissal of proceedings 833 eflfect, without notice 833 dividends, declaration and payment. 832 examination of bankrupt 830 not required in certain cases . . . i 830 first meeting, and examination of bankrupt 835 publication of notices 835 meetings generally 835 newspapers ; designation for publication 616 not required in certain cases 829 receivers, appointment 834 referee to give 665, 836 indemnity for expenses 836 sales of property; notices required 831 perishable property, when not required 832 under statute ; time and how given 827 rules and forms 828 construction and effect of law 828 effect on jurisdiction 830 when not necessary 829 presumption that notice was given 830 voluntary petition after involuntary 835 Oatb. definition, Bankr. Act, S 1 2 Oaths or Affimiatlona. administered by whom, Bankr. Act, § 20a 493 1GS6 General Index. Oaths or Affirmations — Continued. faoe affirmation, when made, Bankr. Act, § 20b 493 attorneys of record, proofs of debts 494 comparison with former acts 493 defects in forms 494 how authenticated 494 Oaths of Office. referee to take, Bankr. Act, § 36 648 Offenses. arraignment and trial, Bankr. Act, § 2(4) 21 bankrupt; punishment, Bankr. Act, § 29b 618 referee; acting when interested in case, Bankr. Act, § 29c 618 purchase of property of estate, Bankr. Act, § 29c i 618 refusal to permit inspection of accounts, Bankr. Act, § 29c 618 time within which to be prosecuted, Bankr. Act, § 29d 618 trustee; unlawful transfer or appropriation of property, Bankr. Act, § 29a 618 purchase of property, Bankr. Act, § 29c 618 bankrupt; commission generally 57, 620, 625 false oath in proceeding 629 concealment of property 625 punishment 631 commission generally ; comparative legislation 620 application of section 29 620 knowingly and fraudulently; requirement 621 jurisdiction of bankruptcy courts 621 indictment or information ; sufficiency 621 false oath in proceeding 622 concealment of property 622 conspiracy to conceal property 623 trustees; what constitute '. 626 punishment 625 others than bankrupj; or officers; in general 625, 631 false claim ; presentation 631 receiving property to defeat law 631 extorting money from estate 632 conspiracy to violate law 632 attorneys violating Act 633 punishment 636 prosecution within one year 633 referee ; acting in case in which interested 633 punishment • "33 Officer. definition, Bankr. Act, § 1 ' 2 Off-sets. See Set-oifa. Open Account. claim founded on, provable debt, Bankr. Act, § 63a (4) 944 provability of balance due 965 payments within four months ; effect 966 Orders, General. Supreme Court to prescribe, Bankr. Act, §30 634 binding upon courts 634 not exclusive of rules of district courts 635 Genekal Index. 1687 P. Papers. PAGE bankrupt to execute and deliver, Bankr. Act, §7(4) 250 referee to transmit to clerks, Bankr. Act, § 39a(8) 662 execution and delivery by bankrupt 256 transfer of property to trustee , ■ 25G Partners. adjudication of partnership, Bankr. Act, § 5a 164 where one or more members are solvent, Bankr. Act, § 5h 164 consent and settlement of partnership business, Bankr. Act, § 5h 164 administration of estates, payment of expenses, Bankr. Act, § 5e 164 distribution of proceeds of partnership property, Bankr. Act, § 5f 164 individual estates of property, Bankr. Act, § 5f 164 surplus of individual and partnership estates, Bankr. Act, § 5f 164 marshalling assets, Bankr. Act, § 5g 164 court of bankruptcy, jurisdiction, Bankr. Act, § 5c 164 proof of claims, partnership against individual estates, Bankr. Act, % 5g 164 individual against partnership estates, Bankr. Act, § 5g 164 trustee, creditors of partnership to appoint, Bankr. Act, § 5b 164 separate accounts of partnership and individual property, Bankr. Act, § 5d. . . . 164 Partnership. adjudication in bankruptcy, Bankr. Act, § 5a 164 jurisdiction of bankruptcy court, Bankr. Act, § 5c 164 administration of estates, payment of expenses, Bankr. Act, § 5e 164 distribution of proceeds, Bankr. Act, § 5f 164' marshalling assets, Bankr. Act, § 5f 164 forms; voluntary petition; all partners not joining, Supp. Forms, No. 117 1364 petition of one creditor against, Supp. Forms, No. 119 1368 voluntary bankruptcy form of petition, OS. Forms, No. 2 1242 letter of attorney; oath or acknowledgment. Gen. Ord. XXI 1206 partner may resist adjudication. Gen. Ord. VIII 1194 notice of filing to be served, Gen. Ord. VIII 1194 schedule in case of adjudication. Gen. Ord. VIII 1194 proof of claims, against individual estates, Bankr. Act, § 5g 164 individual partners against, Bankr. Act, § 5g 164 trustee, appointment by creditors of partners, Bankr. Act, § 5b 164 separate accounts of partnership and individual estates, Bankr. Act, § 5d 164 act of bankruptcy; receivership 118, 170 commission by one partner 172 by minority of members 91 embezzlement of funds 173 what constitutes , , 173 adjudication, efl'ect of entity doctrine 180 separate from that of partners 181 time; before settlement of affairs 171 during continuance of business 171 death of partner, effect 175 insanity of partner, effect 175 infancy of partner, effect 176 form; conformity to petition 180 affected by act, what constitute 167 status to be shown 167 to exist at time of filing petition ; 167 proof of existence > 167 1688 General Index. Fartnerahip — Contimted. page aasets, marshalling to prevent preferences 188 joint and individual, administration 187 marshalling for payment of firm debts 187 distribution, where adjudication is of firm only 188 partnership proceeds among partnership creditors 189 surplus among individual creditors 189 individual proceeds among individual creditors 189 surplus among partnership creditors 189 solvency of one partner, his creditors iirst paid 190 no firm assets ; rights of partnership creditors 190 effect of waiver prior to bankruptcy 190 firm and indivdual, what are i 192 property purchased with partnership funds 192 seat in stock exchange 193 concealment 627 bankruptcy ; history 166 death of partner, no adjudication of partnership 175 effect on jurisdiction in bankruptcy 175 debts, firm and individual 193 provability, cases relating to 193 commercial paper, firm as maker or indorser 194 signing in firm name 194 partner signing individual name 195 proceeds going into firm business 195 assumption of partnership, by partner 196 of individual, by partnership 197 joint and several, proof against both estates 197 dividends from both estates 197 definition, for purposes of bankruptcy 167 discharge of debts; effect of adjudication 180 partnership and individual debts 181 where there are no firm assets 181 dividends, joint and several creditors 197 entity doctrine stated and applied 168 effect on rights of partners and creditors 169 property and debts independent of those of partners 169 adjudication independent of that of partners 169 exemptions in partnership assets 219 right depends on State laws 219, 220 infancy of one partner, effect 176 insanity of partner 175 insolvency, determination 173 what constitute ; individual property 174 involuntary proceedings ; petition ' 176 allegations as to debts and number of creditors 176 non-consenting partner; rights 177 notice to be served 177 answer 177 petition; form and contents 178 jurisdiction; partners domiciled in different districts 182 court in which petition was first filed .' 182 petition against, when filed 176 form of 178 proof of claims, debt of partnership against individual estate 184 partnership against individual estate 184 joint creditors to be first paid 185 General Index. 1689 Partnership — Continued. page partner against partnership estate 184 subrogation of partner to rights of creditors ^ 186' property; application to payment of debt of partner, validity 1068 set-off ; partnership claiin, against individual 1099 solvency of one partner, consent to adjudication 198 waiver of consent 198 administration of partnership estate by solvent partner. 199 trustees; creditors of partnership to appoint 183 individual estates ; powers as to 183 separate accounts of individual and partnership estates 184 payment of expenses and fees 184 voluntary proceedings, petition 176 allegations of petition 176 petition, where all do not join 177 form and contents 177 rights of partner who does not join 178 intervention by creditors 178 Patents. title vests in trustee, Bankr. Act, § 70a(2) 1106 trustee, title vests in 1123 Panper Affidavit. form, certificate of referee as to falsity, Supp. Forms, No. 169 1420 Panper Cases. affidavit filed with petition 756 investigation as to truth 756 statements to be included 756 appeals without bond ■ 601 compensation of trustee 744 exemptions, effect 756 loans to pay costs 757 Penalty or Forf eitnre. proof of claim ; purpose of section 57 j ^^^ Pension Money. exemption; right of bankrupt 2^® Petitions. against same debtor, priority. Gen. Ord. VII 1194 amendments; how allowed and made, Gen. Ord. XI 1197 docket; memorandum of filing. Gen. Ord. 1 1190 frame of, printed or written plainly. Gen. Ord. V 1192 indexes, clerks to prepare and keep, Bankr. Act, § 51 754 in bankruptcy, referee to consider, Bankr. Act, § 38 650 in different districts, first hearing. Gen. Ord. VI 1192 stayed until adjudication upon first, Gen. Ord. VI 1192 transfer to other district. Gen. Ord. VI 1192 involuntary proceedings, service on bankrupt, Bankr. Act, § 18a 451 verification, Bankr. Act, § 18c 451 creditors may file, Bankr. Act, § 59b 837 number of creditors and amount of claims, Bankr. Act, § 59b 837 hearing as to number and amount, Bankr. Act, § 59d 837 computation of number, Bankr. Act, § 59e 837 by three creditors, Supp. Forms, No. 118 1366 one creditor against partnership, Supp. Forms, No. 119 , 1368 1C90 Geneeal Index. Petitions — Continued. pace voluntary proceedings, who may file, Bankr. Act, § 59a 837 filed in duplicate, Bankr. Act, § 59c 837 bankruptcy, proceedings commenced by filing 458 filing, caveat to all the world .- 459 amendments, when allowed 460 matter of discretion 461 conform pleadings to facts 461 correction of mistakes or defects 461 status of bankrupt 462 allegationa as to nature and amount of claims 462 defective verification 463 new act of bankruptcy 463 within reasonable time 461 application, how made 464 effect, when granted 464 composition, to set aside for fraud 333 discharge, by whom made 344 verification ; requirement 348 where filed 349 amendments, when allowed 349 revocation ; what to state 413 amendments, when allowed 413 filing generally ; comparative legislation 839 scope of section 59 840 fraudulent or oppressive; remedy 840 generally, how framed 456 forms to be used 456 facts alleged definitely 457 disjunctive statements prohibited 457 acts of bankruptcy, facts alleged 457 nature of claims of creditors 458 legal conclusions insufficient 457 filed with clerk of court 458 involuntary proceedings, against whom filed 129 time when filed 130 within four months after commission of act 130 record or registration of transfer 130 open possession of property 131 partnership; form and contents 176 allegations negativing exceptions 151 corporations, allegations 155 creditor or creditors may file 842 stockholders and pfficers of corporation 843 must be such at time of commission of act 843 number and amount of claims 843 at time of commission of act of bankruptcy 843 provable debts must be 'held 846 secured, not to file 848 preferred, surrender 848 preferred, right to join 846, 848 who have attachments 849 estoppel, by assenting to assignment 846, 850 participation in assignment or receivership proceedings 846, 851 buying claims or inducement not to join 844 assignment of claims, effect 845 Geneeal Is-dex. 1691 Petitions — Continued! ^^ transactions to prevent petition 845 small current accounts 852 one creditor filing ; counting creditors 852 filed in duplicate 853 waiver of duplicate 853 answer averring more than twelve creditors 853 list of creditors to be filed 853 practice; notice to creditors 854 relatives and employees to be excluded 854 amendment; number and amount of claims 858 dismissal ; practice 859 intent of provision 859 intervention by other creditors 855 joinder after filing petition , 855 withdrawal of petitioners 855 purpose 855 when permitted '..... 856 any creditor entitled to 857 practice ; petition 857 notice to creditors 858 voluntary; any qualified person may file ' 840 motive of petitioner 841 where involuntary petition has been filed 841 form of petition and practice 842 Petition to Revise. in matter of law 575 See Circuit Courts of Appeals; Bevisory Jurisdiction. Place of Business. determination, for purpose of adjudication 40 corporations 40 Pleadings. discharge in bar of debt 448 suit pending at time of bankruptcy 448 involuntary proceedings ; petition of creditors 842 See Fetitions; Involuntary Proceedings. answer averring more than twelve creditors 853 answer and reply 472 form and contents 472 demurrer 472 amendments as in equity 472 verification; how made 474 by attorney 475 appearances and, by bankrupt or creditor 468 when to be filed 469, 470 Pledge. lien unaffected by bankruptcy 1058 retention of possession by pledgor for manufacturer 1059 property, title vests in trustee 1128 stock purchased for customer 1129 Plenary Suits. against adverse claimants ; jurisdiction 523 See Bankruptcy Courts; Jurisdiction; Suits By and Against Trustees. Plural. includes singular number, Bankr. Act, § 1 2 Poor Persons. affidavits, to release from fees 756 See Pauper Cases. 1692 Genesal Ini>ex. Practice. PAGE in bankruptcy, in general 454 scope and limitation of section 18 455 Preference Claims. proof ; surrender of preference 802-810 See Preferences; Proof of Claims. Preferences. attorneys, payments to, recovery, Bankr. Act, § 60d 862 creditors, act of bankruptcy, Bankr. Act, § 3a (2) 82 through legal proceedings, Bankr. Act, § 3a ( 3 ) 82 time of commission of act, Bankr. Act, § 3b 82 insolvency, at time of transfer, Bankr. Act, § 60b 861 recording or registration of transfer, Bankr. Act, § 60b 861 judgment, procured or suffered, Bankr. Act, § 60b 861 judgment procured or suffered, Bankr. Act, § 60b 861 insolvency of bankrupt, Bankr. Act, § 60b 861 new credits set off against preferences, Bankr. Act, § 60c 861 preferred creditors, person deemed, Bankr. Act, § 60a 861 trans-fer or judgment, within four months, Bankr. Act, § 60a 861 suits to recover, jurisdiction of bankruptcy courts, Bankr. Act, § 23b 513 surrender, on proof of claims, Bankr. Act, § 57e 776 transfer within four months, while insolvent, Bankr. Act, § 60b 861 trustee, recovery by, Bankr. Act, § 60b 861 act of bankruptcy ; essential elements 98 transfer of property; meaning 99 payment of money 99 depletion of estate 101 exchange of securities does not constitute 101 intent to prefer, proof required 102 knowledge, when inferred 102 presumption, where result is a preference 103 where debtor was insolvent 103 distinguished from motive 105 Attorney of bankrupt ; payments 925 payments in contemplation of bankruptcy 926 future services ; payment of compensation 926 recovery of payments; practice 927 creditors only may be preferred 897 transfer to another for benefit 897 indorsers and sureties 899 owner of funds converted or misappropriated 900 restoration of embezzled funds 900 transfer for payment of property converted 900 creditors holding, right to fill involuntary petition 848 definition of term 19 distinction between fraudulent transfers and 867 elements ; in general 867 burden of proving on trustee 868 insolvency requisite at time of transfer 869 allegation and proof 870 determination ; valuation of property 870 schedules as evidence 870 within four months before filing 871 date of filing petition controls 871 runs from date of taking effect of transfer or judgment 871 Genebal Index. 1093 Preferences — Continued. page performance of agreement, made prior 872 eflfect of prior agreements 872 possession within period, under prior agreement 874 assignment of accounts 875 date of contract, governs 873 recording required, computation of time 876 transfer before, but recorded after period 876 required ; statutes considered 877 as against judgment creditors 877 as against general creditors 878 change of possession, unless filed or recorded 879 prior to four months, but recorded after 880 judgment procured or suffered 881 procured; meaning 881 transfer of property; what constitutes 881 method immaterial 881 mingling funds with trust estate 882 payments on running account 882 transfer by indirection 882 partnership and individual assets 883 contract of conditional sale 884 intent or good faith 884 exchange of securities 887 estate must be diminished 885 property belonging to bankrupt 885 fair consideration for present loan 886 payments on account, net result 886 payment of antecedent debts 887 distinction between, and security 888 mortgage of property 889 assignment 890 part for present consideration 890 notes and checks 89 1 payment on indorsed 89 1 banker, transactions generally 892 deposit of money 893 payment of wages 894 voidable transfers 894 effect, a greater percentage 894 one creditor to receive advantage 894 test to be applied 896 reasonable cause to believe 896 intent presumed from 896 class of creditors 894 creditors of same class 895 payments share and share alike 895 exemption in property recovered 226 generally ; historical statement 864 comparative legislation 865 'in Canada 865 in England 865 in United States 865 definition ; subsection a 865 effect prior to amendment of 1903 866 partnership, marshalling assets to prevent 187 recovery of property or value 917 1694 Geneeal Index. Preferences — Continued. PAGE when action may be brought 917 trustee only to bring suit 918 refusal to sue; creditor permitted 918 permission to sue 921 against creditors 918 courts in which brought 919 bankruptcy court ; jurisdiction 920 referee not court of bankruptcy 920 practice in suits 921 pleadings carefully drawn 921 governed by rules of court 921 property or its value 922 specific, when recovered 922 where property has been sold 923 damages ; value of property 923 surrender ; on proof of claim 805 voidable must be surrendered 804 liens through legal proceedings 805 optional ; effect of retention 806 payments on running accounts 806 new credits ; net increase of estate 806 intent of transfer or payment 807 payment on notes at bank 808 what constitutes 809 compelled by judgment ; effect 809 to trustee and not to bankrupt 810 set-offs; debts tainted with, not subject 924, 1100 new credits 924 credits in good faith 925 through legal proceedings, act of bankruptcy 106 essential elements 107 comparison with act of 1867 106 intent not essential 107 suffered or permitted judgment or levy 108 appeal from judgment, effect 108 resistance, effect 109 creditors affected ; provable debts 109 resultant inequality among 109 legal proceedings, what included 110 attachment proceedings 110 distraint of goods Ill supplementary proceedings 110 garnishment proceedings 113 vacating or discharging preference 112 five days before a sale 113 final disposition Ill voidable, general meaning of statute 902 reasonable cause to believe preference will result 902 time of cause to believe 902 intent to prefer, effect of amendment of 1903 903 proof of belief of result 904 actual knowledge of result, not required 904 inquiry as to solvency 905 notice of facts causing inquiry 906 mere guess or suspicion insuiBcient 907 Geneeal Index. 1695 Preferences — Continued. page insolvency, knowledge of 909 presumption where insolvency is known 909 proof of cause to believe insolvency 910 belief of insolvency, question of fact 911 payments by insolvent in course of business. . . ., 912 debtor's financial condition, knowledge 912 loan by bank, in settlement of claims 913 pleading cause to believe insolvency 913 purpose and effect to be considered 913 evidence ; presumptions 914 burden of proof or trustee 914 sale of entire stock 915 agent or attorney, belief or knowledge of 916 Principal Place of Business. of persons and corporations 40 corporations, place named in certificate 41 preceding six months 43 Priorities. creditors holding as voters at meetings, Bankr. Act, § 56b 768 debts entitled to prior payment, Bankr. Act, § 64b 985 order of priority, Bankr. Act, § 64b 985 proof and allowance of priority claims, Bankr. Act, § 57e 776 taxes, court to order payment, Bankr. Act, § 64e 985 assignment of claims; effect 790 administration of estate; costs and expenses 1002 what included 1002 referee's fees 1002 notices to creditors; cost 1002 attorneys' fees; allowance 1002 services necessarily rendered 1002 petitioning creditors; amount 1003 bankrupts; in composition 1003 resisting adjudication 1004 receiver of corporation, appointed in State court 1004 creditors holding priority claims, voters at meetings of creditors 773 filing fees in involuntary cases 1001 in general ; comparative legislation 987 construction of act 988 priorities versus liens 988 liens control if valid 988 effect as to wages, fees of attorneys, etc 989 debts due United States 990 order of priority 990 beneficiaries of trust funds 990 determination ; practice 991 preservation of estate ; cost 1000 actual and necessary cost lOOC rent for premises occupied by trustee 1001 recovery property, expenses of creditor lOOi allowance, when made lOOi. proof of ; similar to secured claims 802 taxes ; duty of trustee to pay 992 cost of preserving estate first paid 993 amount and legality, court to determine 993 1696! Gbneeal Index. Frlorltiea — Continued. page not required to be proved 994 payment out of proceeds of sale 995 character; meaning of term 996 claims included 997 federal courts to determine 991 local assessments 997 water rents 997 corporations ; I'cense fees 997 franchise taxes 998 income taxes 999 subrogation on payment 998 accrued since proceedings were instituted 999 interest to be added. 999 under State laws, persons entitled 1013 liens ; continuing after bankruptcy 1013 recognized in bankruptcy courts 1013 unrecorded mortgages 1014 collusive assignment of 1016 landlord's claims for rent 1015 debts due the State 1017 conflicting or overlapping 1017 liens, not priorities 1018 attorneys, may be entitled to priority 1018 fees and expenses, general assignees 1019 receivers and their attorneys 1019 sheriff's fees 1020 under execution or attachment 1020 disbursements as custodian of property 1021 bank deposits 1021 wages, payment 1005 earned by clerk within three months 1005 term construed 1005 burden of proof 1006 assignee of claim . . . 1006 orders directing payment 1007 time checks 1007 borrowing money to pay 1007 services performed within three months 1008 breach of contract; judgment not entitled to priority 1008 owing at time of bankruptcy 1008 persons entitled ; wage-earners 1009 character of services controls 1009-1011 traveling or city salesmen 1012 Privileged Commiuiications. attorney and client; communications 504 confidential communications 504 Process. service on bankrupt, Bankr. Act, § 18a 451 return within fifteen days, Bankr. Act, § 18b 451 issue, under seal and tested by clerk, Gen. Ord. Ill 1191 issuance by clerk '*"5 returnable in fifteen days 465 service, personal, how made • 466 publication ; order directing 466 on absentees ; absconding debtor 467 corporations, infants, lunatics 467 Genekal Index. 1697 Prooesa — Continued. paoE non-joini,ng p^rtn^ra 46T effect, on jurisdiction in rem and in personam 468 del^y in service 468 proof, how made. 468 Promissory Notes. See Commercial Paper. Proof of Claims. appeals to circuit courts of appeal or Supreme Court, Bankr. Act, § 25a 571 assigned; statement filed, Gen. Ord. XXI 1206 bankrupt, duty to examine claims, Bankr. Act, § 7(3) 251 duty to inform as to false claims, Bankr. Act, i § 7 ( 7 ) 251 contingent liabilities; name of creditor unknown. Gen. Ord. XXI 1206 depositions; how entitled. Gen. Ord. XXI 1206 debt due partnership or corporation. Gen. Ord. XXI 1206 open accounts; due date, Gen. Ord. XXI 1206 assignment before proof. Gen. Ord. XXI 1206 estate in bankruptcy, against another estate, Bankr. Act, § 57m 777 filed with clerk or referee. Gen. Ord. XX 1206 filing claims in court, Bankr. Act, § 57c 776 form of proof of unsecured debt, Off. Forms, No. 31 1267 secured debt. Off. Forms, No. 32 1268 debt due corporation, Off. Forms, No. 33 1269 by partnership, Off. Forms, No. 34 1270 by agent or attorney. Off. Forms, No. 35 1271 secured debt, by agent. Off. Forms, No. 36 1272 affidavit of lost bill or note. Off. Forms, No. 37 1273 order reducing claim. Off. Forms, No. 38 1274 expunging claim. Off. Forms, No. 39 1275 special clauses for proofs, Supp. Forms, No. 170 1421 reconsideration and rejection, petition, Supp. Forms, No. 171 1422 notice of petition, Supp. Forms, No. 172 1423 secured debt, Supp. Forms, No. 173 1424 expunging or reducing debt, Supp. Forms, No. 174 1424 order allowing claim, Supp. Forms, No. 175 1425 individual undertaking, secured by, Bankr. Act, § 57i 777 instrument in writing, claim founded on, Bankr. Act, § 57b 776 filed with claim, Bankr. Act, § 57b 776 objections to allowance, Bankr. Act, § 57d 776 hearing and determination, Bankr. Act, § 57f 776 partnership, against partners, and vice versa, Bankr. Act, § 5g 164 penalties and forfeitures, claims for, Bankr. Act, § 57 j 777 preferences, surrender, on proof of claims, Bankr. Act, § 57e 776 provable debts, specified, Bankr. Act, § 63a 944 See Provable Dehts. proved claims, transmission to clerk. Gen. Ord. XXIV 1212 reconsideration, before estate is closed, Bankr. Act, § 57k 777 recovery of dividend paid, Bankr. Act, | 571 777 re-examination ; application by creditor or trustee. Gen. Ord. XXI 1206 order and examination. Gen. Ord. XXI secured and priority claims, Bankr. Act, § 57e 776 allowance, for participation in creditors' meetings, Bankr. Act, § 57e 776 value of securities, determination, Bankr. Act, § 57h 777 statement of claim to be verified, Bankr. Act, § 57a 776 time witbin which proved, Bankr. Act, § 57n T77 107 1698 Geneeal Index. Proof of Claims — Continued. page amendment; allowance 792 fonual defects may be cured 792 after lapse of year i 793 presentment of new claim 794 informal proof; supplying omissions 792 appeals; order allowing or rejecting ,....,.. 594 amount in controversy 595 liens ; determination of validity 595 priority and secured claims 595 contests of claims; object of section 812 objections before allowance 812 parties in interest may file 812 form and contents 813 evidence in support 813 delay by trustee 813 verified proofs as evidence 813 review of referee 's determinations 814 debts created by fraud 791 effect of proof and allowance 825 waiver of lien 825 examination of claims by bankrupt 255 false claims, bankrupt to inform trustee 255 partnership, partnership against individual estate 184 partner against partnership estate 185 joint creditors to be first paid 185 subrogation of partner to rights of creditors 186 joint and several creditors, against joint and several estates 184 dividends from each estate 197 penalty or forfeiture; for wrongful act not included 812 on corporation, for failure to pay tax 812 preferences; proof under former act 802 payments in due course 803 decisions under original act 804 transactions prior to four months' period 804 voidable under § 60 804 effect of amendment of 1903 804 voidable must be surrendered .' 805 liens through legal proceedings 805 surrender, when required 805 compulsory, not a penalty 806 optional; effect of retention 806 payments on running accounts i 806 new credits; net increase of estate 806 intent of transfer or payment 807 payment on notes at bank 808 what constitutes 809 effect or proof 809 compelled by judgment ; effect. 809 to trustee and not to bankrupt 810 priority claims; same as secured 802 proof and allowance, in general 780 scope of section 780 comparative legislation 781 distinction between 781 same as between evidence and judgment 781 separate and distinct steps 781 General Index. 1699 Proof of Claims — Continued. pa^e proof of claim; general requirements 782 statements ; what to show 783 written, signed and verified 783 presumptive evidence of validity 783 contents of statement; Gen. Ord. XXI 786 allegations of proof 784 consideration ; statement 785 items aad dates 785 conformity of proof with statement 785 inquiries as to truth of statement 785 caption of statement 786 verification by partner, agent or officer of corporation. '. 786 before whom taken 787 official forms to be used , 786 creditor, or agent or attorney may make 788 executor or administrator 787 stockholders of identical corporations 788 who may make proof 787 stockholders 788 assigned claims, proof of ownership. 789 proxy, proof by 788 relatives, proof by 787 date and facts of transfer 790 effect on priorities 790 accounts, statement to be attached 791 judgments, transcripts to be attached 791 filed with referee 795 reconsideration and rejection 814 practice and petition 814 jurisdiction of court or referee 815 petition ; presented by trustee 815 by creditor, when trustee refuses 815 time for filing 815 application seasonably made 816 due notice to claimants 816 order of referee or judge 817 review of order 818 coats and expenses 818 recovery of dividends 818 secured claims ; purpose of proof 795 surrender of security, effect r 797 deduction of value of security 7&8 retention of securities , 798 secured creditor ; what constitutes 796 property other than of bankrupt 796 waiver note 796 claim against exempt property 800 value of securities ; ascertainment 799 date of determination 800 interest and dividends on securities 800 secured debt proved as unsecured 801 proof expunged, and value ascertained 801 amendment to permit proof 801 set-offs ; waiver by proof without claiming 1099 provable debts only subject to 1094 subrogation ; surety or indoraer 810 proof in principal creditor's name 811 surety on attachment bonds 811 surrender of preference by surety 811 time limitation on allowance 818 1700 General Index. Proof of Claims — Continued. I>age filed within one year after adjudication 818 purpose and effect of limitation 819 presentation of facts informally 820 tax claims excepted 821 trustee, presentation of claim to 820 claims against specific property 821 exceptions; claims in litigation 821 meaning of phrase liquidated by litigation 822 suit to recover preference 822 to establish validity of lien 822 fraud of bankrupt in preparing schedules 823 concealment of assets 824 amendment after lapse of year , 824 waiver of right to bring suit 292 written instrument, claim evidenced by 790 filed with claim 790 statement of consideration 790 Property. definition of term 20 possession, to start time running within which petition must be filed 131 receivers' power to seize, when claimed adversely 37 referee's order of seizure or release 655 restoration, order directing, refusal to obey 686 failure to obey, contempt 686 inability ; afiBrmatively shown 687 denial of ability, insuflScient 688 suits for recovery, jurisdiction of bankruptcy courts 30, 536 power of receivers to bring 50 Property of Bankrupt. appraisal ; appointment of appraisers, Baiikr. Act, § 70b 1106 creditors having liens, trustee, possesses rights of, Bankr. Act, § 47a(2) 716 redemption; petition by trustee, bankrupt or creditor, Gren. Ord. XXVIII 1214 petition, hearing and order, Gen. Ord. XXVIII 1214 sales ; public auction, Gen. Ord. XVIII 1205 private, when authorized. Gen. Ord. XVIII : 1205 perishable property, without notice. Gen. Ord. XVIII 1205 seizure by marshal, Bankr. Act, § 69 1202 bond to be given, Bankr. Act, § 69 1102 release upon giving bond, Bankr. Act, § 69 1102 bond of bankrupt for release, form. Off. Form, No. 10 1250 special warrant to marshal, form, Off. Form, No. 8 1248 bond of petitioning creditors, form. Off. Form, No. 9 1249 vests in trustee, by operation of law, Bankr. Act, § 70a 1106 appraisal; appointment of appraisers 1165 appraisers ; qualifications 1165 practice on appointment 1166 burdensome; trustee may disclaim 1162 executory contracts and leases 1162 practice ; report for instruction 1163 order to disclaim 1163 conflict as to title, determination 1111 sales; approval by court 1170 before adjudication, when permitted 1168 inadequacy of price; not disturbed for 1169 (Jbneeal Index. 1701 Property of Bankrupt — Continued. page perishable property 1168, 1171 incumbered property; free of liens 1171 liens should be protected 1173 payment of liens out of proceeds 1173 notices to lienors 1173 validity and priority of liens 1175 practice; public or private 1171 resale, when granted 1 176 transfer of title to purchaser 1177 See Sales of Property. ' seizure ; scope of provision 1 103 bond of petitioning creditor 1103 remedy, where claimed by third party 1104 marshal's liability 1104 practice; affidavits and bonds 1105 title vests in trustee, as of date of proceedings 1112 between petition filed and adjudication 1114 and appointment of trustee 1114 effect of amendment of § 47a(2) by act of 1910 727 trustee vested with rights of lien creditors 728 unrecorded liens 731 creditors holding liens 733 conditional sale contracts and chattel mortgages 733 fraudulent transfers 736 property which vests ; in general 1115 possession of bankrupt 1115 acquired after filing petition 1116 subject to claims, liens- and equities '. ■ 1117 same plight or condition 1119 defenses, legal and equitable 1119 acts of bankrupt before bankruptcy 1120 property subject to trust 1120 in possession of bankrupt as bailee 1121 - specific property; scope of subsection a, § 70 1122 documents relating to bankrupt's property 1122 patents, copyrights ani trade-marks 1123 personal powers 1123 fraudulently transferred 1124 See Fraiidulent Transfer. might have been transferred or levied upon 1127 test to be applied 1127 property pledged 1128 purchase of stock for customer ' 1129 includes every vested right 1130 remainders and contingent interests 1133 trust interests 1133 resulting or constructive trusts 1133 surplus income from trust funds 1134 trust funds mingled with bankrupt's 1135 dower and curtesy rights 1136 personal contracts of bankrupt 1137 franchises and licenses 1137 seat in stock exchange 1138 life insurance policies 1139 See Life Instiranoe PoUcie*. 1702 Geneeal Index. Property of Bankrupt — Continued. page property Bold on condition 1145 fire insurance policies 1144 See Conditional Sales. affected by fraudulent representations 1150 rights of action of bankrupt 1158 reclamation proceedings; right to bring 1151 goods purchased without intent to pay 1153 property sold subject to approval 1156 rental contracts 1156 payment on delivery 1157 proof of identity of articles sold 1158 practice 1 158 ProTable Debts. debts which may be proved, Bankr. Act, § 63a 944 unliquidated claims, Bankr. Act, § 63b 944 list proved at first meeting, Off. Forms, No. 19 1258 contingent liabilities; not unliquidated claims 977 distinction between former and present act 978 contingency must happen before liquidation 978 salary due after bankruptcy 979 contracts, debts founded on 966 validity must be established 966 form not material 967 gambling transactions ; violation of statute 967 speculative contracts for future delivery 967 bucket shop transactions 967 debt owing at time of filing petition 968 breach of warranty 868 executory, breach ""8 anticipatory breach 869 damages before complete performance 969 contingent liabilities 870 continuing; surety bonds 870 employment and commissions 871 damages prior to completion "'1 lease, breach of covenant " ' ^ liability for continued use by bankrupt 872 implied; same as quasi contracts 872 torts; liability 872 conversion of personal property 873 liability of stockholder of corporation 873 costs; in action by or against bankrupt 873 taxed prior to bankruptcy 874 in action to recover provable debt 874 in attachment suits 875 creditors filing involuntary petition, must hold 846 debts not provable 879 fines and penalties ; judgments 87P alimony due or to accrue 880 rent to accrue; not fixed liability 880 contingent upon uncertain events 881 notes for, given by bankrupt 881 receiver in occupation of premises 882 re-entry upon bankruptcy; effect 882 Geneeal Index. 1703 Provable Debts — Continued. PAGE barred by statute of limitations 983 commissions of trustee under deed of trust 984 dischargeability not affected by failure to prove 425 fixed liability absolutely owing 956 owing at time petition is filed 967 judgment; evidenced by 957 verdict for damages, where not entered 957 effect of verdict of jury 957 founded on tort 958 final ; State law 959 appeal does not affect provability 958 barred by statute of limitations 959 impeaching, of State court 959 for fraud or collusion 959 instrument in writing; debt evidenced by 960 what are included 960 bills and notes 960 who may prove 960 corporations used for corporate purposes 961 cheeks 960 stipulation for payment of collection fee 962 interest recoverable at time .petition is filed 962 indorser or surety debts 963 indorsers, liability 963 surety and corporate bonds 963 director of savings bank for funds embezzled 965 fee for increase of capital stock 965 history and comparative legislation 947 judgments, entered after bankruptcy 973 entry prior to bankrupt's discharge 973 open accounts ; balance due 965 payments within four months 966 proof of, see Proof of Claims. provability ; determination 947 debt ; what constitutes 947 defenses to allowance 947 ultra vires act of corporation 948 void contracts 948 " proved " and " allowed "; distinction 948 contracts, liabilities based on 949 ex contractu and ex delicto 949 based on torts 949 election to sue on tort, uneffectual 950 fraud or connivance 951 debts existing when petition filed 951 equitable debts 952 money secured by false representation 953 amount due after foreclosure of mortgage 953 debts against more than one person 953 partnership obligation, endorsed by partners 954 person proving; effect 954 corporation bondholders and stockholders 954 wife against husband's estate 955 claim for services 955 services of minor child 955 fraud or preference; effect 96S 1*^04 Geneeal Index. Frovable Debts — C!ontinued. FAeK fraudulent debts not provable 956 set-off; right as to provable debts 1094 taxes not debts, need not be proved 965, 994 unliquidated claims; liquidation 975 effect and purpose of provision 976 injuries to persons or property; damages 976 employer's liability; judgment not provable 76 waiver of tort, and proof on quasi contract 977 liquidation ; how accomplished 977 contingent liabilities 977 Protection from Arrest. bankrupt entitled to, Bankr. Act, § 9a 277 scope and purpose of provision 278 right begins when petition is filed 279 ends upon discharge 279 debts or claims released by discharge 280 application for order 280 referee may grant 280 PuMlcation. notices to creditors; ordered by judge, Bankr. Act, § 58b 826 of meetings of creditors, Bankr. Act, § 58b 826 service of notice in volvuitary cases, Bankr. Act, § 18a 451 Parchaaer in Good Faith. transfers to, valid 1070 inquiries as to solvency 1070 sale of entire stock 1071 present fair consideration ■ • 1071 Q. Qualification!. referee, specified, Bankr. Act, § 35 646 trustees specified, Bankr. Act, § 45 712 prescribed by statute 712 persons not qualified 713 stockholder of bankrupt corporation 714 R. HecelTcrs. compensation, commissions, Bankr. Act, § 48d 741 additional for business conducted, Bankr. Act, § 48e 742 additional, prohibited, Bankr. Act, § 72 1183 power to appoint, Bankr. Act, § 2(3) 21 forms; petition for appointment before adjudication, Supp. Forms, No. 64 1303 order ; before adjudication, Supp. Forms, No. 65 1305 petition for appointment, after adjudication, Supp. Forms, No. 66 1306 order for appointment, after adjudication, Supp. Forms, No. 67 1308 continuance of business; petition, Supp. Forms, No. 68 1309 order authorizing, Supp. Forms, No. 69 1310 contracts; order requiring completion, Supp. Forms, No. 70 1310 reports and accounts, Supp. Forma, No. 71 1310 order confirming, Supp. Forms, No. 72 1318 General Index. 1705 Receivers — Continued. page adverse claimant in possession of property 527 ancillary proceedings, appointment in. .... .° 33 appointment; jurisdiction of court of bankruptcy 44 application for 47 effect of 46 exercise of equity power 44 preservation of estate, purpose of appointment 45 when absolutely necessary 45 power exercised with caution 46 effect of assignment for benefit of creditors 46 notice to creditors 48 attorneys ; allowance for services 938 compensation; when appointed in bankruptcy 938 appointed by State courts 939 priority of payment 1004 bond of petitioning creditors on appointment 48, 834 liability for costs and expenses 135, 1103 remedies against sureties 136, 1 103 compensation, maximuin amount fixed by statute 52, 56 court may deny 53 effect of amendment of § 2(5) by Act of 1903 53 allowance out of assets ....'. 54 continuance of business; jurisdiction. 54 compensation ; effect of amendment of 1910 53 conduct of business 55 contracting indebtedness 55 damages from receivership 54 possession of property claimed adversely 51 in State courts, seizure 51 powers conferred by statute 49 sale of property 49 suits for recovery of property 50 practice ; application for appointment 47 notice of application ^ 48 order of appointment 48 report and accounts 48 State courts; fees and expenses, priority , 1019 suits against; leave of court 52 Receivership. act of bankruptcy ; essential elements 118, 170 See Acts Of Bankruptcy. application for, constitutes act 119 appointment of receiver, under equity power 121 insolvency essential 121 sole ground of receivership 121 record of court appointing receiver, as proof 124 meaning of term 125 precedents under former law 126 damages from 54 partnership, act of bankruptcy 118 Sleclamation Proceedings. forms; demand, Supp. Forms, No. 187 1436 petition to reclaim, Supp. Forms, No. 188 1436 answer to petition, Supp. Forms, No. 189 1439 costs 1158 property in possession of trustee ; right to bring 1151 time when petition to be iiled 1151 1706 Geneeal Index. Reolajnatlon Prooeediiie> — Continued. page Bale or bailment; agency 1152 goods purchased without intent to .pay 1153 purchase on verge of bankruptcy 1153 proof of insolvency 1155 false financial statement 1155 property sold subject to approval 1156 expression of dissatisfaction 1156 under rental contracts 1156 payment on delivery 1 157 failure to pay; title does not pass 1157 proof of identity of articles sold 1158 practice 1158 Reeords. referee to cause to be made, Bankr. Act, § 39a(5) 662 to transmit to clerks, Bankr. Act, § 30a(7) 662 referee to keep, Bankr. Act, § 42a 696 proceedings in separate books, Bankr. Act, § 42b 696 transmission to court, Bankr. Act, § 42c . . . . ' 696 prepared in each case 696 what constitutes 697 certified and transmitted to court 697 referee to prepare 665 to transmit to clerks 665 Reeording. liens void for want 1036 valid as between parties 1038 chattel mortgages and conditional sales 1039 object of recording 1039 effect of failure; New York rule 1040 conditional sale; failure to record 1039 possession of bankrupt 1042 agreement to withhold 1043 recording or filing within four months 1044 See Liens; Fraudulent Transfers. Recovery of Property. conveyed or encumbered with four months, Bankr. Act, § 67e 1031 jurisdiction of State courts, Bankr. Act, § 67e •. 1031 costs, priority of payment, Bankr. Act, § 64b (2) 985 suits by trustee, jurisdiction of bankruptcy courts, Bankr. Act, § 231b 513 trustee; property transferred, Bankr. Act, § 70e 1106 preferences ; suits by trustee 917 when trustee refuses to sue 918 courts in which brought 919 property, jurisdiction of suits 30 receivers, power to bring suits ^ 50 suits, jurisdiction of referee 658 Referee. absence or disability, another referee appointed, Bankr. Act, | 43 698 acts prohibited, Bankr. Act, § 39b ©02 appointment; term of office, Bankr. Act, § 34 ■ 644 certificate of disqualification, form, Supp. Forms, No. 145 1395 certificate of fees payable, form, Supp. Forms, No. 166 1417 clerk to collect fees, Bankr. Act, § 61 754 GrENEBAL Index. 1707' Referee — Continued. PAOT delivery of papers, Bankr. Act, § 51 754 payment of fees, Bankr. Act, § 51 754 compensation; amount of fees, Bankr. Act, § 40a 676 transfer of case to another referee, Bankr. Act, § 40b 676 revocation of reference, effect, Bankr. Act, § 40c. . . . '. 676 additional, prohibited, Bankr. Act, § 72 1183 contempts before, Barikr. Act, § 41a 684 certification of facts to judge, Bankr. Act, § 41b 684 creation of office, Bankr. Act, § 33 642 definition, Bankr. Act, §1 2 designation of districts, Bankr. Act, § 34 644 duties; statutory, Bankr. Apt, § 39a 662 expenses; accounts to be kept. Gen. Ord. XXVI 1212 fees; in full compensation for services, Gen.. Ord. XXXV 1219 not including expenses. Gen. Ord. XXXV ; 1219 indorsement of papers. Gen. Ord, II 1191 jurisdiction prescribed, Bankr. Act, § 38 650 meeting of creditors, to preside at first, Bankr. Act, § 55b 763 notices to creditors given by, Bankr. Act, § 58c 826 number, Bankr. Act, § 37 649 oath of office, Bankr. Act, § 36 648 form. Off. Form, No. 16 , » 1256 offenses; punishment, Bankr. Act, § 29c 618 acting in case in which interested, Bankr. Act, § 29c 618 purchase of property of estate, Bankr. Act, § 29c 618 refusal to permit inspection of accounts, Bankr. Act, § 29c 618 official bonds; amount, sureties, condition, Bankr. Act, § 50a 750 filed with clerk of court, Bankr. Act, § 50h 750 suits upon, for use of person injured, Bankr. Act, § 50h 750 brought within two years, Bankr. Act, § 501 751 vacancy, for failure to give, Barikr. Act, § 50k 751 official bond, form. Off. Form, No. 17 1256 order of reference; to name day when bankrupt shall attend. Gen. Ord. XII 1198 orders; what to recite. Gen. Ord. XXIII 1211 petition to review order, Supp. Forms, No. 158 1406 certificate upon, Supp. Forms, No. 159 1407 qualifications specified, Bankr. Act, § 35 646 records, how kept, Bankr. Act, § 42a 696 proceedings, kept in separate book, Bankr. Act, § 421b 696 transmission to court, Bankr. Act, § 42c 696 reference after adjudication, Bankr. Act, § 22 511 removal of trustee; order to show cause. Gen. Ord. XVII 1203 review; petition for. Gen. Ord. XXVII •. . . 1212 time and place to act; judge to order. Gen. Ord. XII 1198 vacancy, temporarily fflled, Bankr. Act, § 43 698 application for stay of suit against bankrupt 299 appointment by courts of bankruptcy 644 by court and not judge 645 form of court order 645 term of office 645 appraisers ; appointment 1165 compensation ; comparative legislation 677 prior to amendment of 1903 677 pauper cases 678 special master, services as 678 1^08 Geneeal Inbex. Sef eree — Continued. faoe composition cases . . . ; 678 effect of amendment of 1903 679 filing fee; amount 679 claim fee; purpose 679 when payable; charge against estate 680 disbursements to creditors, commissions 680 all creditors included 680 sums paid by trustee, not entitled 681 full compensation; meaning 6S1 reference to two or more referees 683 composition; report of offer and acceptance 322 setting aside, trial before 334 contempts before, scope of jurisdiction ; 685 disobedience of orders 686 restoration of property; inability 687 failure to obey wilful 688 ability to obey affirmatively shown €88 denial of ability insufficient 688 refusal to explain disposition of property 690 xnisbehaTior in presence 690 witnesses, refusal to appear „ 690 subpoena, mileage and fee to be paid 691 refusal to be sworn 691 to answer material questions 691 evasive and indirect answers 692 practice; act must be followed 692 certificate to judge 693 filed with clerk 693 petition and order 693 service on person charged 693 hearing on return 694 punishment; fine or imprisonment 695 commitment; order 695 discharge, application referred to as special master 343 hearing referred, as special master 361 minutes and report of special master 362 compensation and disbursements 362 duties in general 664 dividends; declaration 664 sheets prepared 664 schedules; examine and amend 664 prepare and file in case of failure of bankrupt 665 information as to estates . . , 664 notice to creditors 666 records; to prepare 665 transmit to clerks 665 evidence; preservation when no stenographer . , 665 papers at clerk's offlcp, to call for ! 666 expenses; allowances >. •■•• ®^ what included 882 fees; collection by clerk 758 payment, after estate is closed 756 involuntary proceedings, reference to hear and report 477, 485 reference where judge is absent 485 jurisdiction; comparative legislation 661 General Index. 1709 Referee — Continued. tage not possessed unless conferred 652 adjudications or dismissal of petition 653 reference in case of absence of judge 653 effect of reference; Gen. Ord. XII 653 reference in involuntary cases ; practice 653 administration of oaths to witnesses 654 conduct of examinations of witnesses 654 competency of evidence 654 exclusion of rejected evidence 655 seizure and release of property. 655 statutory jurisdiction of judge 656 court rule conferring 656 powers exercised under grant 657 suits, plenary, for recovery of property 658 discharges and compositions 658 revocation or setting aside 659 injunctions, not to grant certain 659 granted, in certain cases 659 stenographer, employment , 660 payment of fees 660 limits of district 645 not included within meaning of court 10 notices to creditors, duty to give 836 indemnity for expenses 836 offenses ; acting in case in which interested 633 punishment 633 order of reference; form 485 proceedings before, certified copies 509 prohibitions ; not to act in cases where interested 666 cannot practice in bankruptcy 666 cannot purchase property of estate 666 proofs of claims ; jurisdiction 782 inquiries as to truth of proofs 785 filed with ; clerk to transmit , 795 determination as to secured claims 797 securities ; ascertaining value , 799 contests ; hearings 812 reconsideration and rejection; practice 814 order ; review 818 qualifications ; residence 646 relative of certain judicial officers 647 ■ records ; kept in books 696 separate in each case 697 certified and transmitted to court 697 removal from office, for cause 645 when ill or insane 698 reviews by judge ; petition ; contents 667, 669 time within which applied for 667 must be reasonable 668 order only reviewable 669 decision on facts ; effect 669 conflicting evidence ; not disturbed 670-673 record to be certified 674 ruling of referee ; evidence 674 documents handed up 674 ^'■'^ Geneeal Index. Referee — Continued. page hearing, how conducted 675 times and places where they act 653 trustee; appointment on failure of creditors 703 approval or disapproval of appointment 704 grounds of disapproval , 705 Beferenoe. eases after adjudication, Bankr. Act, § 22 511 to any referee in district, Bankr. Act, § 22 511 involuntary proceedings, to referee where judge, is absent, Bankr. Act, § 18f 451 docket; entry in. Gen. Ord. 1 1190 order, form, OS. Form, No. 14 1254 in judge's absence, form, Oflf. Form, No. 15 1255 administration without 512 after adjudication, general 512 entry of order 512 to any referee in district 512 adjudication, in case of absence of judge 653 effect of reference; Gen. Ord. XII 653 involuntary proceedings; where judge is absent 485 order ; form 485 voluntary proceedings; absence of judge 485 order of ; form 485 RemaiudeTi, bankrupt; vests in trustee 1133 Hemoval. trustee, does not abate suit or proceeding, Bankr. Act, § 46 715 referee, when ill or insane 698 trustee, by judge and not by referee 710 cause; inducement of appointment 710 practice 710 withholding compensation 748 Removal of Causes. from one bankruptcy court to another, Bankr. Act, § 32 639 convenience of parties in interest, Bankr. Act, § 32 639 when to be made 639 parties in interest; meaning 640 Rent. to accrue ; not provable 980 not fixed liability owing at time of filing 980 contingent upon uncertain events 981 notes for, given by bankrupt 981 receiver in occupation of premises 982 re-entry upon bankruptcy; effect 982 Re-opening Estates. jurisdiction; exercise by bankruptcy court 73 lack of administration, sole ground 73 application, by whom 73 when to be granted 74 practice on application 74 Reports. trustees final, before final meeting of creditors, Bankr. Act, § 47a{8) 716 condition of estates, Bankr. Act, § 47a (10) 716 Gbnehal Index. 1711' Residence. PAGE of bankrupt, in district 39 corporation, what constitutes 40 preceding six months 43 removal from one district to another, effect 44 Reviews by Slatrlot Judge. certificate by referee to judge, torm, Oflf. Forms, No. 56 1289 by judge, of order of referee; petition, Gren. Ord. XXVII 1212 certificate of question, Gen. Ord. XXVII 1212 forms, petition for, Supp. Forms, No. 158 1406 certificate of referee, Supp. Forms, No. 159 1407 decision on facts; eflFect 670-673 conflicting evidence; not disturbed 671 hearing by judge; conduct 675 order only reviewable 669 record to be certified 674 rulings of referee; evidence 674 documents handed up 674 petition; Gen. Ord. XXVII 667, 669 contents 669 time for application 667 reasonable; what constitutes 668 Revisory Jurisdiction. circuit courts of appeals, exercise, Bankr. Act, § 24b 561 exercise of power 570 forms; petition to revise, Supp. Forms, No. 146 1396 order allowing petition, Supp. Forms, No. 147 1397 notice to respondent, Supp. Forms, No. 148 1398 order of circuit court of appeals, Supp. Forms, No. 149 1399 petition to revise in matters of law 576 distinction between, and appeals 575 right exclusive or accumulative ■ 576 conflict of authority . . . . ; 577 prevailing rule 578 dependent on character of controversy 578 questions of law only considered 581 of law and fact; remedy by appeal 581 appeal treated as 579 uniting with petition! 579 matters subject to 582 object and character of proceedings to govern 583 orders or decrees in bankruptcy proceedings 583 claims as to funds in possession of court 584 liens on bankrupt's property 584 administrative orders '. 585 sale and distribution of property 585 exemption claims 586 claims generally 586 : allowance of fees and expenses 586 proceedings regarding discharge and composition 587 practice ; petition, form 587 record ; state questions involved 587 evidence taken before referee 588 opinion of district judge on review 588 time of filing petition 688 1'12 Geneeal Index. Bevisory Jurisdiction -^ Continued. page notice to adverse parties 590 dismissal for lack of parties 590 Revival. discharged debt by new promise 449 Revocation. of discharge, application within six months, Bankr. Act, § 15 407 fraud of bankrupt, Bankr. Act, § 15 407 discharge, under English Act 408 under former acts 408 jurisdiction ; collateral attack 408 excludes other remedy 409 meaning of words in section 409 grounds; fraud of bankrupt 411 practice 413 effect to nullify discharge 414 Bnles. Supreme Court to prescribe, Bankr. Act, § 30 634 do not enlarge statute 634 Sales of Property. notices to creditors, required, Bankr. Act, § 58a(4) 826 property of bankrupt estates, Bankr. Act, § 70b 1106 appraisal; appointment of appraisers, Bankr. Act, § 70b 1166 conveyance to purchaser, Bankr. Act, § 70c 1106 by auction. Gen. Ord. XVIII 1205 at private sale. Gen. Ord. XVIII 1205 perishable, without notice. Gen. Ord. XVIII 1205 forms; petition and order for auction, Off. Forms, No. 42 1277 free from liens, petition and order, Off. Forms, No. 44 1279 private sale, petition and order, Off. Forms, No. 45 1280 perishable property, petition and order. Off. Forms, No. 46 1281 petition; under Gen. Ord. XVIII (2), Supp. Forms, No. 190 1440 order for sale under Gen. Ord. XVIII (2), Supp. Forms, No. 191 1441 confirmation; petition, Supp. Forms, No. 192 . , 1442 order, after notice to creditors, Supp. Forms, No. 193 1443 private; petition, Supp. Forms, No. 194 1444 order, by trustee, Supp. Forms, No. 195 1445 free of liens, petition, Supp. Forms, No. 196 1446 notice of motion, Supp. Forms, No. 197 1449 order directing sale, Supp. Forma, No. 198 ." 1450 injunctions against, when issued 78 notices to creditors 831 perishable property ; when not required 832 laws and General Orders controlling 1166 practice and conduct, in general 1166 public or private, as directed by court 1167 referee, jurisdiction Ii67 conducted by trustee or ofiScer. 1167 property sold before adjudication 1168 bids; sealed or verbal 116^ offered in good faith 1168 inadequacy ; erroneous 1169 GrENEEAL InDEX. 1713 Sales of Property — Continued. PAGE re-opening, to receive additional 1169 confirmation or approval 1170 public or private, under Gen. Ord. XVIII 1171 incumbered property; free of incumbrances 1171 when authorized 1172 sales subject to incumbrances 1176 dower, sales free of 1173 liens, proceeds subject to 1173 rights of lienors 1173 determination of validity, amounts and priorities 1175 payment of taxes 1174 of expenses of sale - 1174 resale, when granted 1 176 receivers, when authorized to conduct 40 Savings Bank. liability of director, for embezzlement, provable debt 973 Schedules. affidavit, where bankrupt cannot be found, Supp. Forms, No. 84 1331 amendments; when allowed, and how made. Gen. Ord. XI 1197 forms; petition for order, Supp. Forms, No. 81 1328 order to show cause, Supp. Forms, No. 82 1329 order granting, Supp. Forms, No. 83 1330 bankrupt to prepare, Bankr. Act, § 7(8) 261 discharge, debts not included, not affected, Bankr. Act, § 17 1421 frame of, printed or written plainly, Gen. Ord. V 1192 abbreviation or interlineation. Gen. Ord. V 1192 petition and; form, Off. Form, No. 1 '. . . 1228 petitioning creditors to file, when bankrupt cannot be found. Gen. Ord. IX 1196 referee to examine and cause to be amended, Bankr. Act, § 39a ( 2 ) 662 to prepare and file, where bankrupt fails, Bankr. Act, § 39a (6) 662 amendment, referee to cause to be made .- 263 discharge opened to permit 263 composition before adjudication, to be filed 318 setting aside for false 332 contents; form to be followed 259 creditors and liabilities 260 residences to be stated 260 abbreviated addresses 260 use of wrong name 260 assets; accuracy and details 261 omission ; effect 201 distinguishing individual from trust property 262 expectancy 262 claim of exemptions • • 262 articles to be described 263 verification required 263 debts not included, not discharged 441 what constitutes due scheduling 441 actual knowledge of proceedings 443 discharge, failure to include property ground of objection 370 constitutes concealment 370 false oath to, as ground of objection 377 insolvency; evidence of 870 preparation and filing, importance 257 ascertainment of essential facts 267 108 1^14 Geneeai, Index. Schedules — Continued. PAGE time; ten days after adjudication 258 referee to prepare on refusal or failure of bankrupt 258 examination of bankrupt 258 failure of bajikrupt, effect 268 punishment of bankrupt 259 use as evidence; immunity 259 framing; forms to be used 259 written plainly -without abbreviations 259 referee to examine and amend 263, 684 prepare and file in case of failure of bankrupt 258, 665 Searches. certificates, clerks to issue, Bankr. Act, § 71 1182 Secured Olaiins. creditors as voters at meetings, Bankr. Act, § 56b 768 proof and allowance, Bankr. Act, § 57e 776 value of securities, determination, Bankr. Act, § 57h 777 creditors; voters at meetings of creditors 772 excess over value of security 772 creditors holding, not to file involuntary petition 848 proof ; purpose and effect 795 surrender of security 797 secured creditor, what constitutes ; 795 property other than of bankrupt 796 claim against exempt property 800 value of securities; ascertainment 799 secured debt proved as unsecured 801 Secured Creditor. definition, Bankr. Act, S 1 ^ includes what 16 what constitutes 795 proof of claim; purpose , 795 Sednction. discharge not to effect liability for, Bankr. Act, § 17 421 liability for, not discharged 440 Selmre. bankrupt's property by marshal, Bankr. Act, § 69 1102 bond- of petitioning creditors, Bankr.. Act, § 69 1102 release on bond of bankrupt, Bankr. Act, § 69 1102 special warrant to marshal, form, Off. Form, No. 8 1428 bond of petitioning creditors, form. Off. Form, No. 9 1429 Service. petition in involuntary cases, on bankrupt, Bankr. Act, § 18a 451 publication, how made, Bankr. Act, § 18a 451 publication; form of petition, Supp. Forms, No. 120 1370 order denying, Supp. Forms, No. 121 1371 process, personal, how made 488 publication; order directing 466 on absentees, corporations, etc 467 effect, on jurisdiction 468 proof, how made 468 General Index. ITK Set-offs. PAGE mutual debts and credits, Bankr. Act, § 68a 1090 provable against estate, Bankr. Act, § 68b 1090 purchased within four months, Bankr. Act, § 68b 1090 new credits against preference, Bankr. Act, § 60c 860 banks; deposits against unpaid notes 1095 against overdrafts 1096 conditions under which made 1097 effect of failure to off-set 1097 liability of depositor as indorser 1097 comparative legislation; prior acts 1091 determination of right 1091 nature of liability 1094 mutuality, not similarity, is test 1094 mutual debts or credits; distinction 1092 payments on account 1093 damages for breach of contracts 1093 provable against estate 1094 unliquidated against liquidated 1094 advancements to children 1094 mutual debts, in same rights and capacities 1098 joint claim against individual 1099 preferences; payments in due course 924 credits in good faith 925 provable debts only entitled 1099 preferences, not subject 1100 purchase or acquisition, within four months' period 1100 with a view to such use 1101 time when may be made 1093 when right is determined 1094 waiver; proof without claiming 1099 Slierifla. fees and disbursements; priorities 1020 Slngnlar. includes plural, Bankr. Act, § 1 3 Solvency. defense, in involuntary proceedings, Bankr. Act, § 3c 82 defense, in involuntary proceedings 132 burden of proving on bankrupt 133 Special Slaiter. compensation of referee acting as 82, 1184 fees to be charged 1184 State Conrta. 'appeals to Supreme Court 568 cases in which brought 5*9 jurisdiction ; concurrent with bankruptcy court 553 controlled by State statutes 554 property in possession, prior to four months' period 555 suits against bankruptcy officers 55fl, adjudication in. bankruptcy, terminates 557 validity of claims against bankrupt 558 assignment or receivership within four months, control terminated by ad- judication 568, 559 corporation, proceedings for dissolution adjudication terminates 559 1716 Geneeai. Index. State Insolvency I/a\rs. PAGE suspension by bankruptcy act 6 States. definition, Bankr. Act, § 1 2, Statistics. attorney -general to prepare and submit to congress, Bankr. Act, § 53 761 officers to furnish information, Bankr. Act, § 54 762 Stay of Snits. against bankrupt, Bankr. Act, § 11a 285 order; judge to grant. Gen. Ord. XII 1198 actions or proceedings to be stayed 290 assignment for creditors, proceedings in State court 297 commenced after filing petition 287 when will be granted 287 character of suits or proceedings 288 comparative legislation 286 dischargeability of debt upon which suit is based 289 determination, how made 289 duration ; termination by dismissal 301 termination by discharge 302 ■in personam, collection of simple debts 297 when granted ; arrest or detention of bankrupt 298 in rem, property in possession of bankruptcy court 293 property in possession of State court 293 proceedings of long standing in State court 294 jurisdiction under previous acts 286 diflFerence between prior and present acts 287 lien, proceedings to enforce 294 foreclosure of mortgage 295 execution to reach bankrupt's salary 295 mechanic's lien, proceedings not stayed 296 power to grant discretionary 291 exercise, in certain cases 291 caution in exercise 292 practice; application to State court 298 application to court or referee 299 petition ; allegations 300 order, to whom directed 300 motion to modify or vacate 301 proof of debt, waiver of right to sue 292 Stenographer. referee, jurisdiction to employ, Bankr. Act, § 38 650 referee to employ """ payment of fees ®*^ Stoek Exchange. seat of bankrupt vests in trustee 1^38 Snhpoenas, Writ of. issue under seal of court. Gen. Ord. Ill service of bankrupt, in Involuntary cases, Bankr. Act, § 18a 451 to alleged bankrupt, form. Off. Form, No. 5 1246 form; memoranda how issued; duty of clerk *^^ witness, refusal to appear, contempt 89" lawful mileage and fee, excuse for non-attendance 691 General Index. 1717 Subrogation. PAQE on payment of taxes by purchaser; no priority 998 proof of claims; surety or indorser 810 in name of principal creditor . . 811 trustee to rights of creditors in respect to liens 1047 rights of judgment creditor 1048 Suits. receivers, when brought against, leave of court 52 recovery of property, jurisdiction of bankruptcy courts 30 receivers, power to institute 50 Suits By and Against Banl^rupt. stay of suits against, Bankr. Act, § 11a 285 suits by, appearance by trustee, Bankr. Act, § lib 285 trustee may prosecute suits by, Bankr. Act, § lie 285 forms; petition for stay, Supp. Forms, No. 89 1336 stay of referee, and order to show cause, Supp. Forms, No. 90 1337 stipulation as to hearing by referee, Supp. Forms, No. 91 1338 decision and report of referee, Supp. Forms, No. 92 1339 order that writ issue, Supp. Forms, No. 93 1340 continuance by trustee 302 bankrupt as defendant, approval of court 302 option of trustee 303 court may order intervention 303 bankrupt as plaintiff 304 consent of bankruptcy court 304 cause of action for personal injuries 304 order for intervention ; petition 305 costs ; provability , 973 in action to recover provable debt : 974 stay, under previous acts 286 comparative legislation 286 difference between former and present acts 287 suits begun after filing petition 287 when will be granted 288 character of suits or proceedings 288 dischargeability of debt controls 289 determination, how made 289 actions or proceedings, included 290 power to grant, discretionary 291 exercise in certain cases 291 caution in exercise 292 effect of proof of debt 292 property in possession of bankruptcy court 293 in possession of State court 293 proceedings of long standing 294 lien, proceedings to enforce 294 foreclosure of mortgage 295 mechanic's lien, proceedings not stayed 296 assignment for creditors, proceedings in State court 297 in personam, when granted 297 arrest or detention of bankrupt 298 practice ; application to State court 298 application to court or referee : 299 petition ; allegations 300 order ; to whom directed 300 motion to modify or vacate 301 duration ; termination by dismissal 301 termination by discharge 302 1718 Genebal Index. Suits By or Agaiiut Tmstee. PAGE juriBdiction of bankruptcy courts, Bankr. Act, § 23b 513 not to be brought against, subsequent to two years after estate is closed, Bankr. Act, § lid 285 suits by, prosecution of suits commenced by bankrupt, Bankr. Act, § lie 285 by trustee, for recovery of property, jurisdiction 520 purpose of amendments of 1903 and 1910 521 plenary suits to recover assets 523 adverse claimants; determination 523 ■who are; rules controlling 524 possession of property controlling element 526 by lienor 526 by third person in behalf of bankrupt 526 of wife of bankrupt 527 of assignee or receiver 527 under attachment 628 consent of adverse claimants, when required 537 voluntary surrender equivalent 533 method of showing 533 recovery of property 536, 1072 fraudulently or preferentially transferred 638 trustee alone may bring 537 property which may be recovered 537 recovery of property, jurisdiction of referee 920 duty to bring. . ; 722 assignment of right to bring 722 probable cause of action , 722 consent of court or referee 723 of bankrupt corporation, to recover unpaid subscriptions 724 liability for costs 726 fraudulent transfer; recovery 536, 1072 jurisdiction of district courts 636, 1072 to set aside 1178 trustee subrogated to rights of creditors 1047, 1179 jurisdiction of bankruptcy courts 536, 1072, 1181 limitation ; time commenced 305 application 305 time runs from close of estate 306 final decree discharging trustee 306 Snnunary Jnrlsdictlon. bankruptcy court; exercise 539, 549 extent of jurisdiction , 549 investigation as to nature of claim 540 effect of amendment of 1903 541 possession; dependent upon 541 of court, claim of interest in 543 what constitutes 547 constructive ; what constitutes 544 under attachment 546 property wrongfully retained 545 fraudulent transfers 546 when to take effect 547 claim against bank deposits 549 Supreme Court. appeals within thirty days, Gen. Ord. XXXVI 1221 record ; -what to contain, Gen. Ord. XXXVI 1221 Genbeal Index. 1719 Snpreme Court — Continued. FAOE appellate jurisdiction,' Bankr. Act, § 24a 561 exercise of, in certain cases, Bankr. Act, § 25a 571 appeals from circuit courts of appeals, Bankr. Act, § 25t) 571 limited by Act of Jan. 28, 1915 606 certification of controversies to, Bankr. Act, § 25d 571 writs of certiorari issued, Bankr. Act, § 25d 571 rules, orders and forms prescribed, Bankr. Act, i- 30 634 appeals, always in session for 564 controversies arising in bankruptcy 567 fromi district courts as courts of bankruptcy 568 procedure outlined 574 appeals from circuit courts of appeal 606 not permitted under act of Jan. 28, 1915 606 jurisdiction under former law ; amount in controversy 607 federal question involved 607 judgments in certain cases 607 practice; rules regulating 608 certificates, by circuit courts of appeals 609 by district court 568 rules, orders and forms ; force and effect 634 State courts ; appeals from 568 cases in which brought 569 writs of certiorari; issued to circuit courts of appeals 610 application by petition '. .' 610 when to be granted 610 Sureties. official bonds ; justification, Bankr. Act, § 50d, f 750 corporations may become, Bankr. Act, § 50g 750 suits against; when brought, Bankr. Act, § 501, m 751 proof of claims by, Bankr. Act, § 57i 777 discharge, release of principal; liability of sureties 417 appeal bonds ^^ attachment bonds • ^^8 replevin and jail bonds 420 liabilities, provable debts 963 preference; payment to relieve 891, 899 subrogation to right of principal creditor 810 T. Tases. discharge does not affect, Bankr. Act, § 17 421 payment in advance of dividends, Bankr. Act, § 64a 985 not provable debt 965, 994 not dischargeable ■ • • • priority of payment; duty of trustee 992 payment in any event 992 cost of preserving estate first paid 993 amount and legality, court to determine 993 not debts and need not be proved 994 payment out of proceeds of sale 995 kind entitled; meaning of term 996 federal courts to determine 991 local assessments ; water rents 997 1720 Geisteeal Iitdex. Taxes — Continued. PAGE corporations ; license fees 997 franchise taxes 998 license to sell liquors , 998 income tax 999 BuTirogation on payment 998 accrued since proceedings were instituted 999 interest to be added 999 Territories. Supreme Courts, appellate jurisdiction, Bankr. Act, § 24a 561 Time. computation, how made, Bankr. Act, § 31 637 months and years, how computed 638 days and fractions of days 638 Time of Taking Effect. bankruptcy act and amendments 1186 Title to Property. vests in trustee, by operation of law, Bankr. Act, § 70a 1106 conveyance upon sale, Bankr. Act, § 70c 1106 rights of lien creditors, Bankr. Act, § 47a(2) 716 vests in trustee as of date of adjudication 1112 between petition filed and adjudication 1114 and appointment of trustee 1114 relates back to conMnencement of proceeding 1113 rights of lien creditors; amendment of § 47a (2) by act of 1910 727-735 See Estates; Property of Bankrupt; Trustee. Tort. discharge of liability for 427 provability; as claim based on implied contracts 972 conversion of personal property 973 Trade-marks. title vests in trustee, Bankr. Act, § 70a(2) 1123 Transfer. cases, from one court to another, Bankr. Act, § 32 639 convenience of parties in interest, Bankr. Act, § 32 639 efi'ect of provision 639 parties in interest; meaning 640 cases from one referee to another, Bankr. Act, § 22b 511 compensation, Bankr. Act, § 40b 676 Transfer of Property. definition, Bankr. Act, § 1 2 meaning applied and considered 17 within four months, void, Bankr. Act, § 67e 1031 preference ; what constitutes 881 invalid, voluntary settlements on wife 1075 assignments for benefit of creditors 1076 valid, purchasers in good faith, who are 1070 inquiries as to solvency 1079 sale of entire stock of goods 1071 present fair consideration 1071 See Fraudulent Transfer. Traveling Salesmen. wages; priority of payment 101* General Index. 1721 Trials. PAGE involimtary proceedings, by judge 476 jury; act of bankruptcy or insolvency 476, 488 referee or special master, to hear and report 476, 477 voluntary proceiedings ; by judge 484 while involuntary proceedings are pending 484 by jury. See Jury Trials. Trust Companies. as trustees of bankrupt 712, 713 Trnstee. accounts referred to referee. Gen. Ord. XVII 1203 form. Off. Forms, No. 49 1284 final; oath. Off. Forms, No. 50 1285 allowing; order, Off. Forma, No. 51 1286 accounts and papers; open to inspection, Bankr. Act, § 49 749 adjudication, decrees to be filed, Bankr. Act, § 47c 716 appeals, bonds not required, Bankr. Act, § 25e 571 appointment; creditors to meet, Bankr. Act, § 44 699 court may make, if creditors fail, Bankr. Act, § 44 699 jurisdiction of bankruptcy courts, Bankr. Act, § 2(16) 22 approval by referee or judge. Gen. Ord. XIII 1200 not appointed in certain cases, Gen. Ord. XV 1202 notice of, referee to give. Gen. Ord. XVI 1203 notification of acceptance, Gen. Ord. XVI 1203 form, by creditors. Off. Forms, No. 22 1261 by referee. Off. Forms, No. 23 1262 notice of appointment. Off. Forms, No. 24 1262 order that no appointment be made. Off. Forms, No. 27 1264 order for choice of new trustee. Off. Forms, No. 55 1288 order approving, Supp. Forms, No. 160 1408 arbitration of controversies, Bankr. Act, §26 611 attorney; order appointing, Supp. Forms, No. 181 1431 burdensome property, petition for instruction, Supp. Forma, No. 182 1432 order on form, Supp. Forma, No. 183 1436 certified copy of bond; evidence, Bankr. Act, § 21e 495 evidence of vesting title, Bankr. Act, § 21e 495 compensation; fees and commissions, Bankr. Act, § 48a 741 business conducted during administration, Bankr. Act, § 48e 742 three trustees instead of one, Bankr. Act, § 48b 741 withheld for removal, Bankr. Act, § 48c 741 additional, prohibited, Bankr. Act, § 72 1183 compromise of controversy, Bankr. Act, § 27 613 continuance of business, order allowing, Supp. Forms, No. 184 1433 creation of oflSce, Bankr. Act, § 33 642 death, not to abate suit or proceeding, Bankr. Act, § 46 715 definition, Bankr. Act, § 1 2 discharge, opposition to, hearing, Bankr. Act, § 14b 335 meeting of creditors to authorize opposition, Bankr. Act, § 14b 335 duties specified, Btmkr. Act, § 47a 716 two of three to act, Bankr. Act, § 47b 716 duties under general orders, Gen. Ord. XVII ; 1203 inventory of property, Gen. Ord. XVII 1203 exemptions, report, Gen. Ord. XVII 1203 fees, collection by clerk, Bankr. Act, § 51 754 payment by clerk, Bankr. Act, § 51 754 IT" 2 General Index. Trustee — Continued. page in full compenBation for services, Gen. Ord. XXXV 1219 final accounts, notices to creditors, Bankr. Act, § 58a (6) 826 forms; reports, first, Supp. Forms, No. 161 1409 final, and account, Supp. Forms, No. 163 1411 distribution, final order, Sttpp. Forms, No. 164 1413 combined dividend check and receipt, Supp. Forms, No. 165.' 1416 bonds with justification, Supp. Forms, No. 167 1418 order approving, Supp. Forms, No. 168 1419 ao oiBcial permitted. Gen. Ord. XIV 1202 offenses; punishment, Bankr. Act, § 50b 750 official bonds; sureties; approval, Bankr. Act, § 50b 750 amount, creditors to fix, Bankr. Act, § 50c 750 liability for penalties and forfeitures, Bankr. Act, S 50i 751 filed with clerk of court, Bankr. Act, § 50h 750 suits upon, Bankr. Act, § 50h 750 when to be brought, Bankr. Act, § 50m 751 joint bonds, Bankr. Act, § 50j 751 form. Off. Forms, No. 25 1263 order approving, form, Off. Forms, No. 26 1264 partnership bankruptcy, creditors to appoint, Bankr. Act, § 5b 164 separate accounts of partnership and individual estates, Bankr. Act, § 5d 164 preferences, recovery of property or its value, Bankr. Act, | 60c S60 to attorneys, recovery, Bankr. Act, § 60d 861 qualifications specified, Bankr. Act, § 45 712 corporations authorized by their charters, Bankr. Act, § 45 712 recovery of property transferred within four months, Bankr. Act, § 67e 1031 recovery of property transferred, Bankr. Act, § 70e 1^"° jurisdiction of court of bankruptcy, Bankr. Act, § 70e 1106 removal, not to abate suit or proceeding, Bankr. Act, § 46 715 jurisdiction of courts, Bankr. Act, § 2(17) ^ neglect of duty, G«n. Ord. XVII 1203 procedilre before judge. Gen. Ord. XVII 1203 by judge only. Gen. Ord. XIII 1200 petition, form. Off. Forms, No. 52 1286 notice of petition. Off. Forms, No. 53 1287 order, form, Off. Forms, No. 54 12®7 report of exempted property, form. Off. Forms, No. 47 1282 of no assets, Off. Forms, No. 48 1283 subrogated to rights of creditor under lien, Bankr. Act, § 67b 1031 suits by or against, not brought subsequent to two years after estate is closed, Bankr. Act, § lid 285 by, jurisdiction of bankruptcy courts, Bankr. Act, § 23b 513 petition for leave to bring, Supp. Forms, No. 185 1434 order authorizing, Supp. Forms, No. 186 1435 title to property; vested by operation of law, Bankr. Act, § 70a 1106 conveyance upon sale, Bankr. Act, § 70c HOo vesting upon setting aside confirmation or revocation of discharge, Bankr. Act, § 70d IIO*' vacancy; special meeting to fill. Gen. Ord. XXV 1212i vested with rights of judgment creditor, Bankr. Act, § 47a(2) 716 accounts and reports; duty to make 73b for interest 73o difference between 73fi filed with referee 73fl adjudication ; certified copy of decree to be recorded 740 General Index, 1Y23 Trustee — Continued. page appointment; scope of section 700 comparative legislation 700, 769 creditors at first meeting 701, 769 vote, how taken 702, 769 court or referee; failure of creditors 703 delay in appointment, effect 703 disputed claims 70-1 approval or disapproval by court or referee , 70-1 grounds of disapproval 705 effect of disapproval 706 review of approval 706 undue activity of bankrupt 707 interference by bankrupt 708 canvassing of creditors 707 vacancy, how filled 708 after estate has been reopened 709 no asset cases ; none appointed 709 notification; acceptance 710 appraisal of property , 1165 appointment of appraisers 1165 practice 1166 arbitration, submission of controversy -612 order of court 612 effect of findings of arbitrators 612 attorney ; employment 934 necessity of employment 934 fees expense of administration 941 allowance; amount 942 bond, certified copy of order of approval 509 conclusive evidence of vesting title 509 burdensome property; may disclaim 1162 executory contracts and leases 1162 practice; report for instruction 1163 order to disclaim 1163 chattel mortgages; right to attack for failure to file 733 compensation ; under other laws 743 in England and Canada 743 amount ; fees and commissions 743 under original act of 1898 744 pauper cases • 744 effect of amendments of 1903 and 1910 744 commissions on disbursements 744 disbursements to others than creditors 745 proceeds of sale of exempt property 746 payment out of estate 746 rate fixed by act 747 composition, in case of 747 additional, when allowed, for conduct of business 747 allowances by court 748 three, instead of one trustee 748 additional fees not to be charged 1184 scope and purpose of section 1183 conduct of business 1184 isomposition, title reverts on setting aside 334, 1177 compromise of controversy; when made i 613 petition; filed with referee 614 1*24 Geneeal Index. Trustee — Continued. PAOE decision of referee 614 concurrence of two of three trustees 739 continuance of business; jurisdiction to permit 54 contracting indebtedness 55 conduct of business 55 compensation; effect of amendment of 1910 1184 distribution; disbursement by check or draft 737 expenses of administration 737 priorities, payment 737 dividends, payment ■within ten days 737 method of payment 737 Gen. Ord. XXIX ; countersigning checks 737 dividend checks 738 dividends ; garnishment 1025 payment of judgment against creditor 1025 duties; scope of section. 719 resort to court or referee for advice 719 assets, collection , 719 reduction to money 720 failure of due diligence 721 surcharged with loss caused by negligence 72il creditors to be consulted 722 suits, duty to bring 722 right to sue exclusive 722 assignment of right to bring 722 consent of court or referee 723 proibable cause of action 722 corporations, recovery of subscriptions 734 partition of real property 724 liability for costs 726 sales of assets 735 employment of attorneys 735 interest, accounting for 735 information to parties in interest 739 evasion of act, bankrupt to notify 257 execution of necessary papers to pass title 256 exemptions ; setting apart 210, 738 setting-off, out of proceeds of sale ■. . 237 report, exceptions to 240 exempt property, no title to 208, 1164 conflict between § 6 and 70a (5) 1164 rights and duties as to 210 surrender of possession 211 fees; collection by clerk 755 payment after estate is closed 756 final accounts, notices to creditors 839 fraudulent transfer, suit to set aside 1178 trustee subrogated to rights' of creditors' 1179 jurisdiction of bankruptcy courts 1181 suit to recover property or value 1180 judgment or lien creditor, vested with title 727 effect of amendment of 1910 to § 47a (2) 727-736 creditor ; term includes what 733 unrecorded liens and contracts 731-734 number; one or three 709 General Index. 1725 Tmstee — Continued. page offenses; unlawful transfer or embezzlement 625 knowingly and fraudulently done 625 punishment 625 oflScer of court 720 oflScial bond, failure to give 751, 753 creditors fix amoimt 752 court to fix if creditors fail '. 752 where filed 752 suits on; leave of court 752 partnership, creditors to appoint 183 individual estates, powers as to 183 separate accounts of partnership and individual estates 184 property vested in, amendment of 1910 to § 47a(2) 727 amendment construed witli § 70 .' 727 general purpose and effect 728 status that of creditor holding lien 728 determined as of date of filing petition 731 unrecorded liens against, effect 731 lien attaches to property of bankrupt 732 creditors holding liens 733 conditional sale contracts and chattel mortgages 733 fraudulent transfers ■. 735 qualifications ; competency 712 prescribed by statute 712 trust companies 713 persons not possessing 713 stockholder of bankrupt corporation 714 friendly or unfriendly to bankrupt ., 714 recovery of preferences 918 refusal to sue; rights of creditors 918 courts in which suit may be brought .> 919 permission to sue 921 removal by judge and not by referee 710 cause ; practice 710 withholding compensation 748 resignation, how made 711 sales of property; duty as to \166 See Property of Bankrupt; Sales. transfer of title to purchaser 1177 subrogation to rights of creditors 1047 stands in position of creditors 1047 in effect, judgment-creditor 1048 amendment of 1910 of § 47a(2) 1049 suits by or against, limitation. 305 when time commences to run 305 close of estate ; meaning 306 suits by or against bankrupt, continuance 302 bankrupt as defendant ; option of trustee 302 court may order intervention 303 bankrupt as plaintiff 304 consent of bankruptcy court 304 action for personal injuries .■ 304 order for intervention ; petition 305 suits to recover property 536 fraudulently or preferentially transferred 536, 1072 ■^''•^ General Index, Trustee — Continued. PAOF trustee alone may bring 536 property which may be recovered 537 plenary, against adverse claimant 523 determination as to adverse claim 524 taxes; priority of payment 992 title of bankrupt vests in ; purpose 1112 at date of adjudication, relating back to date of filing petition 1113 between petition filed and adjudication 1114 and appointment of trustee 1114 property which vests ; in general 1115 possession of bankrupt 1115 acquired after filing petition 1116 subject to claims, liens and equities 1117 stands in shoes of bankrupt 1119 defenses, legal and equitable 1119 acts of bankrupt, prior to bankruptcy 1 120 property subject to trust 1120 subject to liens and incumbrances 1121 in possession of bankrupt as bailee 1121 effect of amendment of 1910 to § 47a(2) 1122 specific property; in general 1122 documents as to bankrupt's property 1122 patents, copyrights and trade-marks '. 1123 personal powers 1123 fraudulently transferred 1124 creditors' rights of action 1125 effect of general assignment 1125 claims against the United States 1 126 character of transfer 1124 fraud actual or implied 1124 voluntary, to wife or children 1125 receivership in dissolution proceedings 1126 might have been transferred or levied upon 1127 test to be applied 1127 property pledged 1128 wages 1128 stock purchased for customer 1129 shares in possession of broker 1130 includes every vested right 1130 remainders and contingent interests 1133 property in which others have interest 1131 equity of redemption 1132 trust interests 1133 resulting or constructive trusts 1133 surplus income 1 1 J4 funds mingled with those of bankrupt 1135 dower and curtesy rights 1136 personal contracts of bankrupt 1137 franchises and licenses 1137 liquor licenses 1138 seat in stock exchange 1138 life insurance policies '^39 See Life Insurance Policies. fire insurance policies H'** property sold on condition 1145 See Conditional Sales. General Index. 1Y27 Trastee — Continued. page fraudulent representations, effect of llfi^ rights of action for bankrupt 1158 personal injuries; cause of action does not pass 1159 torts affecting property , 1159 unpaid stock subscriptions 1160 proceedings against stockholders and directors 1160 transfer to purchasers 1177 reclamation proceedings; right to bring 1151 goods purchased without intent to pay 1153 concealment Of insolvency 1153 false representation as to solvency 1154 proof of insolvency 1 155 property sold subject to approval 1 156 rental contracts 1156 payiuent on delivery 1157 title does liot pass on failure to pay 1157 proof of identity of articles sold 1158 practice 1 158 time when petition to be filed 1 151 sale or bailment; agency 1152 setting aside composition or revocation of discharge 1177 interests of bankrupt vests in trustee 1133 surplus income from funds 1134 funds mingled with those of bankrupt 1135 Tmst Funds. possession of bankrupt; rights of trustee 1133 resulting or constructive trusts 1133 what constitute 1134 mingling, with other funds 1135 following such funds; traceability 1135 surplus income ; rights of creditors 1134 V. Valnation. pTopettj, for determination of insolvency 12, 13 Verification. pleadings in bankruptcy, Bankr. Act, § 18c 451 how made; defects 474 by attorney *^^ discharge, petition 348 specifications of objections 360 by partnership 360 proof of claim, by agent, partner or officer 786 before whom taken 787 schedules of bankrupt 263 involuntary proceedings, pleadings; how made 474 Voluntary Proceedings. adjudication or dismissal by judge, Bankr. Act, § 18g • 452 reference, where judge is absent, Bankr. Act, § 18g 452 dismissal, notices to creditors, Bankr. Act, § 58a ( 8 ) 826 list of creditors to be filed, Bankr. Act, § 59g 837 notice and opportunity to be heard, Bankr. Act, § 59g 837 ^'^^ General Index. Volnntary Proceedings — Continued. page persona entitled to benefits, Bankr. Act, § 4 13g petition, any qualified person may file, Bankr. Act, § 59a 837 fljed in duplicate, Bankr. Act, § 59c 837 partnership, all partners not joining, Supp. Forms, No. 117 1364 form of petition. Off. Form, No. 2 1242 petition and schedules ; form, Off. Form, No. 1 1228 any qualified person may file petition 141, 840 form of petition; practice 842 where involuntary petition has been filed 841 attorneys for bankrupt ; compensation 940 services in aid of administration 940 in preparing petition and schedules 940 partnership ; petition 176 allegations of petition 176 non-consenting partner ; rights 177 notice and answer 177 petition, who may file 141 debts must be owed 142 corporations may file 142 board of directors may begin proceedings 143 infants, proceedings by 144 lunatics, disability 145 married women 146 aliens having property in country 146 Indians may file 146 estates of decedents 146 notice to creditors, when filed after involuntary 484, 835 trial by judge 484 reference to referee, if judge is absent 484 while involuntary proceeding is pending 484 W. Wage-earner. definition, Bankr. Act, § 1 3 meaning applied and considered 18 involuntary proceedings not to be brought against, Bankr. Act, § 4 138 bankruptcy proceedings against, exception 149 who entitled to exception 149 subsequent change of occupation 147 Wages. priority of payment, Bankr. Act, §